Productivity would far outweigh cost: KPMG proposes childcare subsidy change

There's a call for an overhaul of the childcare subsidy so parents don't lose money if they decide to work additional hours. A report by KPMG estimates the overall economic benefits would far outweigh the cost of making the changes.

Australian Federal Government extends childcare support services Source: AAP

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.