Childcare will be offered for “free” for working families earning under $69,000-a-year under Labor’s new plan to make daycare cheaper for nearly one million families.

Every family in Australia with a combined income under $175,000 will secure cheaper childcare under the plan, which Labor estimates will save working parents up to $2,100 for each child in childcare.

As revealed by The New Daily on Friday, the policy will deliver not only cheaper childcare for families but include a mechanism to deliver a pay raise for childcare workers.

Opposition leader Bill Shorten will announce Labor’s $4 billion early education policy on Sunday, promising to deliver “massive cost of living relief” for families.

The plan will deliver a $26-a-week saving, or up to $52-a-week, for two children in childcare.

Labor’s plan will increase the current 85 per cent rebate for families earning up to $69,000 a year to 100 per cent up to the hourly fee cap of $11.77 per hour.

“The majority of families earning up to $69,000 will get their child care absolutely free – saving them up to $2,100 per child per year,” Mr Shorten said.

But families will have to wait until next July for fee relief in Labor emerges victorious on May 18, with 887,000 estimated to be better off under the policy.

“Every single family in Australia earning up to $174,000 will get cheaper child care with Labor,” the policy states.

“This is a $4 billion investment in early education, in working parents and in helping families with the rising cost of living.”

But families must meet a work activity test to secure access to the increased funding. If families choose more expensive care charged at over $11.77 per hour they will face out-of-pocket costs.

Labor will use the policy as a key argument for higher taxes on big business, negatively geared property investors and self-funded retirees, the additional revenue going to fund hospitals, schools and the proposed childcare changes.

“Labor can pay for cheaper child care for working families because, unlike Scott Morrison and the Liberals, we aren’t giving bigger handouts to the top end of town,” Mr Shorten said.

For parents with children at school, the new policy will also apply to after-school and holiday care.

The ALP claims childcare costs have gone up 28 per cent under the Abbott-Turnbull-Morrison government, costing families $3,000 more a year.

Families earning between $69,000 and $100,000 will also have their government subsidy increased

Working parents earning between $100,000 and $174,000 will receive a subsidy rate between 85 per cent and 60 per cent up to the fee cap – delivering an effective increase of 10 per cent to government subsidies.

There will be no change to the government’s existing regime for parents earning over $175,000 a year.

Under the Turnbull government’s reforms childcare subsides phase out to zero for families with a combined income of over $350,000.

To stop the more generous rebates prompting childcare operators to simply jack up fees, the consumer watchdog the ACCC will be tasked with investigating excessive fee increases.

Providers will then be “named and shamed” through mychildcarefinder.

Labor also claims the reforms will help deliver “free or almost free” pre-school for thousands of children.