For Centre based daycare, the national average hourly fee is $10.25 per hour, but almost 14% of providers charge more than $12.20 per hour. These providers are more likely to be in high demand, high living cost parts of Australia. (See here).

For families trying to get to the bottom of child care costs - there is more than just the cost per hour to consider - it’s the number of hours that the government will support, and in some cases - particularly in the city areas - those hours are not enough to cover a full time work week.

Child care providers open for more than 10 hours per day can be a disadvantage for full time workers. While having more flexibility in drop off and pickup is convenient, this may be at the expense of being covered by the government child care subsidy for all the time in care.

Families need to take a close look at what these extra session hours mean to their child care costs to get a clear picture on what work and childcare decisions mean to their family budget.

Cutting through the complexity of child care costs is essential for managing the financial pressure of having a young family.

How does this happen?

To get to the bottom of this, families need to consider the “activity test” the government uses to decide how much child care they will support.

This “activity test” in itself can warrant a closer look if your activity is not paid employment (we discuss it here). In government terms - if you satisfy the activity test for more than 48 hours in a fortnight, you can qualify for 100 hours of subsidised care.

Like a lot of government rates and numbers, it takes a bit of work to get a clear view.

To simplify this - consider the activity test over a week (not a fortnight) and consider a working day of 8 hours.

For example, 24 hours of activity in a week is a 3 day work week - and because of this, the government will subsidise 36 hours of child care.

More than 24 hours (or 3 days), and you qualify for 50 hours.

So far so good?

This is where it gets confusing. If all childcare providers charged for a 10 hour day this would all be very straightforward. But many providers are open for longer than 10 hours, and this has an important impact.

Take a closer look at your hours.

This is the interesting part.

A quick look at child care providers in Sydney’s CBD shows many are open for more than 10 hours in a day.

This is not just a story for the CBD of course - many providers outside of urban areas will be open more than 10 hours in a day also - and the same challenge could arise.

If you worked 4 days a week, and your provider was open 11 hours a day - you would be using 44 hours of your 50 hour allocation - which means all hours are subsidised. All good.

If you worked 5 days a week, and needed 55 hours, your subsidy runs out at 50 hours. You will have to pay for 5 hours on Friday without any subsidy.

This means that on Friday your family income is impacted by higher child care costs.

Click on the image to zoom. Source: Child Care Finder 28 March 2022

Government policy announcements and your family

A closer look at Government policy announcements about child care will use modelling that considers only a 10 hour day.

You will also note that these announcements may use an average child care hourly rate that is much lower than the one you pay.

When looking at child care in national terms, this may seem fair enough - but in areas where hourly child-care rates are much higher, and centres are open for longer than 10 hours, these numbers will not apply.

Both Liberal and Labor childcare policy will likely be based on assumptions (and proposed benefit) that may not apply to your situation - especially if your centre hours and hourly rate are not a match.

That is why you need to take a closer look.

What next?

If you want to work out your out of pocket childcare costs, you will need to know how many session hours a week you are using, and whether your hours are a match to your entitlement.

The table below should be a good start.

If you are working 3 days, and your provider is open 12 hours a day, you are in a good position to get the most subsidy - as you are not using your maximum number of hours (50).

However, if you are working 5 days - you should check your numbers.

Not so fast…

It’s worth highlighting that some providers allow you to use an amount of hours that are less than the full day session. As an example a facility open 12 hours may allow you to use a session of 10 hours.

This is where it gets complex - and it is likely based on situations where the provider is not worse off by charging you for 10 hours at a higher rate.

This will work in situations where the day rate is lower than many inner city providers - however for provider charging at an hourly rate higher than the rate cap of $12.31, the offer of using only part of the session is less likely to be on the table.

Know the numbers

Your household income is made up of many components - not just your take home pay.

It’s worth the effort to understand all the moving parts so you can make better plans and take away the surprises.

The cost of convenience - higher than you think.