Hundreds of Family Day Care workers have defrauded the federal government of $23 million.
A new compliance program has uncovered 575 cases of people claiming welfare payments and not declaring income from their Family Day Care work.
In several cases, welfare recipients who were also Family Day Care operators and educators used the same accountants to hide income and claim exorbitant expenses under the guise of providing care for children.
Human Services Minister Marise Payne said it was clear that many people were deliberately trying to cheat the welfare system.
The government has plans to audit another 10,000 records of Family Day Care operators.
"Deliberate attempts to defraud the welfare system will not be tolerated," Senator Payne warned.
"If you deliberately defraud the Commonwealth it is only a matter of time before you are caught and face serious consequences including possible jail time."
The government recently announced a crackdown on another rort among family day carers, where carers "swap" children to claim rebates on fees.
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