This report makes proposals to reduce what the authors refer to as the Workforce Disincentive Rate (“WDR”), in the cases where it presents the most extreme deterrent to a primary carer – most often the mother – taking on additional days of work.
The WDR is the percentage of income from taking on an extra day’s work that a primary carer loses to income tax and Medicare levy, withdrawn family tax benefit, reduced child care subsidy and increased out-of-pocket child care costs.
Another initiative to address the highest WDRs would be to provide more assistance to families with more than one child in long-day care. These households experience a relatively high WDR, as the CCS reimburses a maximum of 85 percent of the child care costs for each child, and can therefore be under the most stress in terms of making ends meet. This would involve increasing the CCS to 100 percent (up to a maximum of the CCS’s capped hourly rate) for all households, regardless of income for the second (and any additional) child in simultaneous long-day care.
By alleviating the cost of child care, targeted spending can remove a major barrier facing primary carers seeking to return to work. The reduction in WDRs that would flow from KPMG’s policy options to improve child care policy can therefore create a range of benefits for Australian society.