Introductory Info

Date introduced: 17 February 2021
House: House of Representatives
Portfolio: Education, Skills and Employment
Commencement: Part 4 of Schedule 1 on 1 July 2021; item 44 of Schedule 1 on 1 July 2020; remaining items on the day after Royal Assent.

The Bills Digest at a glance

The Family Assistance Legislation Amendment (Early Childhood Education and Care Coronavirus Response and Other Measures) Bill 2021 proposes changes to family assistance law to:

• establish a new mechanism for the Department of Education, Skills and Employment (DESE) to provide child care providers with Business Continuity Payments (BCPs) in response to emergencies or disasters
• allow only a single Administrative Appeals Tribunal (AAT) review process for all decisions relating to child care providers
• clarify the process for raising debts against child care providers who unsuccessfully appeal the cancellation of their approval to the AAT
• allow for child care grant agreement powers to be delegated to the departments administering the Australian Government’s Grant Hubs
• legislate the extended first deadline for families to submit their 2018–19 tax return or income information for Child Care Subsidy (CCS) reconciliation to 31 March 2021
• allow for CCS reconciliation to take place more than two years after the end of the relevant financial year—and for any underpayments discovered through this late-reconciliation process to be used to reduce a CCS debt
• legislate a number of changes and fixes related to child care measures made in response to COVID-19 and
• a number of other technical changes.

The Bill was passed by the House of Representatives and the Senate on 18 March 2021.

The Bills Digest provides background to Australian Government funding for child care, child care measures in response to the 2019–20 bushfires and COVID-19 response measures.

The new arrangements for providing BCPs in response to emergencies and disasters provide a more tailored way of supporting child care providers in response to events such as pandemics compared to the existing arrangements.

The changes to AAT review processes for providers will limit their avenues of appeal and will allow for debts to be raised against providers if they unsuccessfully appeal an approval cancellation decision while still receiving child care payments on behalf of families.

The changes to reconciliation conditions will encourage families to report their income details and will allow some families to reduce CCS debts.

The Bill’s proposals relating to the COVID-19 measures provide retrospective legal authority for some of the measures taken by the Minister for Education; ensure that normal family assistance law requirements do not affect the operation of the supports offered during the pandemic; ensure that children’s non-attendance at child care during the COVID-19 period does not affect their enrolment; and allow for debts to be raised against providers who received COVID-19 support payments but who should not have been entitled to these payments.

 

Purpose of the Bill

The Family Assistance Legislation Amendment (Early Childhood Education and Care Coronavirus Response and Other Measures) Bill 2021 (the Bill) amends the A New Tax System (Family Assistance) Act 1999 (the FA Act) and the A New Tax System (Family Assistance) (Administration) Act 1999 (the FA Admin Act) to:

• allow the Secretary of the Department of Education, Skills and Employment (DESE) to make business continuity payments (BCPs) to child care services that have been adversely affected by an emergency or disaster which has been declared for the purposes of the Australian Government Disaster Recovery Payment or the Disaster Recovery Allowance, or a disaster that has been specified in the Child Care Subsidy Minister’s Rules 2017
• clarify that Child Care Subsidy (CCS) payments paid during an AAT review of a provider cancellation decision are to be raised as debts against the provider, where the review is ultimately unsuccessful
• clarify that all decisions under family assistance law relating to approved providers are subject to a single review by the Administrative Appeals Tribunal rather than a two-tiered review process
• enable the DESE Secretary to delegate their child care grant agreement administration powers to the departments administering the Australian Government’s Grant Hub
• legislate the extended first deadline for families to submit their 2018–19 tax return or income information for CCS reconciliation to 31 March 2021
• allow for CCS reconciliation to take place more than two years after the end of the relevant financial year—reconciliation after the second year deadline can only be used to reduce a CCS debt but an individual cannot receive any additional CCS payments they may have been entitled to
• ensure that BCPs paid to child care providers as part of the Government’s Early Childhood Education and Care COVID-19 Relief Package during the period 6 April–12 July 2020 do not need to be recovered through future CCS payments to those providers
• allow the Minister’s Rules to specify circumstances where BCPs paid as part of the Relief Package are considered to be debts (for example, overpayments or payments to ineligible providers)
• ensure that the COVID-19 Relief Package period does not count towards a child’s allowable non-attendance period
• removing the requirement for providers to provide weekly session reports for the period of the COVID-19 Relief Package
• correct drafting errors in amendments made by the Family Assistance Legislation Amendment (Improving Assistance for Vulnerable and Disadvantaged Families) Act 2020 and
• enable the DESE Secretary to back-date the start date for child care provider approvals to a date prior to when a valid application is made, in special circumstances.

The measures were not announced prior to the introduction of the Bill.

