The Child Care Package: Activity Test
June 2023
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Overview
This snapshot presents findings from the 2018–2021 evaluation of the Australian Government's Child Care Package.
The Child Care Subsidy (CCS) was introduced in July 2018 as part of the Child Care Package.1 CCS replaces the former subsidy arrangements and helps Australian families in meeting the cost of child care.2 This snapshot presents an overview of the activity test and experiences with it since its introduction, drawing on findings from the evaluation of the Child Care Package.
What is the activity test?
The activity test is one of the four components of the CCS which determine how much, if any, support is provided to families.3 For children in approved child care and eligible for CCS, the activity test determines the maximum number of hours of care than can be subsidised each fortnight. The test is based on time spent by parents in a range of 'recognised activities'. For couples the assessment is based on the parent/carer with the lower number of activity hours.
- For activity of more than 48 hours per fortnight, each child can have up to 100 hours of subsidised child care.
- For activity of more than 16 hours and up to 48 hours per fortnight, each child can have up to 72 hours subsidised.
- For activity of 8-16 hours per fortnight, each child can have up to 36 hours subsidised.
- For activity of less than 8 hours, no subsidy applies (although see the exemption below for low-income families).
While the most frequently reported activity is employment, self-employment, unpaid work in a family business, looking for work, volunteering, studying, and time spent travelling between these activities and child care are also eligible. Families must report how many hours they (the claimant and their partner/spouse, if applicable) spend in recognised activities in a fortnight.
Families may use child care for longer periods than approved under the activity test, however they receive no subsidy for this and must pay the full cost of any 'excess' hours.
There are some exemptions to the activity requirement.4
- Low-income families (those with annual incomes up to $68,163 in 2019-20) who do not meet the activity test can access 24 hours of subsidised care for each child per fortnight as part of the Child Care Safety Net.
- Children who attend a preschool program at a Centre Based Day Care (CBDC) service and who are in the year before full-time school are eligible for 36 subsidised hours per fortnight if families do not meet the activity test.
- If children are eligible for Additional Child Care Subsidy (ACCS), families do not have to satisfy the activity test and can access up to 100 hours of subsidised early childhood education and care (ECEC) per fortnight. (Except for ACCS (Transition to Work), for which an activity test applies.)
- Children cared for by some income support payment recipients including Grandparent principal carers, Disability Support Pensioners and Carer Payment recipients are eligible for 100 subsidised hours per fortnight.
Relative to the former arrangements the new activity test is more complex and stringent. Formerly the Child Care Benefit (CCB) required parents to undertake at least 15 hours of activity per week to be eligible for 50 hours of care per week and children of those who did not meet this were eligible for CCB for up to 24 hours of child care per child per week. As a result the Child Care Package reduces the number of subsidised hours of child care available to families with low activity.
Activity test outcomes and subsidised hours
Taking into account both the operation of the activity test, and the incidence of exemptions, across all families with at least one child in approved child care in October-December 2019:5
The distribution varied for different groups. Families with a higher proportion of access to 100 hours of subsidised care (see Table 1) include:6
- single-parent families, rather than couple-parent families
- families with a youngest child aged 7 years or more, compared to those with younger children
- higher income families.
In contrast, lower income families were much more likely to be only entitled to 24 or 36 allowed hours.
| Hours of Child Care Subsidy per fortnight entitled to: | Families | ||||||
|---|---|---|---|---|---|---|---|
| 0 hours | 24 hours | 36 hours | 72 hours | 100 hours | Total | Total | |
| Distribution (%) | |||||||
| Family type | |||||||
| Single parent | 0.1 | 4.3 | 5.5 | 20.1 | 70.0 | 100.0 | 193,135 |
| Couple parent | 0.8 | 1.3 | 3.8 | 28.8 | 65.4 | 100.0 | 720,102 |
| Age of youngest child attending child care | |||||||
| 0-1 years | 0.4 | 1.7 | 3.3 | 29.8 | 64.8 | 100.0 | 157,615 |
| 2-4 years | 0.6 | 2.5 | 5.1 | 28.8 | 63.0 | 100.0 | 461,197 |
| 5-6 years | 0.7 | 1.1 | 4.1 | 24.0 | 70.1 | 100.0 | 137,983 |
| 7+ years | 1.2 | 1.1 | 2.2 | 21.2 | 74.3 | 100.0 | 156,442 |
| Family income | |||||||
| Missing/Nil | 0.5 | 6.7 | 8.8 | 23.9 | 60.1 | 100.0 | 7,214 |
| <$50k | 0.0 | 8.3 | 9.7 | 26.8 | 55.2 | 100.0 | 145,915 |
| $50-<100k | 0.7 | 2.3 | 5.6 | 27.1 | 64.4 | 100.0 | 197,689 |
| $100-<150k | 0.7 | 0.1 | 2.8 | 30.2 | 66.2 | 100.0 | 219,685 |
| $150-<200k | 0.7 | 0.1 | 1.7 | 27.1 | 70.4 | 100.0 | 176,763 |
| $200k and over | 1.2 | 0.1 | 1.7 | 22.5 | 74.6 | 100.0 | 165,971 |
Notes: Table based on maximum entitlement of the family in the quarter. It excludes a small number of records where hours were not at the standard thresholds, those with missing allowed hours and missing hours of care attended.
