The federal government has rejected claims a freeze in childcare payments will hit low income earners.
Labor says half a million families could be affected by the plan to freeze the income threshold for the childcare benefit, and warns it won't back other changes to childcare payments unless the proposal is scrapped.
The government wants to pause the childcare benefit income threshold at $42,000, and continue to pause the childcare rebate limit at $7500 a child a year.
Labor argues the "never-before-seen" change to the benefit will mean many parents won't be able to return to work.
But Assistant Education Minister Sussan Ley said the government wasn't cutting the childcare benefit and families would still profit from the 50 per cent rebate on childcare costs.
"We are freezing, pausing, the threshold for just three years," she told ABC radio on Wednesday.
"And we have no choice because of the mess we inherited from the previous Labor government."
Labor will agree to the childcare rebate freeze, but only if it's split from legislation changing the childcare benefit.
"At the same time this government are pursuing their multi-billion paid parental leave scheme, the same government is cutting the modest targeted and means tested childcare benefit from families earning as little as $42,000 a year," Labor's early childhood education spokeswoman Kate Ellis told ABC Radio.
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