What Changes for Childcare on 1 July 2026 — and What It Means for Value

The new financial year doesn’t just reset your tax return. On 1 July 2026, three numbers that sit at the centre of every childcare centre’s profit-and-loss moved at once: wages went up, the government subsidy cap went up, and the fee ceiling that links the two is still in force. If you are buying, selling, or holding a centre, today is the day the numbers you model off changed.

Here is what actually shifted, and what it means for value rather than for compliance paperwork.

Three numbers that moved this week

1. Award wages rose 4.75%. In the Annual Wage Review 2026, the Fair Work Commission lifted modern award minimum wages by 4.75% and the National Minimum Wage by 6% (to $26.44 an hour, the first time it has passed $1,000 a week). For childcare, the relevant figure is the award increase — most educators are paid under the Children’s Services Award — and it applies from the first full pay period on or after 1 July. Wages are the single largest cost line in almost every centre, so a 4.75% lift to the award flows straight to the bottom line.

2. The CCS hourly rate cap rose with CPI. The Australian Government Department of Education has indexed the Child Care Subsidy hourly rate caps and income thresholds for 2026-27. The cap for centre-based day care (under school age) rises from $14.63 to $15.19 an hour, and the base income threshold lifts from $85,279 to $88,520. The structure is unchanged — same 90% maximum rate, same taper — and the new figures take effect from the first CCS fortnight in July (6 July 2026). For the mechanics of how the subsidy actually reaches a centre’s revenue, see our guide on how CCS works.

3. The fee growth cap is still binding. Centres claiming the Worker Retention Payment — the grant funding the 15% above-award wage increase — must keep fee growth within the government’s cap (4.2% for the year to 7 August 2026). That payment was confirmed on 17 June 2026 to continue all the way to 30 June 2028. We covered what that extension means in detail in childcare wage funding extended to 2028.

Why this matters for a centre’s profit

Read the three changes together and the picture is a squeeze with an offset.

The squeeze: your wage line just rose, while the fee you can charge families is capped if you want to keep the retention payment. In a normal year that gap would compress margins.

The offset: the retention payment is funding the 15% wage uplift, and its extension to 2028 takes the near-term wage cliff — the thing buyers were quietly pricing into offers six months ago — off the table. At the same time, the CCS cap rising with CPI keeps care affordable for families, which protects demand and, by extension, occupancy.

If you’re selling: your FY27 trading year starts today

The financial year that just closed (FY26) is the trailing P&L a buyer will price off for the next twelve months — that was the point of our end-of-financial-year piece. But from today, FY27 begins, and the award rise will show up in your wage line from the first full pay period in July.

Don’t let that distort the story. Make sure your accounts separate the funded portion of the wage increase (the retention payment) from your underlying labour cost, so a buyer can see the true picture rather than a wage line that looks like it blew out. This is exactly the kind of normalisation we mean when we talk about EBITDA adjustments. If you want a quick sense of how the new cost and subsidy settings move your number, our online estimator is a sensible first step before you commission a full appraisal.

If you’re buying: model on the new rates, not last year’s

The most common modelling mistake right now is using a 2025-26 wage assumption and a 2025-26 subsidy cap. Both are out of date as of this week. Rebuild your P&L on the 4.75% award rates and the new $15.19 CCS cap before you settle on a price.

Two due-diligence points matter more than usual this year. First, confirm the centre is actually compliant with the fee growth cap — a breach can put retention-payment eligibility at risk, and that is a revenue problem you would inherit. Second, look at how reliant the roster is on agency staff, because that cost compounds every time the award moves. For the full cost picture, our operating costs breakdown sets out where the money goes, and our guide to setting childcare fees explains how much headroom a centre realistically has under the cap.

If you’re an investor or landlord: watch the tenant, not just the yield

A net-lease childcare landlord is largely insulated from the wage line — that is the tenant’s cost, not yours. What the 1 July changes affect is tenant health. A subsidy cap that keeps pace with CPI supports family affordability, which supports enrolments, which supports the operator’s ability to pay rent. The funded wage increase running to 2028 reduces the risk that a tenant’s labour costs run away from them in the meantime. For how all of this feeds into what a centre is worth, our complete guide to valuing a childcare centre remains the place to start.

Key Takeaway

The start of FY2027 reset three of the numbers that decide whether a childcare centre makes money: award wages (up 4.75%), the CCS hourly cap (up to $15.19), and a fee cap that still binds anyone taking the retention payment. The wage cliff buyers feared has eased, but the centre that wins on price is still the one whose numbers are clean, compliant, and modelled on this year’s rates — not last year’s.

Buying, selling, or just want to know what these changes do to your centre’s value? Talk to ChildcareLink for a confidential, specialist appraisal. Visit childcarelink.com.au or contact our team directly.

Sources

• Fair Work Commission / Fair Work Ombudsman — Annual Wage Review 2026 (award wages +4.75%, National Minimum Wage +6% to $26.44/hour, effective from the first full pay period on or after 1 July 2026)
• Australian Government Department of Education — Child Care Subsidy hourly rate caps and income thresholds, 2026-27 (CBDC under-school-age cap $14.63 → $15.19; base income threshold $85,279 → $88,520; effective first CCS fortnight, 6 July 2026)
• Australian Government Department of Education / The Sector — Worker Retention Payment (15% above-award wage increase; fee growth cap 4.2% to 7 August 2026; extension to 30 June 2028 announced 17 June 2026)
• ChildcareLink transaction experience

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.