The Government has passed a bill to subsidise three days per week of childcare for families earning less than $530,000.
The announcement was initially floated as an election promise, but the Government chose to pass it ahead of the campaign instead. A federal election must be held by 17 May.
The subsidy means the Government will mostly scrap the “activity test”, which calculates support based on how much a parent works or studies.
The three-day subsidy will take effect from 1 January 2026.
Activity test
The activity test was rolled out in 2018 to calculate how much government funding a family would receive to send preschool-aged children to early childcare.
The assessment considered working hours, volunteering, or studying commitments. The number of hours dedicated to these areas dictated how much funding families were given.
The scheme was set up to encourage more workforce participation.
A Productivity Commission report published in 2024 found the test did not directly help more people get into work.
“Changes in employment and other activities were small and not necessarily attributable to the activity test,” the Commission said.
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It recommended abolishing the activity test.
“Children’s participation in [childcare] should not depend on their parents’ activity.”
Announcement
In December, Prime Minister Anthony Albanese announced the Government planned to subsidise three days a week of childcare for many preschool-aged children.
Families earning a combined annual income of $530,000 or less will be eligible for the three-day subsidy.
The Government estimates this will impact around 100,000 families.
The activity test will still be used for families who apply to have more than three days of care subsidised.
Parliament
The childcare subsidy has now passed Parliament, with the Greens and some crossbenchers voting in favour of it.
Early Childhood Education Minister Anne Aly said the subsidy “is about making sure that every child no matter their background and no matter where they live, has access to the transformative benefits of early childhood education and care.”
The Coalition voted against the measure. Opposition early childhood spokesperson Angie Bell said the move failed to address the “supply” of childcare centres and educators.
