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The Government will convert the existing Child Care Tax Rebate (CCTR) to a direct payment administered through Centrelink at a cost of $1.4 billion over five years (including $451.0 million in 2006-07).

From 1 July 2007, families will receive the CCTR - which covers 30% of out of pocket costs, up to a maximum of $4,000, plus indexation - as a direct payment, soon after the financial year in which they incur child care costs. The change means that the CCTR will be received nearer to the time when costs are incurred by parents compared to current arrangements.

Families will still receive a rebate for out of pocket costs incurred in 2005-06, under the existing tax system arrangements. This means families with out of pocket costs for both 2005-06 and 2006-07 will receive two rebates in 2007 08 - one through the tax system, and one as a direct payment.

The change in the delivery of the CCTR from a tax offset to a payment also means that families with insufficient tax liability to absorb their full CCTR entitlement will now receive their full rebate.

See Budget Paper No 2 p 183

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