Can We Afford for One Parent to Stay Home Longer?
When a baby is on the way, most families start doing the maths.
Not the fun maths about prams or nursery furniture. The serious kind.
Can we afford for one parent to stay home for longer?
For many Australian families, the first year after a baby arrives is financially confusing. Income changes, government payments begin, employer leave may apply, and eventually childcare costs enter the picture. Most parents try to figure this out using rough guesses, spreadsheets, or advice from friends.
The problem is that the first year rarely follows a simple pattern. Household income usually moves through several phases, and small decisions about leave or returning to work can change the outcome more than expected.
This guide explains how the first year typically works financially, and why many parents find it worth modelling the full picture before deciding when to return to work.
The first-year financial timeline most families experience
A useful way to think about the first year is as a timeline, not a single financial situation.
For many families it looks something like this:
| Period | What often happens |
|---|---|
| Birth | One parent stops working |
| First months | Employer parental leave may apply |
| Following months | Government Parental Leave Pay begins |
| Later months | Household income may rely on one salary only |
| Return to work | Childcare begins |
| After childcare starts | Child Care Subsidy reduces the fees |
The timing of each stage is different for every family. Some parents return to work after six months. Others stay home for a year or longer. Some return part-time before increasing hours later.
Because these stages overlap differently for everyone, it is hard to estimate the financial impact without modelling the year as a whole.
How Government Paid Parental Leave works
In Australia, eligible parents can receive payments through the Paid Parental Leave (PPL) scheme, administered by Services Australia.
For 2025-26, the scheme provides up to 24 weeks (120 days) for the family. For couples, 20 weeks are available to the primary carer and 4 weeks are reserved for the other parent. Single parents can access the full 24 weeks.
Payments are made at the National Minimum Wage rate — approximately $189.62 per day for 2025-26 (based on the NMW rate, subject to the Fair Work Commission's annual determination). That is roughly $946 per week before tax.
A few important points:
- Payments are taxable income — 15% is typically withheld, and the gross amount counts toward your family's adjusted taxable income for CCS and FTB purposes
- Leave can often be shared between parents depending on the family's circumstances
- The amount is usually lower than a typical full-time salary, which is why household income often changes during the leave period
For a full breakdown of how PPL payments interact with Family Tax Benefit at balancing, see How Parental Leave Pay Affects Your Family Tax Benefit.
Employer parental leave can make a significant difference
Some employers provide paid parental leave on top of government payments. This varies widely. Some employers offer several months of full pay, others offer shorter periods or half-pay arrangements.
A typical sequence might look like:
| Period | Income source |
|---|---|
| First weeks or months | Employer paid parental leave |
| Following weeks | Government Parental Leave Pay |
| Later period | Partner income only |
Because employer policies vary so much, two households with the same salaries can end up with very different first-year outcomes depending on the leave available to them.
If your employer offers paid leave, it is worth factoring in the exact duration and rate (full pay, half pay, or a fixed top-up) when modelling your year.
Why household income often drops temporarily
Even with parental leave payments, many households experience a temporary income reduction after a baby arrives. This usually happens because:
- one parent stops working completely for a period
- government PPL payments (~$946/week in 2025-26) are often lower than a regular salary
- some leave periods may be unpaid
For some families the drop is manageable. For others it directly influences how long they feel comfortable staying home before returning to work — or whether one partner reduces hours rather than stopping entirely.
This is why many parents start asking practical questions early:
- How long could we actually stay home before we need more income?
- Should we return part-time first, or jump straight back to full hours?
- If we returned earlier, would the extra income outweigh the childcare cost?
The answer to each usually depends on the next major factor in the equation.
When childcare costs enter the picture
For families planning to return to work, childcare is typically the next major financial consideration.
Childcare fees can appear high at first glance. But many families receive significant support through the Child Care Subsidy (CCS), which is paid directly to approved providers and reduces the fees charged to families.
The CCS amount depends on several factors:
- Family income — higher income means a lower subsidy percentage, on a sliding scale
- Number of children in care — a second child under 6 may attract a higher rate
- The provider's fees relative to the hourly rate cap set by the government
- Number of subsidised hours based on your activity level (work, study, volunteering)
Because of this, the advertised daily fee is rarely what families actually pay. Understanding the likely out-of-pocket cost — not the headline fee — is what matters for return-to-work planning.
Use the CCS calculator to estimate your weekly out-of-pocket cost based on your income, hours in care, and fees.
Is it worth going back to work after a baby?
