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Childcare cost blowout creating ‘perfect storm’

Adam Zuchetti
Adam Zuchetti
12 October 2017 1 minute readShare
Storm, umbrellas

Soaring childcare costs are damaging the ability of SMEs to grow, with some Australian parents spending more on childcare than their take-home earnings.

“The perfect storm is brewing with more and more families facing the difficult decision of whether or not both parents can afford to work, given the ever-increasing costs of childcare across the country,” said Mitchell Herrett, principal of restructuring and recovery at global accounting network RSM Australia.

“Businesses are losing top workers because parents, most often women, have to make the tough call that it’s not worth going back to work because the money they are paying for childcare outweighs their potential income.”

As well as stifling recruitment and causing staffing headaches for employers, the cost of childcare is seeing some business owners themselves question whether to shut up shop altogether and become stay-at-home parents rather than toil away in their business simply to pay day care costs.

“SMEs struggle to actually work over the two-month December/January school holidays because they are juggling children and business,” one My Business reader said.

“I know many SMEs who have to virtually close down over this period so they can look after children.”

According to Mr Herrett’s colleague Brad Loftus, principal of RSM Australia’s business advisory division, the government’s attempts to address the issue are far from a foolproof fix.

“From 2 July 2018, a new subsidy will replace previous childcare benefits and rebates. Families earning $185,710 or less and who need to use more childcare will no longer have an annual rebate cap, [while] rebates will be capped for those who earn more than $185,710,” he said.

While this may sound more generous, Mr Loftus said the true value of the subsidy would depend entirely on the rate charged by individual day care centres.

“Th new subsidy appears to be a percentage of the cost of childcare, but in fact it is based on a standard rate of care,” he said.

“Therefore, if a provider charges more than the standard rate, then the parents will not get that percentage of the fee they pay, but a percentage of the standard rate. This is likely to be much lower.”

Mr Loftus noted that most Sydney-based fees are already beyond the standard rate, and rates will vary significantly across states and between metropolitan and regional areas.


Childcare cost blowout creating ‘perfect storm’
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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