can salary sacrificing boost your Child Care Subsidy?
last updated: march 2026
michael churburgher is a financial planner and father of three from Sydney. he writes about family budgets, tax strategies, and getting the most out of government benefits for mini mode.
if your family income puts you in the CCS taper zone — roughly $85,000 to $535,000 — every dollar of income affects your subsidy rate. that makes salary sacrifice a legitimate strategy for increasing your Child Care Subsidy. but it only works if you sacrifice the right things.
the key is understanding adjusted taxable income (ATI) and which salary sacrifice arrangements actually reduce it.
how adjusted taxable income works
Services Australia doesn't use your gross salary or even your taxable income to set your CCS rate. they use adjusted taxable income (ATI), which adds several items back to your taxable income:
- taxable income
- reportable fringe benefits (the grossed-up value on your payment summary)
- reportable super contributions (salary sacrifice into super above the standard employer contribution)
- total net investment losses
- certain tax-free government payments
the combined ATI of both parents determines your CCS percentage. if you can legitimately lower your ATI, you shift into a higher CCS bracket.
which salary sacrifice items actually reduce ATI
not all salary sacrifice is equal for CCS purposes. here's what works and what doesn't:
items that can reduce your ATI
- novated car leases — these reduce your taxable income and the fringe benefit may be exempt or concessionally taxed (especially for EVs)
- portable electronic devices (laptops, tablets) — exempt from FBT if primarily for work use
- meal entertainment and venue hire — exempt benefits for certain employers (hospitals, charities, not-for-profits)
- NFP salary packaging — employees of not-for-profits and public hospitals can salary package up to $15,900 tax-free (or $30,000 for public hospitals), which genuinely reduces ATI
items that do NOT reduce your ATI
- salary sacrifice into super — added back as reportable super contributions (see below)
- items that generate reportable fringe benefits — the grossed-up value gets added to your ATI
the super salary sacrifice trap
this is the most common mistake. many parents assume salary sacrificing into super will reduce their income for CCS purposes. it won't — or at least, not as much as you'd expect.
when you salary sacrifice into super, the amount shows up as a reportable super contribution on your income statement. Services Australia adds this back to your taxable income when calculating ATI. so while your taxable income drops, your ATI stays roughly the same.
there's a small net benefit because the 15% contributions tax paid inside super is less than your marginal tax rate — but the impact on your CCS rate is minimal. salary sacrifice into super is still a good wealth-building strategy, just don't do it specifically to boost your CCS.
worked example: $10K sacrifice saving $2,100 in childcare
let's say Sarah and James have a combined ATI of $155,000. their CCS rate is about 76%. they use three days of centre-based care at $140/day.
before salary packaging
- combined ATI: $155,000
- CCS rate: ~76%
- daily gap fee: $140 - ($14.00 × 76%) = $33.60/day
- weekly cost (3 days): $100.80
- annual out-of-pocket: $5,242
Sarah works for a public hospital and has access to NFP salary packaging. she packages $10,000 of her salary into everyday living expenses (rent, mortgage, groceries), which is exempt from FBT and genuinely reduces her ATI.
after $10K salary packaging
- combined ATI: $145,000
- CCS rate: ~78%
- daily gap fee: $140 - ($14.00 × 78%) = $30.80/day
- weekly cost (3 days): $92.40
- annual out-of-pocket: $4,805
total annual saving
- childcare saving: $437/year (from higher CCS)
- income tax saving: ~$3,450/year (from lower taxable income at 34.5% marginal rate)
- combined benefit: ~$3,887/year
the childcare saving alone is meaningful, but the real win is combining the CCS boost with the tax reduction. for families in the first CCS taper ($85K–$175K), even a 2 percentage point increase in your subsidy rate adds up across 50 weeks of care.
if Sarah packaged the full $15,900 available to public hospital employees, the savings would be even larger — potentially shifting their CCS rate by 3-4 percentage points.
frequently asked questions
does salary sacrificing reduce your income for Child Care Subsidy purposes?
it depends on what you sacrifice. super contributions get added back to ATI. but NFP salary packaging, novated leases (especially EVs), and certain exempt benefits can genuinely reduce your ATI and increase your CCS rate.
how much can you save on childcare through salary sacrifice?
it depends on your income, CCS taper zone, and how much you can package. a $10,000 salary package reducing ATI from $155K to $145K can save around $437/year in childcare plus $3,450/year in tax — nearly $3,900 total.
what is adjusted taxable income for CCS?
ATI is your taxable income plus reportable fringe benefits, reportable super contributions, net investment losses, and certain tax-free payments. it's the combined ATI of both parents.
run your numbers
see exactly how your income affects your CCS rate — and what you'd pay at different income levels.