Structure of the Bill and the Bills Digest

The Bill contains one Schedule in eight parts. The Bills Digest will provide background to the Australian Government’s early childhood education and care (ECEC) response to the 2019–20 summer bushfires and the COVID-19 pandemic. The ‘Key issues and provisions’ section will examine the eight parts separately with a focus on the amendments relating to BCPs for disasters, to AAT reviews of provider decisions, and to the COVID-19 response measures.

Background

Australian Government funding for child care

The Australian Government provides child care fee assistance to families and direct assistance to services. Funding support aims to ‘enable parents and carers to participate in the workforce by making early childhood education and care affordable and accessible’.[1] The main program is the Child Care Subsidy.

Child Care Subsidy

Assistance with the cost of child care fees is delivered via the Child Care Subsidy (CCS).[2] The CCS system commenced on 2 July 2018 and replaced two previous payments: Child Care Benefit and Child Care Rebate.[3]

The CCS is means tested with rates of payment based on family income, hours of care used, type of care used, and parents’ or carers’ level of work, training or study. An activity test determines the number of hours per fortnight a family is eligible to receive CCS.[4] A maximum hourly amount payable via the subsidy is set by the Government (the hourly rate cap) with families receiving a percentage of this rate or the actual fees charged based on their income.[5] The payment is paid directly to providers to be delivered to families in the form of a fee reduction.

The CCS can be paid for Centre Based Care (long day care and occasional care in a child care centre), Outside School Hours Care, Family Day Care and In-Home Care. Different hourly rate caps apply depending on the kind(s) of care used.

Child care services must meet certain conditions to be approved to pass on the CCS, this includes any regulatory requirements set by state and territory authorities under the National Quality Framework (NQF).[6]

Additional Child Care Subsidy

Additional Child Care Subsidy (ACCS) provides targeted assistance to families/children facing barriers to accessing child care. There are four categories of the ACCS:

• child wellbeing—aimed primarily at children at risk of abuse or neglect
• grandparent—for grandparent carers who receive income support (such as a pension) and who are the principal carer of children
• temporary financial hardship—for those experiencing significant financial stress due to exceptional circumstances and
• transition to work—for those receiving certain income support payments such as Parenting Payment, Newstart Allowance or Disability Support Pension and who have a Job Plan (employment pathway plan) in effect.[7]

The child wellbeing, grandparent and temporary financial hardship categories of ACCS allow eligible families to receive a subsidy equal to the actual fee charged by their child care service (up to 120 per cent of the hourly rate cap set for the CCS) for up to 100 hours per fortnight and to be exempt from the activity test. The transition to work category provides a subsidy equal to 95 per cent of the actual fee charged (up to 95 per cent of the hourly rate cap) with subsidised hours determined by the activity test.[8]

Direct support to providers

The Australian Government also provides direct support to child care services to assist with the establishment and running costs of services in areas where they may otherwise be unviable, for delivering services to children with disability or other special needs, and to assist with professional development.

These supports are primarily provided under the DESE’s Community Child Care Fund program.[9] The fund consists of different grant categories:

• open competitive grants, restricted non-competitive grants (for specified services, primarily those previously funded under the Budget Based Funded program which provided assistance to Indigenous, regional and remote services)
• the Connected Beginnings Program and
• the Special Circumstances grants (for services that have experienced a natural disaster or other unexpected event).[10]

In addition the Inclusion Support Program assists services to improve their services for children with additional needs, particularly children with disability.[11]

2019–20 bushfires response measures

As noted in the section above, Special Circumstances grants can be made available to child care providers that are at risk of closure due to an unforeseen event or circumstance such as a natural disaster or pandemic. Families affected by natural disasters can make use of approved absence days and may be eligible for ACCS (temporary financial hardship).[12]

In response to the 2019–20 summer bushfires, the Government announced a range of additional support measures for those affected. On 17 January 2020, the Minister for Education Dan Tehan and Dr David Gillespie MP announced funding for mental health support to schools and ECEC services in bushfire-affected communities.[13] The Minister also announced that families in these areas would be exempt from any CCS debts raised due to the activity test—so that those whose work or study hours were affected by the bushfires would still be eligible for CCS-subsidised sessions of care.[14]

On 12 February 2020, the Government announced a measure to allow families in bushfire-affected areas to receive third-party contributions towards their child care fees, such as donations or state government support, without it affecting their CCS entitlement for 12 months from 1 December 2019, and to allow volunteer firefighters access to the same arrangement for a three‑month period commencing 1 December 2019.[15] The measure for bushfire-affected families applied to those in a Local Government Area where a bushfire had occurred from 1 December 2019 for which the Australian Government Disaster Recovery Payment had been activated.[16] The Australian Government Disaster Recovery Payment is activated by the Minister for Emergency Management and the determination activating the payment will provide eligibility to those in specific Local Government Areas who have been adversely affected by a major disaster.[17]