Source: DESE administrative data
Changes in parents' activity levels and employment
There were some slight increases in average activity levels reported by parents using child care over the period of the evaluation, from the introduction of the Child Care Package in July 2018. This was more marked for single parents (see Table 2). However, the evaluation noted that some of this may reflect parents adjusting to the new arrangements, with data indicating there was some misreporting.
| Selected months | Single parent | Couple | |
|---|---|---|---|
| Claimant | Partner | ||
| Hours per fortnight | |||
| July 2018 | 58.6 | 61.0 | 76.0 |
| September 2018 | 58.9 | 61.1 | 76.1 |
| December 2018 | 59.2 | 61.1 | 76.2 |
| March 2019 | 59.5 | 61.0 | 76.2 |
| June 2019 | 59.5 | 61.0 | 76.3 |
| September 2019 | 59.7 | 61.1 | 76.4 |
| December 2019 | 60.0 | 61.2 | 76.5 |
Notes: Activity hours were capped at 100 hours a fortnight given some unlikely high values. Those with zero hours were excluded from calculations.
Source: DESE administrative data
The evaluation looked in detail at whether parents had changed their engagement in employment as a result of the package. It found that while some had increased their employment, others had reduced their engagement. While on balance the impact was considered likely to have been positive, the extent of this was small, and the overall trends were not inconsistent with historical trends in the workforce participation of families with children. The analysis found that parental values and attitudes were an important issue to increasing workforce participation.
Consistent with this small impact, over the period of the evaluation (July 2018 to December 2019), there was little change in the proportions of families in each of the activity test bands.
Subsidised and unsubsidised hours
As noted above, families can use more care than is subsidised, but have to pay the full cost of this. In the first fortnight of October 2019, Figure 1 shows that, overall, 6.2% of children were charged for more hours of child care than they were eligible for under the activity test. Those most likely to be using more child care than subsidised under the activity test are children eligible for 24 or 36 hours per fortnight, with a little over 3 in 10 of these children using more child care than is subsidised. For children with access to 72 or 100 subsidised hours per fortnight, most children were eligible for some subsidy for all their hours of child care.
Figure 1: Percentage of children using more child care than is covered by the activity test, October 2019
Note: Excludes children with zero approved hours, and a small number of records where allowed hours were not at standard thresholds.
Source: DESE administrative data
While most families considered they had an adequate amount of subsidised hours, a quarter did not. This was more frequently reported by parents using Centre Based Day Care and Family Day Care and by almost a third of couples where one or both worked full-time. Families on upper middle to higher incomes were more likely than those on lower incomes to consider their subsidised hours to be insufficient.
Reporting activity hours and understanding the activity test
Families are required to keep their activity details up to date with Services Australia (e.g. using the MyGov app). Parents who work irregular hours are advised to report the maximum hours they expect to work in a fortnight over a three-month period, and to only update that if the maximum expected hours or type of work (e.g. casual to full-time) changes.
Just over half (51%) of parents surveyed in June 2019 said it was easy to report their activity, including 6% strongly agreeing.7 Another 29% neither agreed nor disagreed, and 19% disagreed. Parents reported in the September 2019 Child Care Package Family Survey that they were confident they had reported their activity details correctly (see Figure 2) and few parents reported they over or underestimated their activity.8 At the same time over half were concerned about having a child care debt associated with the incorrect reporting of activities.9
Surveys also found that while the level of parents' understanding of, and confidence in, reporting activity improved over the first year of the program's operation, there were some parents who did not know what to do if circumstances changed or were not certain that activity such as a job search counted as activities.
Figure 2: Entering and updating activity details, parent perspectives
Note: Excludes those who answered 'Don't know' or 'Prefer not to say'. N = 474-495
Source: Child Care Package Family Survey, Wave 2 (September 2019)
Service and stakeholder views about the activity test
Services and stakeholders expressed reservations about the activity test, and about parents' understanding of the test. There were concerns about a lack of understanding among families of the range of activities that could count towards the activity test, and concern for how the activity test might affect parents/carers engaged in casual or intermittent work. Services and providers spoke of needing to help families to understand the activity test and support them to report all of their activity.
