Topics: New child care package
Reporter: Good afternoon, Minister, thanks for joining us this afternoon on this Facebook Live chat about the upcoming child care changes.
Simon Birmingham: Pleasure, great to be with you.
Reporter: So, we know how important child care is for families across the country, but for a long time now they’ve been hit with soaring fees, their budgets have been stretched and they’re working fewer days and hours because they simply can’t afford care. We now know that four weeks away, you guys are bringing in changes to fix a lot of this. So in a nut shell, what are the basic details of the new system?
Simon Birmingham: So, there are a number of big changes and importantly for families who this time of year, even the last couple of months, might have run out of support for the Child Care Rebate which is capped at about $7500. We’re getting rid of that cap for everybody earning less than, as a family, around $186,000. That means there’ll be no more ceiling on their support. And for families above that, we’re increasing the cap to $10,000. So, that’s going to make a big difference, but we’re also increasing the rate of subsidy. So if you’re a very low income family, currently your subsidy rate is about 72 cents in the dollar. That’s going to go up to 85 cents in the dollar. So the compound of all of those impacts, getting rid of that cap on the level of support, increasing the rate of the subsidy, will leave many families hundreds or possibly even thousands of dollars better off over the year.
Reporter: Okay. So, there’s a lot of figures to go through. But I guess the key thing to point is that the new system isn’t automatic and a lot of families need to update their details to actually get the benefits. So, what do families need to do and how can they find out what their entitlement is?
Simon Birmingham: That’s right. So it’s not automatic because we’re putting an extra $2.5 billion of funding in, but we’re also redistributing some funding within the system to make sure that those working the longest hours get the greatest number of hours of subsidised care and those earning the least amount as a family get the greatest rate of subsidy in terms of their child care. So what we’re asking people to do is to update their details with essentially two pretty simple things. One is what level of activity do you, your partner, does your family engage in in terms of working, studying, volunteering, et cetera, so that we can target the number of hours. Now, it's a pretty light touch activity test. It does count volunteering activity, working, studying, looking for work. If you're a carer to somebody else, that is recognised as well. So there’s a range of different factors, and just four hours of activity per week, on average, will entitle somebody to 36 hours a fortnight of care, and the more hours of work or study or the like you do, then the greater the number of hours of subsidised child care you will be eligible to.
The other thing that the new system asks is for estimated family income. So again, to make sure we get the rate of subsidy that people are paid right. So, for anybody who's currently got children in child care, the message is very much: log on to education.gov.au/childcare, follow the links through to the myGov site, and then make sure that you provide those details. I've done it myself for our family. It took all of about 10 minutes to update the details.
Reporter: And so, I guess you and your family would be busy with a lot of activity, but there are a lot of people that seem to be quite confused by the word activity and what an activity test means. So can you explain a little bit more about, you know, some examples of what would qualify – it can be something as simple as helping out at your local church?
Simon Birmingham: That’s right. So activity: working, obviously; studying; training; looking for work. If you're on Newstart and you're meeting your obligations on Newstart to look for work, then that's considered to be an activity that's counted for those purposes. If indeed you're a carer caring for a family member in circumstances where you attract a carer’s payment, that of course attracts- is an eligible activity too. But then, volunteering. Volunteering, any work for registered charities or charitable organisations ticks the box of volunteering. We've also made sure that volunteering that contributes towards educational purposes, so if you go in and spend time reading to the children at your older child's school that counts towards being an activity, towards then the child care payments for your younger children, for example. So, really trying to encourage people to be active, engaged in that sense and as I say, it's light touch. It's four hours a week to meet that first test and that's averaged over a three-month period. So if you're a casual worker or somebody who studies in intense periods for a few weeks, but then may not for a period of time, you can average that out over the three-month period to give you some certainty in your family circumstances.
Reporter: And so, we'll be getting more questions from our live viewers in a minute. But one that has popped up is just how do people prove that they’re doing volunteer work or working for the family business - they have to show some evidence that it's legitimate work?
Simon Birmingham: Well first and foremost, we treat people at face value. So they register, they tell us what it is they're doing. Of course, there are auditing processes to make sure that people are doing the right thing and aren't claiming subsidies that they're not entitled to. So if that occurs, then that's a fairly simple process. A statement from somebody associated with the charity to verify that you have volunteered the hours you say you were volunteering. That will suffice.
