One of the biggest expenses you may need to consider when preparing for your maternity or parental leave period is the cost of childcare if you do decide to return to work.
Paid childcare can put a large strain on the budget, especially if you have more than one child. That’s why it’s important to plan ahead and accommodate for this expense, especially since you’ll likely be approaching paying for it after a period of not having access to your regular income.
Luckily, there are government benefits available to help you offset the cost of paid childcare, such as the Child Care Subsidy package. This subsidy is available to anyone caring for a child aged 13 or younger who’s not attending secondary school, who is responsible for paying childcare fees and who meets certain residency and immunisation requirements.
The Child Care Subsidy is designed to ease the cost of childcare as the government pays for a certain portion of your child care expenses based on your income. For example, if your family income is between $0 to $68,163, the government will subsidise 85% of your childcare costs. If, however, your family income falls between $173,163 to below $252,453, the amount the government will subsidise falls to 50%.
This table, from the Australian Government Services, breaks down the percentage of childcare costs the government will subsidise further:
Since the government only subsidises a portion of your childcare expenses, we’d recommend factoring in preparing for how much you’ll likely need to pay the out-of-pocket costs in your maternity or parental leave plan.
You may also choose to consider whether returning back to work is the right option for your particular financial needs and circumstances. For example: if your returning to work pushes your family’s taxable income into a higher bracket, in turn lowering the amount of childcare subsidy you’ll receive from the government, it may result in your childcare costs outweighing your income. This is especially true for those with more than one child in childcare, in which case costs can double or even triple.
Don’t worry, your financial advisor will be able to work with you to assess your options when it comes to whether childcare is the right option for you and your family and plan a path moving forward suited to your unique financial circumstances and goals.
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