Childcare Subsidy and Family Tax Benefit: How They Interact with Your Tax Return

Overview

Australian families can access two main government payments to help with the cost of raising children: the Child Care Subsidy (CCS) and Family Tax Benefit (FTB). Both are income-tested, and both require you to lodge your tax return for end-of-year reconciliation.

Getting these payments right — and understanding how they interact with your tax return — can mean thousands of dollars in your pocket or an unexpected debt to repay.

Child Care Subsidy (CCS)

CCS reduces the out-of-pocket cost of approved childcare (long day care, family day care, outside school hours care). It’s paid directly to your childcare provider, who passes the subsidy on as a fee reduction.

Income thresholds and subsidy rates for 2025-26

Family income	CCS percentage
Up to $80,000	90%
$80,001 – $174,999	90%, reducing by 1% for every $5,000
$175,000 – $254,999	72%, reducing gradually
$255,000 – $354,999	50%, reducing gradually
$355,000 – $529,999	20%, reducing gradually
$530,000+	0%

The income used is your family’s combined adjusted taxable income (ATI) — which includes taxable income, reportable fringe benefits, investment losses (added back) and certain other amounts.

Activity test

Both parents must meet an activity test to receive CCS. Recognised activities include paid work, study, volunteering, and looking for work.

Hours of activity per fortnight	Maximum subsidised hours per fortnight
8 – 16 hours	36 hours
16 – 48 hours	72 hours
48+ hours	100 hours

Families earning under $80,000 receive a minimum of 24 subsidised hours per fortnight regardless of activity.

Family Tax Benefit (FTB)

FTB comes in two parts:

FTB Part A

A per-child payment based on the child’s age, paid to families with children under 20 (or 16–19 if in full-time secondary study).

Child’s age	Maximum annual rate (per child)
0 – 12	~$6,444
13 – 15	~$8,380
16 – 19 (in study)	~$8,380

FTB Part A reduces once family income exceeds $62,634. It reduces by 20 cents per dollar above this threshold until it reaches the base rate, then further reduces above a higher threshold (~$111,398) by 30 cents per dollar.

FTB Part B

An additional per-family payment aimed at single-parent families or families where one parent earns under $6,497 per year.

Youngest child	Maximum annual rate
Under 5	~$4,666
5 – 18	~$3,262

For couples, FTB Part B is limited once the lower earner’s income exceeds $6,497, reducing by 20 cents per dollar. The primary earner’s income must be under $117,578 for the family to qualify.

End-of-year reconciliation

This is where CCS and FTB interact directly with your tax return.

How it works

1. During the year, CCS and FTB are paid based on your estimated family income
2. After the financial year ends, you and your partner lodge your tax returns
3. Centrelink compares your actual income (from the ATO) against your estimates
4. If your actual income was lower than estimated → you receive a top-up payment
5. If your actual income was higher than estimated → you may have an overpayment debt to repay

FTB supplements

The supplements are only paid after reconciliation (i.e., after you lodge your return):

Supplement	Amount per child
FTB Part A supplement	Up to $916.15
FTB Part B supplement	Up to $430.70

To receive the supplements, you must lodge your tax return (or notify Centrelink you don’t need to lodge) by the deadline — generally 30 June of the following year (i.e., by 30 June 2027 for the 2025-26 year).

CCS withholding

Centrelink withholds 5% of your CCS payments during the year as a buffer against potential overpayments. This withheld amount is reconciled after you lodge your return. If you don’t owe a debt, the 5% is paid out to you as a lump sum.

Worked example

The Chen family — combined ATI of $120,000, two children (ages 3 and 6) in long day care 4 days per week.

CCS calculation:

• Income $120,000 → CCS rate approximately 82%
• Daily fee: $130 × 4 days = $520/week per child
• CCS per child: $520 × 82% = ~$426/week
• Family out-of-pocket: ~$188/week for both children
• Annual CCS received: ~$44,304

FTB Part A:

• Income above $62,634 by $57,366 → reduction of $57,366 × 20% = $11,473
• Maximum Part A for 2 children: ~$12,888
• Estimated Part A: ~$1,415 per year (near base rate)

FTB Part B:

• If one parent earns significantly less than the other, Part B may apply
• Youngest child under 5 → up to $4,666

At reconciliation: If their actual income was $115,000 (lower than the $120,000 estimate), they’ll receive a top-up. If actual income was $130,000, they’ll owe a debt on the excess CCS received.

Common traps

• Not lodging your tax return on time: You’ll lose the FTB supplements entirely if you miss the deadline. Both partners must lodge (or be formally exempt).
• Forgetting to update income estimates: If your income changes mid-year (new job, bonus, investment income), update your estimate with Centrelink to avoid a large year-end debt.
• Ignoring the ATI definition: Your adjusted taxable income includes items beyond taxable income. Reportable fringe benefits and salary-sacrificed super can push you into a lower CCS bracket.
• Not factoring in both parents’ income: CCS and FTB Part A use combined family income. FTB Part B uses the lower earner’s income separately.

Key takeaways

• CCS covers up to 90% of childcare fees for families earning under $80,000, tapering to 0% above ~$530,000
• FTB Part A and B provide additional per-child and per-family payments based on income tests
• Both CCS and FTB are reconciled against your actual income after you lodge your tax return
• FTB supplements (up to $916.15 Part A and $430.70 Part B per child) are only paid after reconciliation
• Update your income estimate with Centrelink whenever your circumstances change to avoid debts

Use the childcare subsidy calculator and family tax benefit calculator to estimate your entitlements for 2025-26.