Scores of children could be pulled out of child care or have their hours reduced because of planned government changes, parent groups say.
Mums or dads will have to undertake at least eight hours of work-related activity a fortnight to qualify for a new taxpayer-funded subsidy in the Jobs for Families package.
Fresh data from the Australian National University shows the activity test may force kids out of childcare or reduce their hours if parents can't do the minimum hours of work.
It found about 130,000 children will have reduced access to early learning, and almost one in three families will be worse off.
But the research also shows more than 700,000 families will benefit with a higher child care subsidy or won't lose out at all, while the Centre for Independent Studies says the work requirements are "mind-bogglingly generous".
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Early Childhood Australia, which commissioned the research, says there are several reasons why parents can't work - whether due to irregular work, illness or they may struggle with difficult training.
"Our biggest fear ... is that instead of prompting parents to increase their work or study, it will result in them removing their children from early learning," association CEO Samantha Page said.
Parents lobby group The Parenthood said many mums and dads were anxious and confused about what would be required of them to qualify for subsidies.
While childcare days were constant, work and earning capacity could change at a moment's notice.
"This is the first time that parents will be faced with the prospect that if for whatever reason they fail to meet the activity test they will receive nothing," executive director Jo Briskey told a Senate inquiry in Canberra on Friday.
There are also fears the package disproportionately impacts indigenous children, thousands of whom are already locked out of childcare.
To link access to childcare with how much work parents did punished children and continued cycles of disadvantage, Geraldine Atkinson, the deputy chairperson of the Secretariat of National Aboriginal and Islander Child Care, said.
But some experts believe the work requirements are generous.
Libertarian think tank Centre for Independent Studies says instead of having to meet 15 hours of activity a week, parents will only do four hours.
"The existing system is mind-bogglingly generous to begin with," policy analyst Trisha Jha said.
Education Minister Simon Birmingham said the report's data was incomplete and flawed, and the government had superior modelling.
Almost one million families stood to benefit thanks to the package.
"More affordable access to quality childcare puts the opportunity of work within reach for more families," he told AAP.
KEY FINDINGS:
* 708,401 (68.2 per cent) families will have an increased subsidy or be no worse off.
* 330,042 (31.8 per cent) families will have a reduced subsidy and pay more for child care.
* Of these, 127,250 families are impacted by the activity test where the parents are working fewer than eight hours per fortnight.
* 29,281 low-income families will have their weekly subsidised access halved from 24 hours to 12 hours
(Source: Early Childhood Australia).
