Child care costs are not directly tax-deductible in Australia — but the Child Care Subsidy (CCS) provides means-tested government assistance that effectively reduces the out-of-pocket cost of approved child care for most Australian families. In 2026, CCS rates have been increased under the government's affordability agenda, with families earning under $83,280 now eligible for the maximum 90% subsidy rate. Here is what you need to know.

Are Child Care Expenses Tax-Deductible in Australia?

No. The ATO does not allow individuals to claim child care expenses as a tax deduction, even if you are working or studying. This has been the position since 1994 when the government moved child care support to the welfare system through the Child Care Subsidy (and previously the Child Care Rebate). The rationale is that child care is a private expense rather than one incurred in the course of earning assessable income.

Child Care Subsidy (CCS) Rates in 2026

The Child Care Subsidy is paid directly to your approved child care provider, reducing your fees. The subsidy rate depends on your combined family income:

  • Under $83,280: 90% subsidy rate (maximum)
  • $83,280 to $530,000: Subsidy rate tapers from 90% down to 0%
  • Above $530,000: No CCS entitlement

The subsidy also depends on your activity level (hours of work, study, or training), the approved hourly rate cap for your service type, and the number of children in care (higher subsidy for second and subsequent children from July 2023).

Activity Test: Hours of Care Subsidised

The number of subsidised hours per fortnight depends on the lowest activity level of either parent. Activities include paid work, study, training, volunteering, and looking for work.

  • 8 hours or less: Up to 36 subsidised hours per fortnight
  • 8-16 hours: Up to 72 subsidised hours per fortnight
  • 16-48 hours: Up to 100 subsidised hours per fortnight
  • 48 hours or more: Up to 100 subsidised hours per fortnight

What About the Family Tax Benefit?

Families with children may also be eligible for Family Tax Benefit (FTB) Part A and Part B, which provide additional fortnightly payments based on income and family circumstances. FTB is separate from CCS but both are managed through Services Australia (Centrelink). Unlike CCS, FTB Part B can apply to single-income families and single parents.

Frequently Asked Questions

Can I claim child care on my tax return?

No. Child care expenses are not tax-deductible in Australia. The Australian government provides support through the Child Care Subsidy (CCS), which directly reduces your fees with the child care provider. If you believe you were under-subsidised, you can request a CCS reconciliation through myGov after the end of the financial year.

How do I claim Child Care Subsidy?

Apply through myGov linked to your Centrelink account. You will need your family's estimated combined income, details of your approved child care service, and your activity information. The subsidy is paid directly to the provider — your fees are reduced at the point of billing.

Does Child Care Subsidy affect my tax return?

Yes indirectly. CCS is means-tested and based on estimated income. After the financial year, Services Australia reconciles your actual income against the estimated income used to calculate your subsidy. If your actual income was higher, you may need to repay some CCS. If lower, you may receive a top-up. This reconciliation uses your lodged tax return data.

Questions about family tax benefits, CCS, or how government payments affect your tax return? Contact AWTS for a complete family tax review.