Working families with two or more children in childcare will see big cuts to their childcare bills from July under radical budget changes designed to encourage mums back into the workforce.

Under the changes to be unveiled on Sunday half of Australia's families with one child in care will have 95 per cent of their out-of-pocket expenses for any additional kids paid for by the Government.

This will end the current situation which can see childcare costs for families double when they put a second child in care.

The Government is also junking the cap on childcare subsidies of $10,560 after which parents earning more than $189,390 have to pay 100 per cent of child care fees.

Anna Moriarty and Toby Stephens with their son two-year-old Ollie, supported the reform. Picture: Rebecca Michael.
Anna Moriarty and Toby Stephens with their son two-year-old Ollie, supported the reform. Picture: Rebecca Michael.

Together the changes will also go a long way to ending disincentives for parents, especially mothers, to work extra days because their wages are being eaten up by childcare costs.

It will also go a long way to trumping Opposition Leader Anthony Albanese's promise last year to increase childcare subsidies.

The total cost of the reforms which will cut the cost of childcare for more than a quarter of a million families has been budgeted at $1.7 billion.

The average saving across the 250,000 families who will benefit is $2,260 a year.

Under the reforms a family earning $140,000 year with two children in care four days a week who are currently paying $316 a week will be $125 better off under the changes.

A family with three children on $80,000 will be $108 per week better off for four days of care.

Graphic explaining how the reforms will benefit families with two children.
Graphic explaining how the reforms will benefit families with two children.

Treasurer Josh Frydenberg said the money is in addition to the $10.3 billion the government will spend on child care this year.

"These changes strengthen our economy and at the same time provide greater choice to parents who want to work an extra day or two a week," he said.

"This is a targeted and proportionate investment that simultaneously makes child care more affordable, increases workforce participation and boosts the Australian economy by up to $1.5 billion per year."

The changes have been welcomed by business leaders with Business Council of Australia boss Jennifer Westacott they would go a long way towards fixing some of the financial cliffs and disincentives that stop women working to their full potential and hold back our economic growth.

"Today's announcement will make a huge difference to many of the 90,000 people across Australia who said they weren't in the workforce last year because of the high cost of child care," she said.

"This isn't just making a fairer society, it's also an economic imperative."

Ms Westacott said the BCA looked forward to working with the government and the Cabinet Women's taskforce to tackle the remaining issues in the system, so people can get back into the workforce, give families choices and build on our momentum down the path to recovery.

The Government estimates the changes will create incentives for around 40,000 people to work an extra day per week, boosting GDP by up to $1.5 billion per year.

Mr Albanese has also promised to scrap the annual subsidy cap of $10,560 per child which kicks in between $189,390 and $353,680 a year if Labor comes to power

Labor has also pledged to increase the maximum childcare subsidy rate from 85 to 90 per cent.

Originally published as How much families will save on childcare



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