Changes to the Child Care Subsidy laid out in the government's October budget come into effect today.
The subsidy has been lifted from 85 per cent to 90 per cent for families with a combined income of less than $80,000.
Labor says the changes will leave more than one million families better off.
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The subsidy drops by one per cent for each additional $5000 of annual income, until it ticks down to zero at $530,000.
Families already receiving Child Care Subsidy should have by now received a letter from Services Australia outlining their new subsidy rate, which will be applied automatically.
"It's clear lower income families are feeling the impact of the cost of early childhood education," Early Childhood Education minister Dr Anne Aly said in a statement.
"Thanks to our changes to the Child Care Subsidy these families are now better off."
For example, a couple with a combined income of $120,000 would receive an 82 per cent subsidy, up from the current 71 per cent.
Families receive an even higher rate, up to 95 per cent, for additional children under 5, if they earn under $362,408 a year.
However, it is possible some of the potential savings from the subsidy changes will be absorbed by individual early learning centres raising their fees at the start of the financial year.
An ACCC report released last week found childcare costs have risen faster than inflation and wage growth in the past four years.
The interim report on the price and availability of childcare services found fees rose by 20 per cent for centre based and out-of-school hours care as well as 32 per cent for in home care.
Aly said the report gave a "consolidated view of what's really happening in the early childhood education and care sector" and she was looking forward to the final report.
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The Minderoo Foundation's Thrive by Five campaign has called for action on transparency and accountability for any fee increases and urged the government to crackdown on price gouging by providers.
"Anything beyond CPI or that doesn't contribute to better quality is unacceptable," Minderoo Foundation's Jay Weatherill said in a statement.
"Families will be better off financially regardless of increases, but providers who use this nation-building reform to build more profit off the backs of educators and families shouldn't be given a free pass to price gouge."
Labor's budget also included a promise for the consumer watchdog ACCC to undertake a 12-month inquiry into what drives childcare prices, along with a commission into improving affordability.
The government suggested a 90 per cent universal subsidy could also be on the table.
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