In July 2023, the government increased the Child Care Subsidy rates for all families earning up to $530,000, setting the maximum subsidy to 90% for families earning $80,000 or less. This has significantly reduced out-of-pocket costs for families, with data showing a family earning $120,000 a year has saved approximately $2,768 since the changes began.

Building on this initial reform, Parliament has now passed legislation to introduce a '3 Day Guarantee' from January 2026. This will remove the current 'activity test' that restricts subsidy access based on work or study requirements, ensuring every child can access at least three days of subsidised early education. The reform is expected to benefit over 100,000 families, with those earning between $50,000 to $100,000 saving an average of $1,460 annually.

The reforms mark a significant shift towards universal early childhood education. The removal of the activity test, which the Australian Institute of Family Studies found had no evidence of increasing workforce participation, will particularly benefit children from disadvantaged backgrounds who were previously locked out of the system.

The Dutton led Coalition voted against this legislation. The Liberals have said the 3 Day Guarantee was “not something…the country can afford” [1]

UPDATE 29-03: 3 DAY GUARANTEE - Passed in Senate:

Labor's Three-Day Child Care Guarantee

A critical reform ensuring all families can access at least three days of subsidised child care per week regardless of work or study commitments.

The Early Childhood Education and Care (Three Day Guarantee) Bill abolishes the activity test for the first three days of child care, guaranteeing families can access 72 hours of subsidised care per fortnight starting January 2026. Previously, parents needed to work or study at least 16 hours per fortnight to access this level of subsidy, creating barriers for vulnerable families. The bill also ensures families caring for Aboriginal and Torres Strait Islander children will access 100 hours of subsidised care regardless of activity levels.

The Productivity Commission recommended scrapping the activity test as it was hurting families who needed support most without substantially increasing workforce participation. The $426.7 million reform will benefit approximately 66,700 families in its first year, with more than 100,000 families eligible for additional hours of care.

Key Benefits

• Guarantees 72 hours of subsidised child care per fortnight for all eligible families

• Families with 48+ hours of recognised activities still qualify for 100 hours of subsidised care

• Average savings of $1,460 per year for families gaining additional access

• Families caring for Aboriginal and Torres Strait Islander children receive 100 hours of subsidised care

[1] https://www.abc.net.au/news/2025-02-13/childcare-three-day-guarantee-subsidy-passes-parliament/104932300

[2] https://ministers.education.gov.au/clare/albanese-government-introduces-legislation-guarantee-3-days-early-education-and-care

[3] https://www.education.gov.au/about-department/resources/3-day-guarantee-early-education

[4] https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7316

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[1] https://ministers.education.gov.au/clare/albanese-government-passes-legislation-deliver-child-care-3-day-guarantee

[2] https://www.education.gov.au/early-childhood/about/data-and-reports/quarterly-reports/june-quarter-2024

[3] https://www.vu.edu.au/about-vu/news-events/news/labor-guarantees-3-days-of-childcare-160-new-centres-what-does-this-mean-for-families

[4] https://ministers.education.gov.au/clare/new-data-shows-albanese-labor-governments-early-childhood-education-plan-working-families-and

[5] https://www.abc.net.au/news/2025-02-13/childcare-three-day-guarantee-subsidy-passes-parliament/104932300