COVID-19 response measures

Early Childhood Education and Care Relief Package

In late March 2020, in response to the COVID-19 pandemic and the resulting downturn in child care attendance, the Australian Government announced that it would provide families with additional allowable absences and waive requirements for child care providers to collect fees if the service was forced to close.[18]

On 2 April 2020, the Government announced temporary funding arrangements for child care which took effect on 6 April 2020 and were to remain in place until 28 June 2020 (but later were extended until 12 July).[19] Under the temporary funding arrangements, known as the Early Childhood Education and Care Relief Package:

• the CCS system was suspended and
• child care services started receiving a weekly BCP equivalent to 50 per cent of fees charged—up to the CCS hourly fee cap—for sessions of care in the fortnight preceding 2 March 2020 (17 February 2020 to 28 February 2020).[20]  

This meant services could receive a payment worth up to half of their pre-pandemic fee revenue. In order to be eligible for the new payment, a child care service had to:

• stay open with at least one child actively enrolled (except where the service was made to close on public health advice or for other COVID-19 health and safety reasons)
• not charge families any fees
• continue to record attendance
• prioritise care for children of essential workers, vulnerable and disadvantaged children and previously enrolled children and
• comply with other regulatory requirements under the NQF and the conditions for approval for the CCS.[21]

During the Relief Package period providers could, where eligible, access JobKeeper Payment and apply for additional funding from DESE. Additional funding would be provided as an Exceptional Circumstance Supplementary Payment—exceptional circumstances include an increase in enrolments; higher demand from essential workers or vulnerable or disadvantaged children; or where the provider was ineligible for JobKeeper.[22]

The main Relief Package measures were implemented via a legislative instrument, the Child Care Subsidy Amendment (Coronavirus Response Measures No. 2) Minister’s Rules 2020.

A review of the Relief Package was undertaken by DESE examining its impact over the first four weeks. The summary report of this review stated that, prior to the announcement of the package, child care attendance had reduced by 30–40 per cent on average and closures and staff layoffs were imminent.[23] The review found the Relief Package had succeeded in its objective of keeping services open and viable with 99 per cent of services operational as at 8 May 2020.[24]

A separate report outlining the Government’s consultation with the ECEC sector on the next stages of its COVID-19 response found that a key issue with the initial response was that many educators were ineligible for JobKeeper Payment: ‘Among services eligible for JobKeeper, 23 per cent of educators were ineligible, with OSHC [Outside School Hours Care] (37 per cent ineligible) and IHC [In Home Care] (38 per cent), particularly impacted.’[25] A survey of child care services asked about the impact of the Relief Package combined with JobKeeper Payment and found that these measures, to at least some extent: ‘helped services to stay open (90 per cent of services), retain staff (91 per cent), provide care to children of essential workers and vulnerable children (91 per cent), remain financially viable (82 per cent) and keep children enrolled (82 per cent)’.[26]

Transition Payment and activity test changes

From 13 July 2020, the CCS and ACCS were reinstated and a Transition Payment was introduced to assist services and child care employees who were made ineligible for JobKeeper Payment.[27] While JobKeeper Payment remained available for other businesses and organisations, child care employees had their eligibility removed from 20 July 2020. The Minister for Education, Dan Tehan, stated that the decision to withdraw JobKeeper Payment was to ‘ensure Government support is appropriately targeted’.[28]

The Transition Payment was paid for the period 13 July to 27 September 2020 and was equivalent to 25 per cent of a service’s fee revenue (or the hourly cap—whichever is lower) in the fortnight preceding 2 March 2020. To be eligible for the Transition Payment, providers had to continue to employ those employees over the transition period that were working or being paid JobKeeper at the end of the Relief Package and they needed to cap fees at their pre-COVID-19 level.[29] The Transition Payment was paid as a grant, not as a BCP.[30]

In a further measure, for the period 13 July 2020 to 4 October 2020, families who could no longer engage in the same number of hours of approved activities as they did prior to COVID-19 were able to access 100 hours per fortnight of CCS subsidised care—that is, the activity test was effectively waived.[31]

Additional measures for Victoria

In response to the COVID-19 situation in Victoria, the Government announced special child care measures applicable in some areas of the state:

• an additional 30 days of allowable absences and provisions to enable waiver of fees for families (CCS is still paid for allowable absences)
• a higher Transition Payment of 30 per cent of pre-COVID revenue for services in Stage 4 affected metropolitan Melbourne
• an additional top-up payment for eligible services in Stage 4 affected metropolitan Melbourne receiving lower CCS payments and experiencing greatly reduced attendance
• an Additional Viability Support Payment for Outside School Hours Care services in all of Victoria (an additional 15 per cent of fee revenue (or hourly cap) payment on top of the Transition Payment).[32]

