Monday 9 November 2026 • By Timothy, CPA — Managing Director, Professional Financelink (PFL)

Abstract illustration of a single funding stream splitting at a valve, most of it flowing on to families and a thinner stream that once fed the centre now closed off

Start Strong Ends in December. Before You Set 2027 Fees, Model What NSW's New Preschool Funding Does to Each Centre.

The headline rates look generous. The finance question is how much of the money your centre actually keeps, and the answer can be very different from site to site.

This one is for NSW operators. Elsewhere, the method still works but the program details won't apply.

The NSW Government announced the change back in June: from 1 January 2027, Start Strong is replaced. For long day care it becomes Fee Relief for Long Day Care. For community preschools it becomes the Universal Preschool Funding program. The Universal Preschool Funding guidelines came out on 19 October, and the 2027 Fee Relief for Long Day Care guidelines followed on 4 November. And last week, the cost of the change started to show up in regional press, with one operator saying two of her centres face combined cuts of around $70,000 to $80,000 a year and a community preschool director saying it is set to lose more than $120,000.

I'm not going to argue the policy here. Peak bodies are doing that. What a finance lead needs before fees are set for next year is a per-centre answer to one question: of the funding we receive now, how much did we keep, and how much of that survives in 2027?

1 Jan 2027 New programs start. Start Strong payments for long day care cease in December 2026 (NSW Department of Education)	$2,625 Maximum annual Fee Relief per child aged four and over in long day care, applied as a weekly reduction to the family's fee
$150m Amount the Early Learning and Care Council of Australia says comes out of long day care preschool programs. This is an advocacy estimate, not a government figure	$255m The government's stated size of the Fee Relief for Long Day Care initiative in 2027

What is actually changing

The government's material is clear on the structure, even where the dollar effect is still being argued:

Long day care: Fee Relief for Long Day Care replaces Start Strong for Long Day Care. It is a flat annual amount per enrolled child aged three and over, paid as a weekly reduction to the session or gap fee after the Child Care Subsidy. The 2027 rates are up to $2,625 (age four and over) and $788 (age three) for children at the maximum rate, and up to $1,826 and $434 for other eligible children. The rate is the same for not-for-profit and for-profit services. Only services that run a preschool program are eligible.
Community preschools: Universal Preschool Funding replaces Start Strong for Community Preschools. Three- and four-year-olds are funded at the same rate, and children in priority cohorts get an extra funded day a week. The government says the funding is designed to cover most operating costs, including a mandated pay increase from 1 January 2027.
Fees at community preschools: out-of-pocket fees for funded preschool are capped at $20 a day, and services already charging more are frozen at their August 2026 census level. Compulsory charges such as enrolment fees count towards the cap. This is a Universal Preschool Funding condition. The long day care guidelines don't contain it.
Fee increases in long day care: the guidelines say providers are not permitted to unreasonably increase fees to offset the benefit of Fee Relief, and must keep evidence for any increase they make. That matters a lot for the modelling below.

Operators quoted last week say the long day care Fee Relief continues, but without the "programming portion" that previously stayed with the centre. That's the mechanism worth understanding, because it changes which line of your P&L the money lands on.

Pass-through money and kept money are not the same revenue

Funding that passes straight through to families as a fee reduction makes your service cheaper for parents. It doesn't pay your teacher. Funding the centre keeps to run a preschool program does. Two centres can receive the same total in 2026 and be affected completely differently in 2027, depending on that split.

Finance teams often book both to a single "government funding" line. If yours does, the first job is to separate them for 2026, centre by centre. Without that split, the 2027 forecast is guesswork.

Here's a simple illustration. The numbers are made up, not from any real centre:

Illustrative centre (60 places)	2026	2027
Funding passed to families as fee relief	$60,000	$62,000
Funding kept by the centre for the preschool program	$35,000	$0
Total funding	$95,000	$62,000
Change in money the centre keeps	—	−$35,000

On a board slide, "funding down $33,000" understates the problem. The family side actually went up a little. The centre's side went to zero. If the program costs (a degree-qualified teacher's time, resources, planning hours) don't change, that $35,000 comes straight off the centre's result.

