A number of Sydney parents have been arrested for allegedly handing their children's details over to a sham family daycare provider so it could use the information in a fraud scheme worth millions.

Police arrested 16 women after raids in Sydney's south-west this morning, which came two days after seven men and one woman were charged.

The women were transported to nearby police stations and are expected to be charged in the coming hours.

It follows high-profile arrests in May where 17 people were charged for their involvement with Red Roses Family Day Care which had locations in Sydney and Wollongong.

It is alleged the family-run company made fraudulent claims through Government childcare programs, including the Commonwealth's Child Care Subsidy Scheme (CCSS).

Police said the company made about $4 million in rebates over eight months.

The parents allegedly sold their children's identities so the syndicate could claim subsidies. ( Supplied: NSW Police )

The CCSS was designed to help reduce the financial burden of child care on low- and middle-income families, with subsidies generally paid to childcare providers who are then required to pass them onto parents as a free reduction.

Families then make a co-contribution to their childcare fees, paying the provider the difference between the fee charged and the subsidy amount.

At the time of the May arrests, police said the centre filed claims for children who never existed.

They also revealed they would pursue a large number of parents who allegedly sold their children's identities to help the company make claims.

The ABC understands the business existed on paper but no child ever went into care at any of the properties.

One of the childcare centres that supposedly looked after 50 children was operating out of a garage, police said.

The police investigation has been assisted by the Federal Department of Education and Training, the Australian Criminal Intelligence Commission, the NSW Department of Education and NSW Crime Commission.