These FAQs have been designed to help family day care services and educators understand the upcoming changes to the Direct Gap Fee Collection (DGFC) model.

To make it easier to find answers quickly, we have grouped the FAQs into the following headings:

General information about Direct Gap Fee Collection
Support and Resources for Services and Educators
Preparing for the Transition to a Direct Gap Fee Collection
Managing Payments and Avoiding Debts

General Information about Direct Gap Fee Collection

1. What is a Direct Gap Fee Collection (DGFC) model?

The Direct Gap Fee Collection (DGFC) model, also referred to by some services as a centralised payment model, requires all family day care approved providers to collect the Child Care Subsidy (CCS) gap fee directly from families.

This means educators will no longer collect the gap fee, as the approved provider will be responsible for the direct collection of the CCS gap fee from families and then pays educators accordingly.

2. Why is the Government legislating the change to a Direct Gap Fee collection model?

The Australian Government has introduced this measure to systemically strengthen the sector by:

Ensuring CCS is correctly administered and that gap fees are being paid as required.
Freeing educators up from collecting fees from families, reducing administration burden, minimising potential tensions around debt collection from families and allowing them to focus on their core role of providing education and care.
Increasing confidence in the sector’s payment integrity status, which will allow for higher levels of sector investment into the future.

3. What does this change mean for family day care educators who currently collect the gap fee?

Under the new Direct Gap Fee Collection model, educators will no longer be responsible for collecting gap fees directly from families.

Instead, educators will receive their portion of the gap fee from their approved service.

This aims to reduce the administrative pressure on educators, and supports stronger, more positive relationships with families.

4. When will the Direct Gap Fee Collection model become mandatory?

The new requirement is expected to take effect from 1 January 2026, subject to the passage of legislative amendments to the New Tax System (Family Assistance)(Administration)Act 1999.

While the legislation has not yet passed, the Australian Government has committed to this reform and has announced the update to commencement date here. FDCA will continue to provide updates as the legislative process progresses.

Services are strongly encouraged to begin preparing for the transition well ahead of time to ensure that you are compliant once the requirement takes effect from 1 January 2026.

5. What are the benefits in changing to a Direct Gap Fee Collection model?

Services that have already transitioned to a direct, or centralised, model of gap fee collection report improved governance and stronger relationships with both families and educators. They have seen:

Greater transparency and compliance with CCS requirements.
Reduced administrative and financial stress for educators.
Streamlined payment processes and record-keeping.
Better oversight and early identification of issues related to debt and non-payment.
Strengthened payment integrity across the sector.

6. Does the change to Direct Gap Fee Collection mean that educators will become employees?

No. Educators will continue to operate as independent contractors, and the independent contractor model remains unchanged. This change is about how families pay for care, not about changing the nature of the educator’s business model.

That said, FDCA has sought legal advice to clarify whether a centralised (direct) gap fee collection could affect the independent contractor model. This advice has highlighted the following key points that services should consider below:

While there is a legal risk that centralised gap fee collection may increase the likelihood of a court finding an educator to be an employee rather than a contractor, this risk can be minimised.
The key is to ensure that educator agreements clearly and comprehensively set out the terms of the engagement between the provider and educator, especially around:
- How the provider collects and disburses gap fees on the educator’s behalf.
- The fact that families remain liable for payment of care fees – not the service.
- The educator’s entitlement to payment is based on the sessions of care delivered and reported, not to other obligations under the contract.

Additionally, agreements should reinforce that the educator:
- Is operating their own family day care business.
- Maintains control and autonomy consistent with an independent contract relationship.

Feedback from services already using a direct gap fee collection model shows that with the right agreements in place, there have been no negative impacts on their contractor model, with many services reporting positive results.

Support and Resources for Services and Educators

7. What sort of resources and support will be available to services to assist in transitioning to a Direct Gap Fee Collection model?

FDCA has partnered with the Australian Government Department of Education to develop a range of guidance resources and provide tailored practical support to assist services in their transition to establishing a Direct Gap Fee Collection model.

FDCA will develop:

A range of awareness and information resources tailored for services, educators and families.
Good practice guidance resources for services on efficient business practices, and relevant governance policies, practices and procedures.
Expert debt collection guidance through best practice models and policies, tips and tools.

Ongoing direct phone and email support is available through FDCA’s Sector Support team to respond to your questions, help resolve concerns and address challenges as they arise. Tailored advice will also be available following the consultation and initial resource development phase to help services update contracts, policies and fee structures.

8. When and where will resources be available?

Resources will be rolled out progressively throughout 2025 and will be made available on the main DGFC webpage. Regular updates will be shared via bulletins and newsletters.

The resources and direct support will be available to all approved services and educators – regardless of whether they are a member with FDCA or not.

9. My service has already transitioned to a Direct Gap Fee Collection model – how will the resources being created be of use to me?

Even if your service has already transitioned to a Direct Gap Fee Collection model, the resources and supports we will provide will help approved services and educators in critically reflecting on and refining your current systems, practices, policies and procedures.

FDCA will be promoting good news stories and tips from those who have already transitioned. If you have had a positive experience and want to share your journey or offer tips, please reach out to us as we would love to feature your journey in our JiGSAW magazine or in our weekly newsletters.

