Families who receive Child Care Subsidy (CCS) must make a co-contribution to their early childhood education and care fees. They do this by paying the gap fee. There are specific rules when a third party contributes to a family’s child care fees.
On this page:
What are the rules?
Generally, when a third party helps a family pay its early childhood education and care fees, you must deduct the contribution from the total session fee. The family’s CCS percentage will then be applied to the reduced session fee.
This is because families are only entitled to CCS in relation to the amount you actually charge them.
This is a requirement under Family Assistance Law. We may take compliance action if you fail to meet your obligations.
There are exceptions to this rule in limited circumstances. These circumstances are known as prescribed third-party payments.
Prescribed third-party payments
State and territory governments may contribute to some or all of a family’s gap fee with no impact on CCS in the following circumstances:
- where you receive a contribution from a state or territory government for a disadvantaged or vulnerable child
- where a family in New South Wales uses a before and after school care voucher issued by the NSW government, between 1 January 2022 and 1 July 2023
- where you receive a contribution from a state or territory government for a child attending a preschool program at a Centre Based Day Care service under one of the following funding schemes, from 1 January 2023:
- Three-Year-Old Preschool, ACT
- Start Strong, NSW
- Early start kindergarten, VIC
- Free Kindy, Queensland
- Kindy Family Tax Benefit Subsidy, Queensland
- Base Subsidy Fee Reduction, Queensland
Recording third-party payments
You must maintain records of all third-party payments. Your records must show how the contribution was applied to a family’s account.
It is up to you how to keep these records. You may wish to talk to your third-party software provider on the best way to keep records.
You must also record third-party payments in statements of entitlements provided to families. If you receive a third-party payment for a period in the past, you must provide the family with a new statement of entitlement.
Reporting third-party payments
You must submit session reports that are accurate and complete. Reporting the correct fee information in session reports is essential to work out how much CCS a family is entitled to. The way you report a third-party payment will depend on whether it is a:
- prescribed third-party payment
- other third-party payment.
How to report prescribed third-party payments
When reporting prescribed third-party payments, you do not need to adjust the total session fee before reporting. You should submit session reports as usual.
This is because prescribed third-party payments do not impact on CCS.
The prescribed third-party payments are listed above.
Example: state government contribution on behalf of a vulnerable child
Your service charges $100 for a session of care.
A family at your service has a CCS percentage of 85%. Normally, the family would receive $85 in CCS and pay a gap fee of $15 per session.
The state government contributes $15 to the family’s fees because the child is considered vulnerable.
Because this is a prescribed third-party payment, you don’t need to reduce the session fee ($100) before reporting. The family will still be entitled to $85 in CCS and the gap fee is now $0.
| Description | Amount |
|---|---|
| Session of care fee | $100 |
| Family CCS (85%) | $85 |
| Contribution from state or territory government | $15 |
| Gap fee | $0 |
How to report other third-party payments
For all other third-party payments, you must deduct the contribution from the total session fee before reporting.
The family’s CCS percentage will then be applied to the reduced session fee.
Example: when other third parties pay part of a family’s fee
Your service charges $100 for a session of care.
A family at your service has a CCS percentage of 60%. Normally, the family would receive $60 in CCS and pay a gap fee of $40 per session.
| Description | Amount |
|---|---|
| Session of care fee | $100 |
| Family CCS (60%) | $60 |
| Gap fee | $40 |
However, a third party has contributed $40 to the family’s fees. The contribution does not fall under the list of prescribed third-party payments.
As this is not a prescribed third-party payment, you must deduct $40 from the original session fee before reporting. The new session fee, which you must report, is $60.
The family’s CCS and gap fee will then be recalculated against the new session fee.
| Description | Amount |
|---|---|
| Original session of care fee | $100 |
| Third-party payment | $40 |
| Correct fee to report | $60 |
| Family CCS (60%) | $36 |
| Gap fee | $24 |
Example: when a family salary sacrifices part of their fees
Your service charges $100 for a session of care.
A family at your service has a CCS percentage of 85%. Normally, the family would receive $85 in CCS and pay a gap fee of $15 per session.
| Description | Amount |
|---|---|
| Session of care fee | $100 |
| Family CCS (85%) | $85 |
| Gap fee | $15 |
The family salary sacrifices $15 to their child care fees through their employer.
As salary sacrificing is not a prescribed third-party payment, you must deduct $15 from the original session fee before reporting. The new session fee, which you must report, is $85.
The family’s CCS and gap fee will then be recalculated against the new session fee.
| Description | Amount |
|---|---|
| Original session of care fee | $100 |
| Salary sacrifice amount | $15 |
| Correct fee to report | $85 |
| Family CCS (85%) | $72.25 |
| Gap fee | $12.75 |
Example: when a third party pays all of a family’s fee
If other third parties pay all of a family’s child care fees, the family will not be entitled to CCS.
This includes where:
- a family receives child care as part of an employment package
- an employer pays for 100% of a family’s child care fees, such as through salary sacrifice.
Financial assistance paid directly to families
A third party may provide financial assistance to a family directly. The family may choose to use this assistance to pay for early childhood education and care. As this support is provided directly to the family, it is not considered in the calculation of CCS.
Grants and funding for providers
The advice on this page does not apply to funding provided directly to a provider for purposes other than fees. For example, if you receive funding to improve your facilities or attract high-quality staff.