Could you recover it through fees? Spread across, say, 30 preschool-age children attending three days a week for 48 weeks, that's 4,320 child-days, or about $8.10 a day. That's the number to put in front of the people who set fees. Then put the guideline restriction next to it: fees can't be unreasonably increased to offset Fee Relief. Read that restriction closely, and get advice if unsure. It may rule out the simplest answer.

Build the per-centre table before you set fees

For a multi-site operator, the averages hide everything. One centre with a large four-year-old room and many maximum-rate families may come out roughly even. Another, where the old programming money funded a teacher, may not. The table needs to be per centre, with these columns:

Enrolled preschool-age children by age band (three, four and over) and by rate category (maximum rate or other), from your Child Care Subsidy enrolment data for the week of 22–28 June 2026, since the guidelines use that week to set initial 2027 allocations.
2026 Start Strong receipts, split into the part passed to families and the part kept.
2027 Fee Relief at the published rates for each child.
Program costs you incur regardless: teacher hours above ratio, planning time, resources.
The gap: kept money lost, less any cost you can genuinely remove.
The fee effect: what closing the gap would mean per child-day, and whether the guidelines allow it.

Community preschools moving to Universal Preschool Funding need a different version of the same table. The question there is whether the new funding covers the mandated pay increase and your actual operating costs. The government says the program is built to do that. Test it on your own numbers, using your 2027 funding advice and your actual pay rates, not the media release.

The cash timing across Christmas

Start Strong long day care payments stop in December. The guidelines say the first quarterly Fee Relief for Long Day Care payment (covering January to March) is expected by 18 December 2026, and the first Universal Preschool Funding payment by 19 December. But the department can change the schedule, and payment depends on accepting the 2027 terms in its contract system. If it slips into January, a centre that has just paid December wages and leave loading will feel it. Put both the expected date and a late-January date in your 13-week cash view.

Also check the admin: each eligible child needs a Fee Relief declaration and consent form, and February and June 2027 enrolment data may be used to adjust funding during the year.

Where AI helps, and where it doesn't

This is a good job for an AI tool, within limits. Given de-identified child counts by centre, age band and rate category, plus the published rate table, it can build the per-centre table and the fee scenarios in minutes. It can also pull every condition, date and form from the guidelines into a checklist, with a section reference for each, so a person can check them.

What it can't do is tell you which part of your 2026 money was "kept". That depends on how your ledger was coded and needs someone who knows the history. Nor can it make the fee decision, which is a judgement about families, competition and what the guidelines allow. Tie every input back to the funding letter before anyone relies on it.

Using AI with enrolment data: children's and families' information is sensitive. Before any of it goes into an AI tool, check whether the vendor keeps your inputs or trains its models on them. The safest posture is a business-grade tool where data isn't retained for training, and only de-identified counts going in.

This post is general commentary based on publicly available information and does not constitute legal or tax advice. Always seek independent professional advice before acting.

Before the fee letters go out

Four things, in order. Split your 2026 funding into pass-through and kept, by centre. Build the 2027 table at published rates. Read the fee-increase restriction properly before you model a fee rise. And put the December and January payment dates in the cash view. If the table shows a gap you can't close, it's better to know that now, while you still have options, than in March. We made a similar point about fixed costs in last fortnight's post on centre closures.

Do you know which of your centres loses money on 1 January?

PFL provides senior-level outsourced finance, management reporting, and AI automation for Australian NFP, NDIS, and SME organisations. We can help you split your funding by centre, build the 2027 scenarios, and put a clear answer in front of your board before fees are set.

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Timothy, CPA is Managing Director of Professional Financelink (PFL), providing senior-level outsourced finance, management reporting, and AI automation for Australian NFP, NDIS, and SME organisations. 20+ years in finance leadership across NFP, NDIS and SME.

Sources

Tomorrow: I shipped a game with a team of one and three AI tools. What it taught me about running an efficient organisation.

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