How the Child Care Subsidy Works in Australia

What is the Child Care Subsidy?

The Child Care Subsidy (CCS) is the Australian Government's main payment to help families with the cost of childcare. It replaced the older Child Care Benefit and Child Care Rebate in July 2018.

CCS is paid directly to your childcare provider, reducing the amount you pay out of pocket. The subsidy covers a percentage of the hourly fee (up to a government-set cap), with the exact percentage determined by your combined family income.

Three factors determine how much CCS you receive:

1. Your combined family income — determines the subsidy percentage (up to 90%)
2. The hourly rate cap — the maximum hourly fee the government will subsidise
3. The activity test — determines how many subsidised hours you can access per fortnight

The income test

Your CCS percentage is based on your combined family income — both partners' adjusted taxable income added together. For single parents, it's just your individual income.

The formula for FY 2025–26 is straightforward:

• Family income up to $85,279 → maximum 90% subsidy
• For every $5,000 above $85,279, the subsidy drops by 1 percentage point
• The subsidy reaches 0% at approximately $535,279

For example, a family earning $95,000 is $9,721 above the $85,279 threshold. Dividing by $5,000 and rounding up gives 2 brackets, so their CCS rate is 90% − 2% = 88%.

Annual subsidy cap: Families earning above $85,279 have an annual CCS cap of $11,003 per child. Families below that threshold have no cap. The cap is unlikely to affect most families — you would need to use more than about 4 days per week of expensive care at a lower CCS rate to reach it.

Hourly rate caps

The government doesn't subsidise unlimited fees. There is a maximum hourly rate (called the “hourly rate cap”) that CCS will cover. If your provider charges more than the cap, you pay the difference entirely out of pocket.

How the cap works in practice: Suppose your child is in centre-based day care at $15.00 per hour. The cap is $14.63, so CCS is calculated on $14.63 — the remaining $0.37 per hour is an above-cap gap you pay in full. Over a 12-hour session, that's an extra $4.44 per day above what CCS covers.

The activity test

The activity test determines how many subsidised hours per fortnight your family can access. “Activity” includes paid work, self-employment, study, training, volunteering, or looking for work.

The test is based on whichever parent or carer does the fewest hours of activity per fortnight. For single parents, it's based on your hours alone.

In practice, most working families meet the threshold for the full 100 hours (48+ hours per fortnight equals roughly 3 days of work per week). Families where one parent is not working or works very few hours still receive the guaranteed 72 hours.

The 3-day guarantee (from 5 January 2026)

Since 5 January 2026, every eligible family receives a minimum of 72 subsidised hours per fortnight — equivalent to about 3 days of care per week — regardless of activity level. This is commonly called the “3-day guarantee”.

Before this change, families where neither parent met the activity test received either no subsidised hours or a very limited amount. The 3-day guarantee means:

• Stay-at-home parents can access subsidised care for up to 3 days per week
• Families between jobs or reducing hours are not suddenly cut off
• Children maintain continuity of care even when family circumstances change

Higher rate for younger children

Families with more than one child aged 5 or under in approved care benefit from the higher CCS rate. Introduced on 10 July 2023, this policy increases the subsidy for every child except the eldest.

The higher rate is calculated as:

• Take the eldest child's standard CCS rate
• Add 30 percentage points
• Cap the result at a maximum of 95%

For example, if your eldest child's standard rate is 77% (at $150,000 combined income), your younger children would receive 77% + 30% = 107%, capped at 95%. That means the government covers 95 cents of every dollar of fee (up to the cap) for each younger child — a significant saving.

5% withholding explained

Services Australia withholds 5% of your CCS entitlement each fortnight as a buffer. This is not a fee or a tax — it's held back to protect against overpayments that can occur if your actual income differs from the estimate you provided.

After the end of the financial year, the government compares your CCS entitlement (based on your actual income from your tax return) against what was paid during the year. The withheld 5% is then either:

• Refunded to you — if your actual income matches or is below your estimate
• Used to offset a debt — if your actual income was higher than estimated (meaning you received too much CCS)

In our calculator, we show both figures: the gap fee during the year (which includes the 5% withholding effect) and the true gap fee after reconciliation (assuming your income estimate was accurate).

Worked example: one child, $90,000 income

Step 1 — Determine the CCS rate:

Income of $90,000 is $4,721 above the $85,279 threshold. Dividing by $5,000 and rounding up: ⌈4,721 ÷ 5,000⌉ = 1 bracket. CCS rate = 90% − 1% = 89%.

Step 2 — Check the hourly rate cap:

Mia's daily fee is $150 for a 12-hour session = $12.50 per hour. The hourly rate cap for centre-based day care (below school age) is $14.63. Since $12.50 is below the cap, the full fee is subsidised — no above-cap gap.

Step 3 — Calculate the daily subsidy:

CCS per day = $150.00 × 89% = $133.50
Gap fee per day = $150.00 − $133.50 = $16.50

Step 4 — Add the 5% withholding:

Withholding per day = $133.50 × 5% = $6.68
Gap fee during the year = $16.50 + $6.68 = $23.18 per day
True gap fee (after reconciliation) = $16.50 per day

Step 5 — Annualise (3 days × 50 weeks):

The bottom line: The government covers $20,025 of Mia's $22,500 annual childcare cost. Sarah and Tom pay $2,475 per year out of pocket (after reconciliation) — about $49.50 per week.

Worked example: two children, $150,000 income

Step 1 — Determine the CCS rates:

Income of $150,000 is $64,721 above the threshold. ⌈64,721 ÷ 5,000⌉ = 13 brackets. Standard CCS rate = 90% − 13% = 77%.

Aiden (eldest child) gets the standard 77%.
Zara (younger child) gets the higher rate: 77% + 30% = 107%, capped at 95%.

Step 2 — Calculate daily subsidies:

Both children's fees ($12.50/hr) are below the $14.63 hourly cap — no above-cap gap.

Step 3 — Combined family costs (3 days × 50 weeks):

How much does the higher rate save this family?

If both children were at the standard 77% rate, Zara's gap fee would be $34.50 per day instead of $7.50 — an extra $27.00 per day. Over 3 days and 50 weeks, the higher rate saves Priya and James $4,050 per year.

How to apply for CCS

Applying for CCS involves five steps:

1. Create a myGov account and link it to Centrelink (if you haven't already). You'll need to verify your identity.
2. Submit a CCS claim through your Centrelink online account. You can do this before your child starts care.
3. Provide your family income estimate for the current financial year. Be as accurate as possible — this determines your CCS rate and affects the 5% withholding reconciliation.
4. Complete the activity test — declare the hours of recognised activity (work, study, volunteering) for both parents each fortnight.
5. Confirm your enrolment — your childcare provider will send an enrolment notice through the system. You need to confirm it within 14 days.

CCS claims are usually processed within 1 to 2 weeks. Once approved, the subsidy is paid directly to your provider each fortnight.

Ready to see what CCS will cost your family? Use our free CCS calculator for a personalised estimate — it takes about 2 minutes.