Childcare Centre Operating Costs Breakdown: What Owners Need to Know

Running a childcare centre is not a high-margin business. It is a consistent-margin business, provided the operator respects the line items. Once you know where every dollar of revenue goes, the rest of ownership — pricing, staffing, lease negotiation, even sale preparation — becomes much easier.

This pillar guide walks through the real cost structure of a long day care centre in Australia. We focus on the five expense categories that actually decide whether a centre makes money, and we finish with what a healthy profit and loss looks like at the unit level.

Why operating costs decide almost everything

Most centres do not fail because fees are too low. They fail because costs drift upwards while occupancy, rostering, or lease terms lock the operator into a structure they can no longer flex. Three numbers matter more than the rest:

• Wages as a percentage of revenue
• Rent (or notional rent, if you own the building) as a percentage of revenue
• Occupancy percentage

Those three together explain most of the variance between centres that earn 10% EBITDA margin and centres that earn over 20%. Everything else is a rounding error by comparison — but the rounding errors still matter, because five or six small line items out of line can wipe out a whole month’s profit.

1. Staff wages — the largest and most regulated line

Wages and on-costs (superannuation, workers’ compensation, leave accruals, payroll tax where applicable) are by far the biggest expense category. Industry analysis consistently puts staff costs at around 60–70% of revenue for a centre running at strong occupancy. Below 70% occupancy, that ratio typically spikes — ratios are fixed by regulation, but fee income is not.

The wage floor itself is set by the Children’s Services Award (MA000120). As of the 2025 Annual Wage Review, indicative hourly rates include:

• Certificate III qualified educator (Level 3.1) — around $27.16/hour
• Diploma qualified educator (Level 4.1) — around $32.00/hour
• Early Childhood Teacher (Level 1) — around $1,342 per week

2. Rent and occupancy costs

For leasehold centres, rent is almost always the second-largest expense. A reasonable benchmark is that rent should sit in the low-to-mid teens as a percentage of revenue at full occupancy — push beyond 18–20% and the site is structurally tight even with excellent operations. Outgoings on top of base rent (council rates, insurance recovered by the landlord, land tax in some states) are usually recoverable by the landlord under the lease, so “rent” on the P&L is rarely just the headline figure.

3. Compliance, insurance, and quality

This bucket is not the largest, but it is the least compressible. You do not “save” on compliance — you pay it or you lose your approval to operate.

Typical line items include:

• Public liability and professional indemnity insurance
• Workers’ compensation (mandatory, rate varies by state and claims history)
• NQF-related costs: self-assessment, Quality Improvement Plan maintenance, training hours
• Working With Children Checks, first aid, anaphylaxis and asthma training for staff
• Cyber and management liability cover (now standard for larger providers)
• Audit, accounting, and CCS compliance fees

Together, these typically run in the low single digits as a percentage of revenue, but they have been trending upwards. Insurance premiums in particular have repriced across Australian commercial sectors in recent years, and childcare is not exempt.

4. Food, consumables, and utilities

For centres that provide meals (the default expectation in most metro markets), food is usually the third-biggest operating line after wages and rent, though it sits well behind them in absolute terms. Most well-run centres keep food within a single-digit percentage of revenue by planning weekly menus, bulk ordering staples, and cooking on site rather than outsourcing.

Consumables cover nappies, wipes, cleaning supplies, art and craft materials, and replacement items for the programming cycle. Utilities — electricity, gas, water, telephone/internet — are trending upward on a per-child basis, particularly in centres with older HVAC and lighting infrastructure. An energy audit is one of the higher-return investments available to an owner: payback periods on LED retrofits and controls are often inside two years in heavy-use facilities.

5. Marketing, admin, and maintenance

The final bucket is the “run-the-business” layer: marketing spend, software subscriptions (CCMS, HR, rostering, parent communications), bookkeeping and payroll, professional fees, bank charges, and planned maintenance.

Planned maintenance is another line that owners skip at their peril. Deferred maintenance becomes capital expenditure eventually, but it also shows up in a sale as a buyer’s discount — often for far more than the repair would have cost.

What a healthy childcare P&L looks like

Aggregate that structure and a representative long day care centre operating profitably at high occupancy looks broadly like this:

• Wages and on-costs: 60–68% of revenue
• Rent and outgoings: 10–16% of revenue
• Food, consumables, utilities: 8–12% of revenue
• Compliance, insurance, professional fees: 3–5% of revenue
• Marketing, admin, maintenance, other: 3–6% of revenue
• EBITDA margin: 10–20% for most centres, with well-run independents reaching the upper end and larger group operators typically sitting in the low-to-mid teens

Those ranges are consistent with publicly reported results in the sector — G8 Education, the largest private operator, reported an EBIT margin around 11% on revenue above $1 billion in FY2024. Smaller, well-located independents can earn a higher margin because they carry less corporate overhead and can lift quality-of-care premiums in fees more quickly.

The single biggest lever is occupancy. A centre moving from 70% to 85% occupancy rarely adds 15% to costs — the ratios, rent, and fixed overheads are largely already in place. Most of that extra revenue drops to the bottom line. This is also why occupancy growth, rather than fee increases, is the most reliable way to improve an operating business ahead of a sale.

Key Takeaway

Childcare operating costs are not mysterious — they are structured, measurable, and largely predictable. Wages and rent decide most of the outcome, compliance sets the floor, and the smaller lines together add up to whether a centre runs at the top or bottom of the industry margin range. Owners who read their P&L as a percentage of revenue every month, and compare those percentages against the benchmarks above, tend to spot problems months before they show up in cash. That discipline is also what sophisticated buyers are paying for when they apply an EBITDA multiple at sale.

Sources

• Fair Work Commission — Children’s Services Award MA000120 and 2025 Annual Wage Review determinations; IBISWorld
• Child Care Services in Australia industry report 2025; Australian Bureau of Statistics
• Childcare Services Cost Index (CSCI); AMP Econosights on the economics of the early childcare industry; Finexia
• Mollard Advisory and Braig (BEST) market commentary on childcare profitability; G8 Education FY2024 investor communications.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. ChildcareLink recommends seeking independent professional advice tailored to your specific circumstances before making any business or investment decisions.