Am I Financially Better off Employing a Nanny?
In 2018, there were substantial changes to child care benefits and child care rebates. These were replaced by the Child Care Subsidy which is determined by three separate tests detailed below.
These changes were designed to increase assistance for lower income households and accordingly reduce benefits for those families on higher incomes. Putting aside political bias and welfare/education opinions, some families may be financially better off employing a nanny.
Cost of a Nanny
As a starting point ‘Live in’ nannies often range between $250 to $400 per week (Plus food and board) Nannies that have experience may charge a higher rate that can range from $350 to well over $1,000 a week. A nanny that doesn’t live in the home may simply charge an hourly rate often in the range of $18-$25 per hour.
Cost of Child Care (Long day care at a Child Care Centre)
Once again the cost of child care can vary greatly with some rates as low as $80 per day all the way up to over $170 per day. The actual cost will then be determined by your eligibility to receive the child care subsidy which is calculated by applying the following 3 tests (Note: For families earning $185,710 and $350,000 this is capped at $10,000 per child).
- Combined family income
- Activity level of parents
- The type of child care service
Test 1: Combined Family Income:
|Combined family income^||Subsidy rate*|
|Up to $65,710||85%|
|Over $65,710 to under $170,710||Gradually reducing to 50%|
|$170,710 to under $250,000||50%|
|$250,000 to under $340,000||Gradually reducing to 20%|
|$340,000 to under $350,000||20%|
|$350,000 or more||0%|
^ These figures increased by the Consumer Price Index (CPI) when the package began in July 2018.
* Subsidy rate of actual fee charged or the maximum hourly rate cap (whichever is lower).
Test 2: Activity Level of Parents
There is also an activity test for parents that caps the maximum number of subsidised hours as per the table below. Note there are a range of recognised activities as well as some exemptions.
|Step||Hours of activity*||Maximum number of hours of subsidy per child*|
|1||8 hours to 16 hours||36 hours|
|2||More than 16 hours to 48 hours||72 hours|
|3||More than 48 hours||100 hours|
Test 3: Service Type
The Government will subsidise child care based on the type of service received.
|Service Type||Rate Cap|
|Centre Based Day care (Long day care and occasional care)||$11.55 max hourly rate cap|
|Family Day Care||$10.70 max hourly rate cap|
|Outside school hours care (Before, After and Vacation care)||$10.10 max hourly rate cap|
Every household will vary slightly depending on their unique circumstance however for families on higher incomes it is certainly worth considering alternative options. There are numerous calculators available online to calculate what subsidy you are entitled. Talk to one of our Financial Specialists to find out the best option for you, complete your details below and we’ll be in touch or give us a call on (03) 9835 8200.
DISCLAIMER: GENERAL ADVICE ONLY
The information provided in this blog is general in nature. It has been prepared without taking into account any person’s individual objectives, financial situation or needs.
Before acting on any information in this blog, you should consider its appropriateness to you, having regard to your objectives, financial situation and needs or seek professional advice from a financial advisor.