The government plans to begin assessing delivery costs immediately, anticipating a process that will take about 18 months.

There has been a growing call to eliminate the activity test, as it has hindered vulnerable children from accessing essential early education.

To address market failures, the government will also establish its own childcare services in small and remote towns where operating costs are higher.

The Labor government has committed $1 billion to establish childcare centers in 160 underserved areas ahead of the next election.

Prime Minister Anthony Albanese highlighted the significance of investing in community-run centers to provide opportunities for families in these regions.

Families earning less than $530,000 will have guaranteed access to three days a week of subsidized childcare, with the removal of the activity test that previously limited low-income parents' work opportunities.

Starting in January 2026, the elimination of the activity test is projected to benefit an additional 66,700 families by allowing greater access to childcare subsidies.

Funding for these initiatives will be allocated through grants to states, councils, and not-for-profit providers, with a focus on placements at primary school sites, and distribution expected to commence in mid-2025.

A supply-side model featuring a flat fee for parents is being considered, although determining appropriate funding levels presents complexities.

The Australian Childcare Alliance has raised concerns that insufficient funding could threaten the quality of care, drawing parallels to challenges faced in the aged care sector.

As part of a comprehensive funding system overhaul, a benchmark price for delivering high-quality childcare services will be developed.

Early Childhood Education Minister Anne Aly noted that many regions struggle to retain essential staff due to a lack of early learning services.

Minister Aly also acknowledged that delivering quality early childhood education in rural and regional areas incurs higher costs compared to urban settings.