Aussie families face tax shock

Hundreds of thousands of Australian families could be hit with a surprise tax bill as the government begins reviewing their income.

The Department of Human Services is set to check families' actual incomes against the estimated income they entered into the myGov website in July 2018.

Childcare providers believe that about a third of the 1.1 million families receiving the childcare subsidy will be hit with tax charges from July 29.

Early Childhood Australia chief executive Samantha Page told Nine Newspapers the new system is confusing and the costs could lead to children being pulled out of early learning.

"There is a degree of uncertainty for families that is not comfortable," she told the newspapers.

According to Nine Newspapers, childcare sector experts fear the five per cent of families' entitlements held to cover unexpected discrepancies won't cover all families.

Childcare providers believe that about a third of the 1.1 million families receiving the childcare subsidy will be hit with tax charges from July 29. Picture: Supplied
Childcare providers believe that about a third of the 1.1 million families receiving the childcare subsidy will be hit with tax charges from July 29. Picture: Supplied

The Department of Human services will compare the estimated income provided last year with actual income from July 29. Families will receive a letter stating either that their payments were accurate, they were overpaid, or that they were underpaid and will be topped up.

Those who have been overpaid might find their future childcare subsidy payments, family tax benefits or tax refunds reduced as a way of recovering the money.

Parenting organisation The Parenthood said parents engaged in casual work or were in financially vulnerable positions were most at risk due to unexpected changes in their income.

"Their hours change from week to week," spokesperson Megan O'Connell told Nine Newspapers.

"Hopefully the first they hear about this issue is not receiving a debt notice via email."

A department spokesperson said rebalancing was a normal process and a range of repayment options would be available, adding that some families could receive a tax return.

"Similarly, families who have been underpaid could see part of their withholding returned," the spokesperson said.