In the interviews conducted by the evaluation a particular focus of concern with the activity test was around vulnerable and disadvantaged children who only have access to a maximum of 24 hours per fortnight of subsidised care under the activity test, compared to the previous arrangements where they had access to 24 hours of subsidised care per week. This was raised by over half of the responding services. It was also reflected more broadly in a view by services that the activity test diminished the focus on addressing the wellbeing and development of children through child care, in favour of just parental employment.
Summary
The evaluation found that for the majority of families, the activity test did not impose a significant limitation on access to child care, nor did families feel constrained by it. For many, the child care they were using was covered by the number of subsidised hours they had access to. However, for some the activity test did have an impact. This was especially so for those whose activity test result gave them access to 24 or 36 subsidised hours. For them, significant proportions were using unsubsidised child care beyond these amounts.
A majority of parents reported it was easy to update their activity details but there is evidence of some gaps in understanding. Concerns about the activity test largely centre around the degree to which it impacts access to ECEC for more vulnerable children.
A majority of parents reported it was easy to update their activity details but there was evidence of some gaps in understanding. One key concern, especially by services and other stakeholders, was that the activity test adversely impacted on access to child care for more vulnerable children.
Child Care Package evaluation
In July 2018 the Australian Government introduced the Child Care Package. The Australian Institute of Family Studies in association with the Social Research Centre, the UNSW Social Policy Research Centre and the ANU Centre for Social Research and Methods were commissioned by the Australian Government Department of Education, Skills and Employment to undertake an independent evaluation of the new Child Care Package. Findings presented here are based on data collected and analysed for the Child Care Package evaluation. The evaluation commenced in December 2017 prior to the introduction of the Package and reported on data collected up to December 2019. The evaluation was impacted by external events, particularly COVID-19, which resulted in the suspension of the child care funding system for a period during 2020. As a result, the evaluation only draws on data to the end of 2019 and does not include data from 2020.
1 The policy settings described in this snapshot refer to those that applied at the time of the evaluation. There have been some updates to policy settings since this time, and the Department of Education, Skills and Employment (DESE) is now the Department of Education.
2 The former funding arrangements comprised an activity tested Child Care Benefit (CCB) and universal Child Care Rebate (CCR).
3 Other components that determine the amount of CCS are the activity test and: (1) hourly rate caps, which limit the hourly fee charged by child care providers subject to the subsidy; (2) the income test, which determines the percentage rate of CCS families are eligible for. The subsidy rate commences at a rate of 85% of the fees paid, up to the hourly rate cap, and then is tapered, in stages, as family income increases. (3) the annual cap, which is the maximum amount of CCS, per child, that will be paid to a family in any one financial year. The annual cap only applies to families with an annual income over $186,958 (2018-19).
4 This is a summary of exemptions only. In exceptional circumstances, families can make an application to Centrelink that it would be unreasonable for them in their circumstances to satisfy the activity test. This provision also allows for a subsidy for more than 100 hours per fortnight. In couple families, if one person has an exemption, the hours of subsidised care for the family is based on the person with the lowest activity test result.
5 Some families may have children eligible for different numbers of subsidised hours, given that some exemptions apply at the child level. These proportions are the maximum entitlement reported for any child in the family in this quarter.
6 As noted, the proportion of families accessing 100 subsidised hours per fortnight combines both those meeting the activity test and children covered by an exemption, or are on ACCS. The data available to the evaluation did not allow these to be disaggregated. See also Vulnerable Families and ACCS snapshots.
7 This data was collected in the DESE/ORIMA Parent Surveys, which were managed and designed by the Department and conducted on the Department's behalf by ORIMA Research. Results were provided to the evaluation as the main source of data on parents' experience and views. The surveys were conducted twice-yearly from June 2018, and in all but the November 2019 survey included a sample of parents not using child care. We refer to respondents as parents but a small number were grandparents or other carers.
8 This survey was conducted by AIFS for the evaluation, with respondents being a subset of the DESE/ORIMA Parent Survey respondents. It was conducted in November 2018 and September 2019.
9 If it is determined that activity details were incorrect and were lower than recorded, this may result in families having accumulated an 'activity debt', which is recovered as part of the end of financial year reconciliation.
Australian Institute of Family Studies. (2023). The 2018–2021 Child Care Package Evaluation: Activity Test. (Findings from the Child Care Package evaluation). Melbourne: Australian Institute of Family Studies.