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Productivity would far outweigh cost: KPMG proposes childcare subsidy change

Generic photo of parent and child, Friday 14 Feb. 2014.(AAP Image/Joe Castro) NO ARCHIVING Source: AAP

There's a call for an overhaul of the childcare subsidy so parents don't lose money if they decide to work additional hours. Released by accounting firm KPMG in partnership with the group Chief Executive Women, the report estimates the overall economic benefits would far outweigh the cost of making the changes.

Accounting firm KPMG is proposing to change the childcare subsidy to remove unintended financial disincentives.

Under changes made last year, the childcare funding system subsidises a proportion of families' childcare fees based on how much parents earn and how much they work.

Some parents say they would be worse off if they returned to work because of what KPMG calls the "workplace disincentive rate" - the proportion of a person's income that goes towards tax, the Medicare levy, reduced family tax benefits and greater out-of-pocket childcare costs if they decide to work an extra day.

It uses the example of a person earning $32,000 a year who goes from working four days a week to five.

KPMG says this sees them earn just $7.58 in net income on their extra day.  

Sasha McSweeney, who has two children aged 4 and 11 months, says she and her husband did the maths and realised a return to work for her wouldn't be financially worthwhile.

She says she decided to work for herself from home and employ a nanny two days per week rather than pursue government-subsidised childcare.

Chief Executive Women is a group that represents more than 550 of Australia's most senior women leaders and partnered with KPMG to release the report.

President Sue Morphet says the financial disincentives are making it harder for some women to advance their careers.     

KPMG is proposing changes to address these inequities which it has costed at $368 million.

It says the cost would be offset by a 700 million-dollar boost to the Gross Domestic Product because parents would no longer face financial penalties for electing to work extra days per week.

Sue Morphet says the proposal is well worth consideration.

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