Business Council of Australia joins chorus for CCS reform in Pre-Budget Submission

The Business Council of Australia (BCA) has, in a 2021-22 Federal Budget Submission, confirmed its support of proposed changes to the Child Care Subsidy (CCS), intended to serve as a means to reduce financial disincentives currently embedded in the system, and in turn, support a step change in female workforce participation rates.

The BCA is a leading business peak body and represents over 200 of Australia’s largest companies.

“This submission puts forward practical suggestions from the Business Council membership with the immediate priority of bringing back jobs and returning the economy to full employment,” the submission notes. 

“This year’s budget cannot solve all of our problems but it can make important steps towards setting us up for success and ensuring we do not go backwards.”

As part of the “Labor market recovery strategy” chapter a section titled “Removing barriers to female workforce participation” focuses on the challenges currently being faced by many households with young children as they weigh up the financial trade offs between the net cost of care post subsidies and the additional income they would earn should they return to work. 

“The combined effect of personal income tax, Child Care Subsidy taper rates, withdrawal of the Family Tax Benefit and the cost of additional child care can eliminate any financial incentive to work additional hours, with effective tax rates in some cases in excess of 100 per cent,” the BCA notes. 

In order to combat this, the BCA have recommended the following changes to the CCS:

• Increasing the maximum CCS rate for lower income households to 95 per cent (from 85 per cent currently)

• Resetting the income based reduction rates to commence at $80,000 (up from the current $66,958 level)

• Replacing the current taper system with a simplified version whereby for reach additional $4,000 earned above $80,000, the CCS rate receivable is reduced by 1 per cent

• Phasing out the any CCS support for families earning more than $450,000 (up from the current $351,248)

Although no additional information was provided on the impact their recommendations would have on workforce participation, in response to overall affordability and demand for care, the BCA referred to a recent report from KPMG which concluded that additional net CCS expenditure, post reform, of around $2.5 billion would see a corresponding GDP increase of around $4.0bn to $5.0bn.  

The BCA joins other organisations in calling for CCS reform including ECEC focused enterprise The Front Project.

To review the BCA submission please click here.