TAXPAYERS are handing over $260 million each year to subsidise childcare for high-income families, prompting calls for a rethink on the level of generosity.

But women's workforce advocates have warned against making cuts, arguing the subsidy saves money long-term because women who drop out of paid work lose skills and confidence and stop paying taxes.

Families on more than double the average wage are claiming the childcare tax rebate.

More than 65,000 families that earn double the average wage - or more - are claiming the childcare tax rebate.

In past years, Labor considered applying a means test but ruled it out amid fears such a move would cut women's workforce participation.