The Federal Government has dismissed criticism that its childcare package will force vulnerable children out of early education.

Key points: Payments to low and middle-income families will be boosted and the annual limit will be removed

Payments to low and middle-income families will be boosted and the annual limit will be removed To qualify for subsidised care both parents must be working, studying, training or volunteering

To qualify for subsidised care both parents must be working, studying, training or volunteering Early childhood sector is criticising the activity test which now applies to both parents

The Government's $1.6 billion package passed the Senate last night with the support of the Nick Xenophon Team, One Nation and Derryn Hinch.

Prime Minister Malcolm Turnbull visited a childcare centre this morning to promote the passage of the long-awaited bill as a big win for families.

"This package backs hardworking Australian families — those with the greatest need and working the most hours get the most support," he said.

"It's the biggest reform in childcare for many years and we've been fighting for this, fighting for those families."

Under the changes, payments to low and middle-income families will be boosted and the annual limit will be removed.

For families earning more than $185,000 a year the subsidy cap will be lifted from $7,500 per child, per financial year to $10,000.

The childcare subsidy will cut out for families earning more than $350,000.

Under the new package, to qualify for subsidised care both parents must also be working, studying, training or volunteering for at least four hours a week.

Education Minister Simon Birmingham said unemployed parents who are looking for work would meet that test as well.

"There is no reason as to why parents cannot simply meet that four-hour activity test that includes volunteering activities that can be as simple as coming and reading to children at your pre-school," Senator Birmingham said.

"All of the details of this have been worked through to make sure that vulnerable children are cared for, catered for and supported whilst delivering maximum support for hardworking families."

Early childhood sector 'very disappointed' with activity test

The early childhood sector said it has been let down by the Government and was bitterly disappointed by the outcome.

Families earning less than $65,000 who do not meet the test will be able to access 12 hours a week of subsidised care.

That is half of what they are entitled to now under the current system.

The early childhood sector wanted the 12-hour limit increased to 15 hours instead, and wanted the activity test to only apply to families earning more than $100,000 a year.

Early Childhood Australia's Sam Page said she thought the sector had an agreement with the Government.

"We're very disappointed, very disappointed," she said.

"We had negotiated across the sector, we had brought a lot of people together, we'd spent a lot of hours identifying solutions that we thought went some of the way to providing a better safety net for families.

"We thought the Minister had heard that, he assured us he had heard that.

"I think what a lot of families are going to be surprised by when this new package is implemented is the fact that the activity test applies to both parents, all the time.

"That means if your shifts drop or if you're out of work between contracts, your eligibility can plummet from four of five days a week to nothing."

John Cherry, from childcare provider Goodstart Early Learning, echoed the criticism over the decision to reduce access for children from low-income families that fail the activity test.

"In our many discussions with the Government over the past year we believed the Minister understood the importance of the international and local evidence on this point but he has failed to act," he said.

"This leaves up to 100,000 children from low-income families without the support they need.

"While many working families will be better off as a result of the childcare reforms it is disappointing that modest changes which would have protected children from very low income families have been ignored."

Paul Mondo, from the Australian Childcare Alliance, said he was also disappointed with the end result.

He said families earning more than $65,000 with one stay-at-home parent would fail the activity test and would not be eligible for any childcare subsidy.

"This will be devastating to over 30,000 families who currently receive some level of subsidy support in this circumstance," Mr Mondo said.

"We cannot accept the actions of the Government and crossbench senators in ignoring the plight of these families in their back room negotiations."

The package will return to the House of Representatives next week for the final approval and is scheduled to start from the middle of next year.