Preparing for the Transition to Direct Gap Fee Collection

10. As a service, where do we start when transitioning to a direct gap fee collection model?

Start by laying the groundwork early. Key steps include:

Planning Communication: Notify educators and families at least three months in advance. Clearly explain that a change is coming, why it is required, when it will take effect in your service and how it will affect them (e.g. payment processes, timelines and payment options available).
Policy Updates: Consideration needs to be given to updating your fee, payment and debt management policies, as well as revising educator agreements where needed.
Notice Period: Provide families with at least 14 days' notice of any fee or payment changes. Educators will also require advance notice about how their payment processes will change.
Consult your CCSS Software Provider: Third party software providers may have specific timeframes, onboarding requirements, or system updates that need to be factored into the transition planning. Each provider may support the process differently, so it is important to engage with them early, so you understand what is required.
Keep an eye out for the resources we are developing to help support you.

11. Do services need to upgrade or modify third party software to support Direct Gap Fee Collection?

Not necessarily. This will be a business decision for each service and will depend on your current system and business needs. We recommend you:

Speak with your third-party software provider to assess current functionality.
Ask about features to support a Direct Gap Fee Collection model, available upgrade options, timing for roll-out, additional costs and the integration tools.
Consider evaluating current functionality such as invoicing options, direct debit options and debt tracking tools.

12. What strategies will help support clear communication to families?

Transitioning families to the new system and expectations will take time, care and clarity. Tips include:

Plan your messaging early and keep it consistent. Start with small, manageable chunks of information and build awareness over time.
Clearly explain the reason for the change emphasising the benefits for families and educators i.e. improved oversight and less admin burden on educators.
Ensure your educators have clear talking points about the change that they can use with families ask questions and provide clear avenues for educators to escalate any questions they cannot answer.
Be available to answers questions – making sure your team are also well briefed and able to answer questions confidently.
You may want to tailor your support to families. Some families may want detailed information, others may only require the essentials.
Use FDCA’s family communication templates once available as they will help support clear and consistent messaging.

13. How can educators be supported through this change?

Supporting educators through this transition is key to a smooth rollout. Here are some practical strategies and tips based on feedback we received from services:

Communicate early with clear and regular communication. Don’t overload educators with information. Instead, share small, manageable updates as decisions are made.
Hold regular team meetings or online sessions to explain and walk educators through the Direct Gap Fee Collection model and how it supports them.
Explain the rationale behind your service’s decisions. For example, this may be around:
- Debt recovery processes
- Decisions on when to suspend care
- Payment options available to families
- Any adjustments that may be made to the educator agreements
- When educators may expect to get paid and how this process will look.

Acknowledge any concerns and reassure them that the independent contractor model remains unchanged.
Offer the opportunity for educators to ask questions or express concerns.
Use FDCA’s educator specific resource once available.

14. What role can educators play in supporting the service’s transition to Direct Gap Fee Collection?

While the service remains responsible for implementing and managing the Direct Gap Fee Collection model, educators can play a valuable role in supporting its success through clear and consistent communication with families. Here are some practical ways educators can assist services:

Reinforce messaging: Educators can help reiterate key messages from the service around upcoming changes to payment methods, timelines and family responsibilities.
Building trust and reassurance: because educators have such strong relationships with families, they can help ease concerns, answer simple questions and encourage families to reach out to the service for further clarification if needed.
Monitoring family needs: As educators are often the first to identify if a family is experiencing payment difficulties, they can flag concerns to the service early, allowing for timely support or follow up.
Providing feedback: Educators can offer insights on how families are responding to the changes and can suggest improvements to communication or processes. Providers should ensure there are processes in place for educators to provide feedback easily.

15. As a service we are feeling concerned about the transition to Direct Gap Fee Collection – what help is available?

You are not alone – and help is available. If your service is feeling overwhelmed or unsure about how to start the transition, FDCA is offering ongoing dedicated support services throughout the lifespan of the project and beyond 1 January 2026.

Our direct support service includes phone and email support through FDCA’s sector support team to respond to your questions, help resolve concerns and address challenges as they arise and receive your feedback. Tailored advice will also be available following the consultation and initial resource development phase to help services update contracts, policies and fee structures.

Please reach out if you have any questions about the transition to the Direct Gap Fee Collection model by:

Phoning 1800 658 699
Emailing enquiries@fdca.com.au

Managing Payments and Avoiding Debts

16. What payment methods can services offer families?

Services can choose the payment methods that align with their business models and will therefore vary between services. Common options include:

Direct debit
BPay
Credit card payment via third party platforms
‘Pay Now’ functions via third party platforms

Please note that each method carries different bank processes, timeframes and potential charges. It is important to understand these when deciding what to offer to families. FDCA’s good practice guidance will help you to compare options and reduce risks.

17. How can services manage unpaid gap fees and reduce the risk of debt?

Unpaid CCS gap fees become a debt owed by the family. While each service may approach debt management differently, developing proactive strategies can reduce the risk of non-payment and therefore support smoother financial operations.

The following strategies reflect practices shared by services during consultations:

Debt Prevention

Consider upfront payments.
Establish clear and firm payment expectations with families around due dates, payment methods and consequences for non-payment (e.g. dishonour fees).
Implement a clear debt management policy with families and educators.

Debt Recovery

Draw from advance payments if a payment is missed or pause care if funds are exhausted.
Maintain a documented trail of attempts to recover unpaid fees to demonstrate ‘reasonable steps’ in the event of an audit.
Use third party software tools to track outstanding debts or set flags for payment plans.
Offer support options, such as payment plans or, where appropriate, assess eligibility for ACCS for families in financial hardship.
Seek expert advice and engage legal or debt recovery services if needed.
CA’s resources will provide further guidance on effective debt prevention and recovery strategies.

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