The average family will be $30 a week better off, but high income earners will lose out, under changes to childcare policy announced by the federal government.

Families earning between $170,000 and $250,000 will get back 50% of their childcare costs, as long as they meet minimum standards of work, training or employment. The subsidy will be tapered to 20% for families earning $340,000. Families earning more than $340,000 will also receive the 20% subsidy.



Families earning less than $65,000 will still receive a subsidy of 85% gradually decreasing to 50% for those earning $170,00 a year.

Subsidies for families earning more than $185,000 will be capped at $10,000 per child per year.

The federal education minister, Simon Birmingham, also announced that grandparents who were primary carers of children would be exempt from the activity test, meaning they did not have to fulfil the work, training or study requirements.

That measure will affect 3,900 grandparents at a cost of $20m.

The 20% floor for income earners is a departure from what was announced in the May budget, which set a 50% minimum for families earning over $185,000 a year.



Birmingham conceded that “perhaps the original model was too generous in certain instances”.

“Families using child care in 2017, on family incomes of between approximately $65,000 and $170,000 will be around $30 a week or $1500 a year better off under the legislation to be introduced this week,” he said.

The innovation minister, Christopher Pyne, said the reforms were about increasing productivity.

“This measure is designed to support low and middle income families, so we shouldn’t focus on the high end of the announcement,” he told reporters on Sunday. “In fact, this is a measure that would support and reform child care so that low and middle income families can get more support from the Commonwealth government and return to work and make a contribution in the way they wish to make a contribution.”

The Greens spokeswoman on childcare, Sarah Hanson-Young, admitted that the changes would mean that some families are better off, but said that the rigid activity test will lock out jobseekers and new mums.

Currently, parents who do not meet the activity test are able to access 24 hours of childcare a week. That will be halved to 12 hours under the Coalition’s proposal

“I’m very concerned that the group who has been overlooked in all of this is parents who are re-entering the workforce,” Hanson-Young told reporters on Sunday. “The lack of flexibility around the work test versus the subsidy rate is going to mean that, some weeks and some fortnights, parents don’t get anything. If they’re to keep their childcare place, they have to pay full fees regardless.

“With an increasing casualisation of the female workforce, we have an issue where childcare subsidies are not going to be flexible enough to guarantee a childcare place.”

The executive director of advocacy group the Parenthood, Jo Briskey, said that many in the sector were caught offguard by the announcement on grandparents.

“It’s a confusing announcement by the government today that in fact these grandparents before today weren’t exempt from those work activity tests,” she told ABC TV.

Labor’s childcare spokeswoman, Kate Ellis, said not all grandparent carers would be better off.

“The government deserves no congratulations for reversing their previous cuts to grandparent guardians,” she told reporters on Sunday.

“We know that they have still not undone all of the damage. There are still grandparents who will be worse off as a result of the fact that they will be losing their childcare entitlements through the government’s reforms.”

Labor will look at the detail of the package before committing to it, the opposition foreign affairs spokeswoman, Tanya Plibersek said.

The legislation, which will be introduced into Parliament next week, will require the support of six of the eight crossbench senators to pass, if neither Labor nor the Greens backs it.

The crossbench will not support money from low-income earners going to subsidies for higher-income earners, the independent senator, Nick Xenophon said.

“That part needs to be pared back otherwise there won’t be approval,” he told Channel 7.

Xenophon wants the taper rate to start from $180,000 rather than $250,000.

The changes will see the government pump an extra $3bn over the next four years, taking the total for the portfolio to $40bn over four years.