Fake Sydney daycare 'defrauded millions'

It supposedly operated out of multiple sites in Sydney and Wollongong, providing "safe, nurturing and loving" care to more than 450 children.

Except there were no children, only photographs of them, police allege.

Play areas had been mocked up, time sheets were faked and rosters fixed.

"The whole thing was a fraud," Acting Assistant Commissioner Stuart Smith said on Thursday.

Detectives say the business raked in about $4 million in rebates through an elaborate scheme that exploited the federal government's childcare subsidy scheme.

It's alleged the company's director alone pocketed $30,000 a fortnight.

After an eight-month investigation, detectives on Wednesday arrested 18 people - three men aged 24, 40 and 49, and 15 women aged between 21 and 44 - following raids on 23 properties.

Three people have since been charged with directing a criminal group and 14 with participating in a criminal group.

Large volumes of documentation, including business records, have been seized, as has a Range Rover, $35,000 in cash, and two electronic control devices.

"We saw a level of sophistication or coordination in this that we don't see in outlaw motorcycle gangs," Mr Smith told reporters in Sydney.

Some 150 parents who said they had between three and seven children in care claimed rebates - but their involvement in the operation is unclear.

Police discovered a number of "vulnerabilities" during their investigation and are working with state and federal education departments to address them.

Mr Smith said the company designed processes to evade authorities and "defeat" physical and phone auditing by the NSW education department - which regulates the scheme in the state.

If there was an audit of one site, the rest of the syndicate would find out by the end of the day and they would put processes in place to make sure they complied with any audit, he said.

The department issued the business an immediate suspension notice.

There is evidence the syndicate was also planning to move into the National Disability Insurance Scheme.

Mr Smith said more syndicates could be targeted, and further significant arrests have not been ruled out.

The NSW education department has been contacted for comment.

Australian Associated Press