Simon Birmingham: It’s fairly straightforward there and for most people they wouldn't ever expect to be audited and won't be audited. But we have that process in place to make sure that people claim what they're entitled to, receive every cent they're entitled to, but obviously nobody who's paying taxes want to see people make claims that they're not entitled to.
Reporter: And we know- before we mentioned, you know, family budgets are stretched and a lot of people are struggling with child care fees. The ones who aren't eligible for the subsidies because they can't meet the activity test – they might be a stay-at-home parent, but you know, they are struggling with caring for kids full time – what do you have to say to the parents who do miss out and whose children miss out on this vital skill- these vital skills and being in that environment?
Simon Birmingham: So, I mean, we're doing these reforms because we know people are struggling with child care and that, as you said in the intro, many people are choosing to work fewer days or fewer hours because of the cost of child care. So that's why we're making these changes to ensure that people can choose to work the hours that suit them, the days that suit them, without child care costs being an impediment; knowing that the more hours they work, the more subsidised care they’ll receive, and the less they're earning the greater the rate of subsidy. If somebody truly doesn't meet any of the elements of the activity test, there's a couple of points I'd say. Firstly, we continue to put hundreds of millions of dollars annually into supporting universal access to pre-school. So we do recognise that there is an early childhood education element that's critical and we want to make sure that children get that preparation for school, and we back that through preschool services.
But secondly, there's also a range of other safety nets that we've provided for in terms of ensuring that children in vulnerable circumstances, families going through particularly difficult or challenging times such as health scares or challenges within the family, that all of these issues can be properly addressed to make sure that those families get the type of support they need. And for some of them that will be ultimately receiving essentially full-time child care availability with complete subsidy coverage. So we've really tried to make sure we cater for the circumstances where it's necessary. But importantly this is about targeting support to ensure families don't cut back on work because of child care costs.
Reporter: Okay. And so, we've had some mums who have complained about being penalised for being promoted or taking on more hours because the more they work the less they get back on their child care costs. So how does the new system benefit them or work for them?
Simon Birmingham: Well, the system is one where the higher the family income the lower the level of subsidy that applies, and that's to try to create a fair system. But of course if you're working long hours, but as a family earning relatively low or moderate wages, we want to give the maximum level of subsidy there. That can be up to 85 cents in the dollar, which means if you're somebody who is paying $100 a day for child care services, well actually the government will cover 85 of those dollars and you'll only be faced with a $15 bill. For many people, they'll see that the subsidy averages out at 50 per cent, which is what the current Child Care Rebate is. So if you're earning more than about $186,000 but less than $250,000 as a family, you’re still going to get the same 50 per cent level of support as you did before. It's only really very high income families where you start to see that rate of subsidy decline a bit, and we've done that in fairness to try to make sure we can give that additional support to people where child care costs are a real impediment to their ability to be able to go back to work or work more hours.
Reporter: Okay. We’ll throw to questions in a minute because we’ve got some coming through from our readers. But one of the big issues that we know, too, is the cost variation between centres and how fees can vary quite dramatically between centres just a few kilometres apart. So, should that be more consistent and are you doing anything to address those cost issues?
Simon Birmingham: So we got a lot of expert advice and public consultation to design this new Child Care Subsidy. Really, it’s the biggest overhaul in child care subsidies in about 40 years. One of the improvements we've done is to put in place an efficient price type mechanism. So really, for long daycare services and family daycare services, they'll be benchmarked against that price and we'll be paying the subsidy against that price to try to stop extravagant fee increases. That was clearly recommended by the Productivity Commission. Our hope and belief that it's a much better way of doing it than previously, where we saw when the Labor Party was last in government they upped the allowable amount under the Child Care Rebate but all that happened was centres put their fees up and families didn't really derive any benefit. The new changes that changed the way subsidies paid, but also put this efficient price in, should ensure that centres keep their fee growth in check in the future, and we'll be watching very closely to hopefully make sure they do.
