Like parents in many other parts of the world, Australians must contend with increasing childcare costs, and the problem is worse in some parts of the country. For example, a 2014 report showed that childcare costs in Sydney have increased 150 percent since 2003. In fact, Sydney residents generally pay more than the national average.
In many cases, childcare costs increase because of strong demand and a lack of available places. In Sydney, parents living in the inner west and the lower north shore areas can expect to pay as much as $120 per day, compared to the national average of $75 per day. With such a drain on your family's income, it's vital that you work with an independent financial planner to explore the options available to you from the Australian government.
The Child Care Rebate
The Child Care Rebate is a government scheme that can help you offset certain costs. The Rebate covers 50 percent of your out-of-pocket expenses, which the government calculates by deducting any Child Care Benefit or other financial assistance you receive from your total childcare costs. The annual limit for this scheme is currently $7,500 per year, per child.
The good thing about the Child Care Rebate is that the scheme is not income tested, so the money is theoretically available to all families. That aside, there are strict eligibility criteria. You must:
- Use an approved childcare provider
- Meet the criteria for Child Care Benefit, even if your income means you can't receive any money
- Meet the Work, Training, Study test (which means you or your partner should have worked, trained or studied at some point in every week that your child is in childcare)
Make sure you tell the Department of Human Services if any of your personal circumstances change. If you don't tell them within 14 days, you may have to pay back some of the money you receive.
Child Care Benefit
Child Care Benefit helps parents meet the costs of childcare, including day care, outside school care and kindergarten. Eligibility criteria for the scheme are strict and, unlike Child Care Rebate, parents on the scheme are subject to income testing. That aside, the scheme does not take your assets into account, so the value of property you own does not affect your eligibility.
You must use an approved or registered care provider. You must also make sure that your child receives all necessary immunisations, and you must meet Australian residency requirements. The Department of Human Services also examines several other factors. For example, a salary sacrifice scheme with your employer can interfere with a Child Care Benefit claim if your company pays any part of your childcare costs.
The government adjusts payment rates annually. These adjustments normally match fluctuations in the Consumer Price Index. The amount you receive depends on many factors, but the Department of Human Services publishes an online calculator to help you work out how much you would receive.
Planning For Childcare Costs
A financial advisor can help you plan for future childcare costs. Indeed, it's important to start planning before you have a family, as this can help you save up enough cash to get the childcare you need. A savings account or term deposit is a low-risk option, but the interest rate may not deliver the return you want.
A portfolio of shares and bonds could offer a better return on your investment. Diversifying your portfolio makes your investment more secure over time, although you should also consider some level of risk. With a more diverse investment portfolio, you may not need to pay as much each month to get the same return as a standard savings account.
With increasing childcare costs, Australian parents must consider all available sources of financial support. Ask a financial planner to help you understand how to maximise return on your investment, and find out if you can claim Child Care Benefit or the Child Care Rebate.