The current activity test for the Child Care Subsidy limits access to subsidised child care and is contributing to at least 126,000 children from the poorest households missing out on critical early childhood education and care. As a result, these children are more likely to start school behind their peers, with many never catching up.

The activity test aims to encourage participation in the workforce, but does the opposite by creating significant uncertainty for parents in casual employment due to the ongoing risk that they will fail to meet the test and generate overpayment debts.

This report argues that abolishing or simplifying the activity test would ensure that all children in Australia have greater access to early childhood education and care. This is an important step toward universal early childhood education and care and help increase the number of children developmentally on track when they start school. In addition, abolition or simplification of the activity test will reduce the complexity of the system and the risk of overpayments, removing barriers faced by low-income casual employees seeking to increase their hours of work.