Child Care Subsidy (CCS) withholdings 007-17103126

Withholding some of a family’s entitlement to Child Care Subsidy before it is paid to child care providers is a way to reduce the likelihood of families incurring a debt at the end of a financial year. The process of withholding does not reduce a family’s overall entitlement to Child Care Subsidy.

Five per cent of Child Care Subsidy will be withheld to reduce the likelihood that individuals will incur a debt. This means that the full subsidy amount, minus 5%, is paid to providers on behalf of families following submission of session reports. Providers will be able to see the amount withheld on the payment advice they receive each fortnight. The amount withheld will be part of the gap fee that needs to be paid by parents to their child care provider.

There is no withholding for Additional Child Care Subsidy payments.

After the end of each financial year, the total entitlements and payments for each child will be reconciled against the customer’s (and any partner’s) actual income and activity for the year. If a customer received more than they were entitled to, the withholding amount will be used to offset the overpayment, so they do not have a debt (or have a reduced debt) to repay. If the customer received the correct amount of Child Care Subsidy, or received less subsidy than they were entitled to, amounts withheld during the year will be paid directly to them as a lump sum. This process of reviewing and recalculating entitlements for the full year is called Reconciliation.

The standard withholding amount for CCS which is applied at the initial claim is 5% of the subsidy amount. Customers cannot request a different withholding percentage during the claim process, however are able to request to vary the withholding amount once their claim has been finalised.

The standard rate of recovery is 20% of the customer’s ongoing CCS payments, this may be weekly, or as session reports are received from their child care service. This amount will be automatically withheld from a customer’s ongoing CCS entitlement where the customer only:

• has child care related debt(s), and
• is only receiving CCS payments

Customers can increase or decrease this withholdings amount. Any decrease to the rate of 20% would require the customer to undertake an assessment for financial hardship. If a customer requests a change to the standard 20% CCS recovery rate or for information on viewing debt repayment withholdings from an ongoing CCS entitlement, see Recovering Child Care Subsidy (CCS) debts in Process Direct.

Where the standard rate of recovery is applied to a customer’s CCS entitlement to recover their CCS debt, the withholdings are applied automatically. These customers do not need to enter into a voluntary arrangement.

When the standard rate of withholdings is applied and the customer enters into a voluntary arrangement to repay their CCS debt, the standard 20% recovery will still be withheld from their ongoing CCS entitlement.

If these customers contact to set up a voluntary repayment arrangement, make sure the customer is aware that the voluntary arrangement will be applied in addition to the standard 20% debt withholding rate.

Voluntary repayment arrangements for CCS debts do not prevent the 20% recovery rate for current CCS customers from being applied - see Child Care Subsidy (CCS) debts.

Customers can request a different withholding percentage at any time through the year. The preferred channel for customers to change their withholding percentage is through online services.

Staff are able to update a customer’s verbal request for a variation (increase or decrease) to their withholding percentage in Process Direct.

CCS withholdings are applied to reduce the likelihood of an overpayment at the end of the financial year. Through the year if a customer updates their income estimate that results in a reduced CCS rate it is important to also check if the customer would like to increase their withholding rate.

The customer can either request:

• A withholding rate increase from 5-100%
• A withholding rate decrease to 0%

Reasons for requesting a lower withholding percentage:

• Low risk of debt at reconciliation
• declaration of steady employment arrangement, work hours and income
• reported relevant change of circumstances (substantial decrease in estimated annual income)
• Other - Customer to provide reason for request

Reasons for requesting a higher withholding percentage:

• High risk of debt at reconciliation:
• declaration of unsteady employment, highly variable income
• reported relevant change of circumstances (substantial increase in estimated annual income)
• estimated combined annual income is around CCS income threshold that applies a taper
• Received notification that accumulated withholding was reduced or exhausted to offset an overpayment
• Other - Customer to provide reason for request

Customers who reduce their withholding rate are at as increased risk of incurring an overpayment at the end of the financial year when their payments are reconciled.

Customers increasing their withholding amount will reduce their likelihood of an overpayment at reconciliation however as a result of the increased withholdings their child care centre will receive less Child Care Subsidy on their behalf. This this will increase the child care fees that the customer is required to pay their service.

When requesting a change to the CCS withholding percentage customers must indicate the start date for the change – this cannot be a date in the past.

Customers have the option of providing an end date for the varied withholdings. Where an end-date is not specified in the initial request, the varied withholding amount will apply until the customer requests the withholdings to change. Customers are not able to retrospectively end date a varied withholdings request.

Customers who provide an end date will be notified 28 days before their requested withholding percentage is due to be changed back to the default 5%. They will be advised they can submit a new request for a different withholding percentage or if they take no action their withholding percentage will revert to the default five per cent on the date indicated.

The new withholding percentage will take effect from the day specified (i.e. does not have to be the first Monday of a CCS fortnight). This will generally be the day indicated by the customer.

The withholding percentage that applies is the one that is in effect when a service submits attendance information. For example, if a child attends a service every day of a week (Mon–Fri), a new withholding percentage is recorded on the Wednesday, and the service submits the session report for the child on the Friday, the new withholding percentage will apply to the whole payment, which is calculated for all sessions in the week (i.e. the old withholding percentage does not apply to the sessions of care delivered on the Monday and Tuesday).

Changes to CCS withholdings cannot be backdated for any reason.

See Child Care Subsidy (CCS) debts for information on how to add a cash or voluntary arrangement.