Reporter: Okay. Well, that answers David's question from Brisbane, who said what was being put in place to stop childcare providers increasing their fees. So we've also got a question from Joanie from Sydney who asks: how do we do an estimate if your partner works a casual job - my partner’s hours vary each week? So I guess that was another question a lot of people ask is what happens if their circumstances change, they can’t really predict what income they will be earning in the coming financial year. How does it work for them?
Simon Birmingham: Yeah sure, and that's a problem that people may well face today as well in terms of claiming under the existing Child Care Benefit where there's a means tested element to that. But what we've tried to do here is say you can average your estimated hours of work over a three month period. So if you work a lot one week and nothing at all the next week, you're able to make that estimate. They’re also pretty broad steps in terms of the activity test. So, first step is to be working four hours a week. Then it's about whether or not you're working on average around 16 hours a week, I think it is off the top of my head. Then it's up to about 32 hours a week. So it's about ensuring that there's big steps in between so people can make that average with confidence that their entitlement to the number of subsidised hours won't vary. And of course, in terms of the rate of subsidy people get – which is linked to how much a family might earn – ultimately that will be worked out at the end of the financial year. So we'll pay as we go based on what people assess, but if they have under-claimed a little bit, well, then they'll find that they'll get a bit of an extra top up on their tax return at the end of the year.
Reporter: Well, that’s always a good thing. And so Tamara from Ballarat asks for some grandparent carers, will these new changes mean losing all child care benefits? Some informal carers will be hardest hit and many will be forced to give up work altogether. So I guess there's been some people with unique caring situations and asking those kind of questions.
Simon Birmingham: Yeah, absolutely. I really want to give reassurance to grandparents who might be the primary or majority carer for their grandchildren that, in fact, they are essentially excluded from the activity test. So we recognise the grandparents who are caring for their grandchildren deserve a break and deserve that support. The means testing level, if you like, the income testing level still applies. So if they are earning very high incomes, well, they might not get the full level of Child Care Subsidy but grandparents don't have to meet the work test or the like. We want to make sure that in those special circumstances they're part of the safety net that we’re catering for.
Reporter: Okay. We've also had some people asking about the centres themselves, if they need to register, and do families need to check that their centres have registered and see what they're doing, if anything, different with the new changes?
Simon Birmingham: So centres need to make some changes themselves. Now, the vast majority of centres have already done so, and so families should have great confidence that their centre will do so. And as a government, we are literally personally ringing those centres who have not done so. So my department is working through that process to ensure that every eligible child care provider makes that switch before July 2. Families should really only worry about making sure they make the switch themselves. Now, more than 800,000 have done so to date so that's fantastic that people are embracing the change and see the opportunities and the benefits it provides and getting on board already. But certainly to make sure people don't have any disruption to their childcare payments, I encourage them to go education.gov.au/childcare. Follow the links and update your details now.
Reporter: Okay great. Well, I think we have covered off a lot of the themes of the questions that have been coming through earlier in our chat and also through what we've just addressed now. So just to recap, families have until the end of the month to update their details.
Simon Birmingham: July 2 is the first new day.
Reporter: Sweet, yeah. And so any other final messages or things you'd like to point out to families watching?
Simon Birmingham: Look, what I really encourage families to do is also to have a look in terms of on the childcare estimator there about the benefits for your family, because what you're going to be able to do is potentially make that decision to work more hours or work different days when you realise that the new subsidy’s a flexible arrangement that adjusts to your family circumstances. Our estimates are that around 230,000 Australian families may well choose to work more as a result, and that around 1 million families are going to benefit from this. So it's a great positive reform. I really do encourage people to seize the opportunities that it creates.
Reporter: Okay well thanks for joining us this afternoon, Minister. We'll be posting this video to our Facebook page, so anybody who does still have questions can check it later or share it around and obviously we'll keep covering the issue and doing more stories. I think your department will be checking the comments if there are people we've missed or questions that come forward. We'll be able to keep answering them.
Simon Birmingham: Absolutely. The other thing I should say is if you've got unique circumstances, reach out and ask the questions. We've got dedicated call line there that you can speak to people through Centrelink to help you through. So if you don't fit the usual [indistinct] of somebody who's working and easily meeting the activity test but you have challenging family circumstances, get in touch, there may well be other ways that you can be supported.
Reporter: Great, thank you.
Simon Birmingham: Thank you.