Earlier this month, the government released draft guidelines for the pilot, which will subsidise about 4000 nannies to work for up to 50 hours a week.

But the Australian Nanny Association says that the cost to providers who participate in the trial will "outweigh the funding allocated to services wanting to tender".

Under the draft guidelines, nanny services will receive two types of payments: a family subsidy direct from the government, and an administrative fee, which is 5 per cent of the family subsidy.

The family subsidy will be a proportion - up to 85 per cent - of the fixed hourly fee of $7 an hour per child.

The Nanny Association said this would mean funding for administration would be between 18¢ and 30¢ per hour, per child, depending on a family's income.

"No quality organisation would be able to manage the nanny pilot on such low subsidies," association vice-president Annemarie Sansom​ said, noting that providers would need new software to administer the pilot, as well as make visits to rural and regional families to meet compliance standards.

"We have grave concerns the program is being set up to fail."

She said the Nanny Association was already aware of childcare providers deciding not to apply for a spot on the trial, if funding remains at current levels.

Ms Sansom said a qualified, experienced nanny would cost at least $30 an hour, but under the trial, families would be more likely to get less experienced nannies, who can earn as little as $18 an hour.

She also raised concerns that under the draft guidelines, nannies would be allowed to care for up to four children under school age and seven in total.

"We see a high risk around having the ratio of up to one nanny for seven children," she said.

"We're trying to come to the party, but it's really hard."

Earlier this year, the Abbott government announced $250 million for a two-year nanny trial, as part of its broader childcare reform package.

The trial, which is due to begin in January 2016, will allow families who earn less than $250,000 a year to apply for the program from September.

They will need to outline their employment details, as well as the type of care they need and why.

The Department of Social Services will then prioritise families who live in very remote areas of Australia or are far from child-care services, parents who work non-standard hours and children who need extra support.

Preference will also be given to families who have two or more children and who can demonstrate an "increase in work hours".

Social Services Minister Scott Morrison said the government had consulted families and found "the majority support the expansion of government financial assistance to include nannies with the key benefits being the flexibility and convenience that nannies can provide".

"This isn't a replacement for mainstream child-care services; this is a pilot subsidy scheme to ensure that those who are currently unable to access those services can," he said.

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