One of the most common questions parents ask is: "Is it even worth going back to work if childcare is so expensive?"
The honest answer is: it depends on your specific numbers. But for most families, returning to work — even part-time — does improve the household position after childcare costs, particularly because:
- the Child Care Subsidy reduces out-of-pocket costs significantly at typical family income levels
- household income increases even after childcare, building buffer and long-term savings capacity
- working patterns can be adjusted as children age and childcare costs shift
- career continuity has longer-term income implications that are harder to quantify but real
The question is less often "should we?" and more often "when, and how many days?"
Why 3, 4 or 5 days can change the outcome more than expected
Many families are surprised that small changes in the number of work days shift the household budget more significantly than they anticipated.
| Return to work | What typically changes |
|---|---|
| 3 days/week | Lower childcare use, lower income |
| 4 days/week | Higher income, more childcare days |
| 5 days/week | Maximum income, maximum childcare use |
Because both income and childcare costs change simultaneously, the final net position is not always obvious. The relationship between the two is non-linear — moving from 3 to 4 days does not simply add one-fifth of a salary, because:
- CCS entitlement may change with income and activity hours
- some fixed household costs do not scale with work days
- the marginal tax rate on the extra income affects the real value
This is why seeing all four scenarios — 2, 3, 4, and 5 days — side by side, with actual childcare cost estimates, is more useful than calculating one option at a time.
Common planning mistakes
When families try to estimate the first year, a few mistakes come up regularly.
Looking only at the headline childcare fee The Child Care Subsidy can reduce fees significantly. The daily fee at the door is almost never what you will pay.
Forgetting that parental leave payments are taxable The gross PPL amount counts toward your ATI for both CCS and FTB. Ignoring this can cause underestimates of income, and unexpected debts at tax time.
Thinking in weekly snapshots rather than the full year Income changes several times during a typical leave year. A single-point calculation misses the transitions.
Assuming childcare begins immediately after leave ends Many families start care several months after returning to work, or stagger the start. The timing affects the full-year cost significantly.
Not accounting for the FTB impact of PPL Parental Leave Pay can reduce FTB Part B entitlements at balancing because it pushes the secondary earner's income above the threshold. See How Parental Leave Pay Affects FTB for detail.
Modelling your first year
Because the first year involves so many moving parts, many parents find it helpful to model their situation before making decisions.
Modelling can help answer questions like:
- How long can we afford to stay home before returning to work?
- Would returning three days or four days make a bigger financial difference?
- When would childcare costs begin, and how much would they reduce the Child Care Subsidy?
- How does the household income look month by month across the full year?
Small changes in timing or return days can sometimes shift the annual household budget by thousands of dollars in either direction.
Plan your first year with the PPL Planner
If you want to see how parental leave, returning to work, and childcare costs interact for your household, the PPL Planner is designed for exactly this.
It allows you to:
- estimate government Parental Leave Pay income (net of withholding)
- include employer parental leave weeks and rate
- see a month-by-month household income timeline across the first year
- compare return-to-work scenarios at 2, 3, 4, and 5 days per week
- estimate how the Child Care Subsidy may reduce fees once care starts
For many families, seeing all of this together — rather than estimating each piece separately — makes the answer to the central question much clearer.
Can we afford for one parent to stay home longer, or should we return sooner?
Understanding the numbers before you commit to a decision tends to make the first year feel far more manageable.
Frequently asked questions
How long do most Australian families take off after a baby?
There is no single answer — it varies widely. Government PPL provides up to 24 weeks (from July 2025), but many families use this alongside employer leave and unpaid leave to extend the period. Some primary carers take 6 months, others 12 months or more. The financial and personal circumstances of each family are different.
Does taking more unpaid leave affect CCS later?
Taking unpaid leave itself does not affect CCS — but the income reduction during that period does, if it was not factored into your estimate. Lower income typically means a higher CCS rate once care starts. The timing of when you return to work and when you start childcare also affects the activity test, which determines your subsidised hours entitlement.
If my partner stays home and has no income, do we get more CCS?
CCS is tested on combined household income, so a lower combined income generally produces a higher CCS rate. However, the activity test is also assessed per parent — a parent who is not working, studying, or volunteering will typically be limited to 24 subsidised hours per fortnight. The 3-Day Guarantee (from January 2026) provides a minimum of 36 subsidised hours regardless of activity, which helps families in this position.
This guide provides general information only. Individual entitlements are determined by Services Australia based on your actual circumstances. For personalised advice, contact Services Australia at 136 150 or visit servicesaustralia.gov.au.