Almost a quarter of Australian families currently using early childhood education and care will be adversely impacted by the activity test and potentially face higher out of pocket fees for care than before COVID19, under a snap-back to the old subsidy model.
The activity test cuts the level of subsidy available to a family where one or both parents are out of work, particularly where the family income is above $67,000.
National surveys by The Parenthood, Goodstart Early Learning and KU released in recent weeks indicate that roughly half of all families accessing early education and care have lost work or income since COVID19.
The Parenthood understands that these job losses mean an estimated 23% of families will drop down an activity rung under the old model and will therefore no longer be eligible to receive the same subsidy they did before April.
This is alarming because it is unlikely that many families understand the exact financial ramifications of this change. It may be the first time a family has experienced a job loss that means they fall below the activity threshold.
Given more than a third of all families are already saying they’ll have to reduce the days their children attend ECEC, any additional cost to parents is likely to trigger further reductions in days and removals from care altogether.
The activity test creates a significant financial disincentive to accept work which has always been a problem, but it is exacerbated in an economic slump when high unemployment is a significant problem. Anything that makes it harder for any Australian to return to work right now needs to be addressed. This will then make parents returning to work much more difficult.
If the Education Minister Dan Tehan plans to return to the old childcare model in July, as reported, without removing the activity test thousands of families will be forced to report changes to avoid either their family or their service accumulating a debt to government.
The widespread change and uncertainty around work and income in so many Australian households – and how they relate to childcare subsidy payments – will create a nightmare for both families and Centrelink.
The Services Australia system proved so inflexible it had to be turned off for the sector to survive COVID-19, and that the system is under immense pressure as it is with Job Seeker so it is difficult to imagine families flooding the system will be sustainable.
Parents are urging the government to extend the fee-free childcare arrangement until September as initially planned, as well as increase the payment to services and address the issue of JobKeeper ineligibility.
The old model is not for purpose in a post-COVID economy and there is no point pretending otherwise. Rather than tweaking subsidies and increasing the layers of complexity in a broken model, parents are calling on the government to overhaul the funding of ECEC in Australia.
In addition to working with Women’s Agenda, Georgie Dent is also the campaign director for The Parenthood, a not-for-profit community of parents working to make Australia the best place in the world to raise kids.