Fears childcare subsidy could leave families in the red

The childcare sector is sounding the alarm that parents could end up owing debts to Centrelink if the same system used to calculate "robodebts" is used to match income declared for childcare subsidies.

The government has hosed down the concerns though, saying the upcoming "balancing" of declared incomes is a process that has been in place for many years.

After changes made to the way childcare subsidies were calculated and paid came into effect at the start of the financial year, this month Centrelink is expected to use income declared to the Tax Office to ensure families didn't claim more subsidies than they were entitled to.

There are fears the change will disproportionately affect vulnerable lower-income families more than those on higher, steady incomes.

The childcare subsidy is means-tested and paid directly to childcare centres. Picture: Shutterstock

The childcare subsidy is means-tested and paid directly to childcare centres. Picture: Shutterstock

Under the changes introduced last year, the childcare subsidy is means tested by a family's income, and an estimate of the income must be declared in advance for the subsidy, which is then paid directly to the childcare centre.

Casual and part time workers who may have picked up more work than they expected could find they claimed a higher subsidy.

Australian Childcare Alliance vice president Nesha Hutchinson said the risk of over-payment has been known since the system came into effect.

"This debt is going to hit lower income families as higher income families aren't as dependent on the on the subsidies as lower income families," she said.

"It's a very uncertain time and while the government hasn't released any information about how it's all going to play out, it's the uncertainty that's most frustrating for families and services."

Ms Hutchinson said childcare providers were worried about the stress placed on families and the uncertainty around the way debts would be recovered, including if debts could be raised with providers.

"There's a lot of childcare centres in regional and remote areas who don't have a strong cashflow and don't have that money up their sleeve and being told 'we're going to take back thousands of dollars' without any notice would affect their ability to make staff payroll and many other things," Ms Hutchinson said.

Human Services said childcare providers won't be made to pay and that five per cent of the subsidy is withheld across the year to be used once the actual income is balanced against the estimate. Ms Hutchinson is concerned about what will happen in cases where the five per cent buffer hasn't been enough.

"It's a very complex thing to manage," she said.

Labor's spokeswoman on early childhood education and development Amanda Rishworth said the government's history didn't give people confidence in the system.

"This is the same government that brought us 'robodebt' - there is no reason to have any confidence the Liberals have got any better at managing their IT system since that debacle," she said.

"Given the complexities of these changes to the system and the historic failures of this government, families are right to be worried that they will be targeted and be hit with a big bill."

New Government Services Minister Stuart Robert has moved to reassure families big debts won't be raised against them.

"Compared to the multiple payments with varying eligibility requirements in the past, the Child Care Subsidy introduced by the government is far simpler and provides more support to those who need it most," Mr Robert said.

"While this is the first time Child Care Subsidy payments will be balanced, previous childcare payments have also been balanced in a similar way."

Mr Robert said the department relies on families giving them up to date information and regular reminders are given to ensure people give the correct information and tell Centrelink when their circumstances change.

"I am confident the department will deal sensitively with families to manage the balancing of family payments, including any overpayments that may arise."

Human Services says the system being used is an established process that has been used for 17 years for the family tax benefit and childcare benefit.

Human Services spokesman Hank Jongen said there were three possible outcomes of the "balancing process".

"If people didn't receive all the subsidy they were entitled to, they will receive a top up payment. If they received the right amount of Subsidy throughout the year, they won't be impacted by the balancing process. If they have been paid too much Child Care Subsidy, they'll be notified of the overpayment amount and repayment options," he said.

"For those who have been overpaid, we want to reassure them that we can help them find a suitable repayment arrangement."

Mr Jongen said it was important to note that even if a family has an overpayment, it doesn't affect their eligibility for the childcare subsidy.