When the old subsidy is reintroduced, the government will put in place transition measures to protect centres and families whose incomes have been harmed.
The government will provide $708 million of extra funding – worth 25 per cent of their fee revenue – to help centres shift back to the old model.
The work activity test for parents will also be eased until October 4 to help them afford services. Eligible families who have lost income will get 100 hours of subsidised care a fortnight.
Fees would be capped at pre-pandemic levels and families with reduced incomes would only pay fees covering the gap between the subsidy and the cost of care, Mr Tehan said.
“This will assist families to return to the level of work, study or training they were undertaking before COVID-19,” he said.
From July 20, centres will also lose access to the JobKeeper wage subsidy. Mr Tehan said the extra transition payment would be slightly less than the sector was receiving under JobKeeper.
He said the relief package was always going to be temporary and the government had consulted widely about the shift away from fee-free childcare.
Asked about the possibility demand would drop when fees were reintroduced, Mr Tehan acknowledged there might be an impact.
“We can’t guarantee that demand won’t go backwards,” he said.
“But what we can guarantee through this package is that we have done everything we can to support the sector transition, that we have consulted with the sector, listened to what they have said will be needed to make sure that demand will continue to grow and we think that we have a package that will work for families going forward.”
The relief package was introduced at the start of April after enrolments plummeted, threatening the viability of thousands of childcare services. The package locked in half the centres’ usual level of government funding in combination with an expected $1 billion of JobKeeper wage subsidies. Centres have not been allowed to charge fees under the arrangements.
While the measures helped save thousands of centres, many services that had successfully maintained high enrolments in March and those that were receiving limited support from JobKeeper felt the package actually hurt them and some have been operating at a loss.
While some services have pushed for a return to the old model, the government has also faced a campaign to make free childcare permanent. Advocates have argued that making care more affordable would yield significant economic benefits by boosting workforce participation.
Labor early childhood education spokeswoman Amanda Rishworth criticised the government’s shift, calling it a “snap-back” that risked putting childcare out of reach for many families.
She said under the old subsidy model, Australia had one of the highest fee-charging childcare systems in the world.
“This could well act as a handbrake on the economy. If women and families are not able to access affordable childcare, how are they going to get back to work? How are they going to actually participate in the economy? How are they going to actually be able to make ends meet?” she said.
Ms Rishworth said there needed to be a plan for affordable and accessible childcare, especially in the harsh economic environment caused by the pandemic.
Fergus Hunter is an education and communications reporter for The Sydney Morning Herald and The Age.