CHANGES to the federal government's childcare scheme will hit families and centres hard, Bendigo MP Lisa Chesters says.

Federal Education Minister Dan Tehan on Monday announced the government's COVID-19 childcare package would end on July 12.

Mr Tehan said JobKeeper payments would also stop for the sector from July 20.

The government would instead pay childcare services a "transition payment" of 25 per cent of their usual fee revenue.

The payment would be made from July 13 to September 27 as services transition back to the childcare subsidy system.

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Federal Member for Bendigo Lisa Chesters said the changes were confusing and unfair to families.

"This is the third childcare scheme in as many months," she said. "How confusing would it be if you were a parent with a child in childcare? You wouldn't be sure how much to pay or where to pay.

"It's another hybrid model which relies on parents paying more fees. I believe that locally there will be families who will struggle to pay the full fees. If they withdraw their kids, what will that mean for the centres?"

The federal government announced the current childcare package on April 2 amid a sharp decline in centre attendance numbers.

The scheme meant providers received 50 per cent of their fees from the government on the condition they did not charge parents.

Mr Tehan said it was time to return to the original scheme because demand for childcare places was back up around 74 per cent across the sector.

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"No one imagined two months ago that we would be in the position that we are," Mr Tehan told reporters. "I think most people, most experts thought it would take at least four to six months for us to be in this position."

Mr Tehan said the activity test for families eligible for childcare subsidies would be eased until October 4 to support those whose employment had been impacted by COVID-19.

Families will receive up to 100 hours per fortnight of subsided care during this period.

But Ms Chesters said the easing of the activity test should be extended past the October deadline.

"If you're working in the tourism or hospitality space, shifts are not going to be normal by October 4," she said. "Our industries are coming back slowly and people's shifts are not returning properly.

"What the government should be doing is funding free childcare properly for an extended period of time, until our economy is back on its feet.

"They should invest in the early years and ensure parents don't have to worry about fees. They should support the centres with proper funding, not the half model they had."

Earlier

The government's coronavirus childcare package, which included free childcare, will end on July 12 with a new set of measures to be introduce as the sector transitions back to the subsidised model.

Federal education minister Dan Tehan said JobKeeper payments would cease for the sector from July 20.

Instead, the government will pay childcare services a "transition payment" of 25 per cent of their usual fee revenue.

This payment will be made from July 13 to September 27 as it transitions back to the childcare subsidy system.

Providers will be asked to cap fees at the level of the reference period, which is the fortnight ending in March 2.

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Mr Tehan said demand for childcare places was increasing again, prompting the new transition phase.

"No one imagined two months ago that we would be in the position that we are," he said.

"I think most people, most experts thought it would take at least four to six months for us to be in this position.

"So what we must do is now put in a system, in place, that enables us to transition, to be able to deal with the extra demand that is coming into the system and that is what this package is designed to do."

Mr Tehan said the most recent survey showed that demand has reached 74 per cent across the childcare sector.

He said the government would bring forward the last two relief payments scheduled for September to assist with cash flow.

He also said the activity test for families eligible for childcare subsidies would be eased until October 4 to support those whose employment had been impacted by COVID-19. Families will receive up to 100 hours per fortnight of subsided care during this period.

The federal government announced a childcare package on April 2, which meant providers received 50 per cent of their fees from the government on the condition they did not charge parents.

This story originally appeared at The Canberra Times.