These measures were announced on 5 August 2020 and were to run until 13 September 2020. The measures were later extended until 27 September 2020.[33] These additional payments for Victorian providers were paid as grants.[34]

On 20 September, Minister for Education Dan Tehan announced further measures to assist Victorian providers:

• a Recovery Payment for Centre Based Day Care, Family Day Care and In Home Care providers equivalent to 25 per cent of pre-COVID revenue for the period 28 September to 31 January 2021
• a Recovery Payment for Outside School Hours Care providers in Melbourne equivalent to 40 per cent of pre-COVID revenue for the period from mid-October 2020 (when in-school teaching resumed) to 31 January 2021 (vacation care-only services could receive the payment from the end of the school year to 31 January 2021) and
• a Recovery Payment for Outside School Hours Care providers in regional Victoria equivalent to 40 per cent of pre-COVID revenue until the end of the 2020 school year (21 December).[35]

A range of conditions apply to the Recovery Payments including maintaining the same number of staff and how the funding should be allocated to support workers. Providers cannot claim JobKeeper Payment and remain eligible for the Recovery Payment. The Recovery Payments are also administered as grant payments.[36]

Committee consideration

Senate Standing Committee for the Selection of Bills

At the time of writing, the Bill had not been referred to any committees. In its report on 18 March 2021, the Senate Selection of Bills Committee recommended the Bill not be referred to Committee.[37]

Senate Standing Committee for the Scrutiny of Bills

In its report on 24 February 2021, the Senate Scrutiny of Bills Committee raised a number of concerns with the use of delegated legislation to set rules relating to the manner in which BCPs may be made and rules determining the circumstances in which a debt is due to the Commonwealth.[38] The Committee requested the Minister’s detailed advice as to why it was considered necessary to leave these matters to delegated legislation and whether the Bill could be amended ‘to include at least high-level guidance regarding these matters on the face of the primary legislation’.[39]

The Minister for Education and Youth, Alan Tudge, responded to the Committee’s comments on 10 March 2021 acknowledging that a number of matters would be left to the delegated legislation but that ‘… the section endeavours to set as much detail as reasonably practicable for a discretionary payment mechanism that is intended only to be triggered in response to emergencies’.[40] The Committee requested that the further information provided by the Minister be included in an addendum to the Explanatory Memorandum ‘noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation’.[41]

The Committee also raised concerns with the retrospective application of item 38 of the Bill—which seeks to provide that paragraphs 8(1)(h) and (i) and section 47AA of the Child Care Subsidy Minister’s Rules 2017 are taken to be and always have been valid exercises of power under subsection 85GB(1) of the FA Act.[42] The relevant provisions in the Minister’s Rules provide that child care providers could not charge fees for sessions of care while receiving BCPs under the Early Childhood Education and Care Relief Package (providers could lose approval and a family using a service would not be eligible for CCS if they charged fees while receiving a BCP). The Committee sought advice from the Minister as to why retrospective validation is sought for these provisions in the Minister’s Rules and whether any persons were likely to be adversely affected by the retrospective validation of the provisions.[43]

The Minister’s response stated that the amendments are required as:

Advice to Government indicates that there is a risk that the specific measures enacted by paragraphs 8(1)(h) and (j) and section 47AA of the Minister's Rules may not be fully authorised by the powers in the family assistance law to make Minister's Rules.[44]

The response stated that the retrospective validation was not expected to impact families or service providers.[45] The Committee noted the Minister’s advice and requested an addendum to the Explanatory Memorandum including the key information provided by the Minister be tabled as soon as practicable.[46]

Finally, the Committee sought advice on the amendments in Part 3 of Schedule 1 of the Bill which provide for the delegation of the Secretary of the Department of Education, Skills and Employment’s funding agreement powers under section 85GA of the FA Act to an official of a non-corporate Commonwealth entity. The Committee requested the Minister’s advice as to why the delegation could be to an official at any level, and whether the Bill could be amended to provide guidance as to the categories of people to whom the powers might be delegated.[47]

The Minister’s response stated: ‘Grants administration is a widespread task undertaken at all levels of the Australian Public Service, and limiting decision-making in relation to grants to SES officers would have a significant adverse effect on the efficiency and coordination of grants processes’.[48] The Committee requested an addendum to the Explanatory Memorandum including the key information provided by the Minister be tabled as soon as practicable.[49]

No addendums to the Explanatory Memorandum were issued by the Government before the Bill was passed on 18 March 2021, despite the Committee’s multiple recommendations.

Policy position of non-government parties/independents

Shadow Minister for Early Childhood Education and Development, Amanda Rishworth, stated in her second reading speech that amendments proposed by the Bill ‘are sensible and mostly technical in nature and are supported by stakeholders in the sector’.[50] In regards to some of the changes related to COVID-19 measures, the Shadow Minister noted: ‘It's not surprising that there were some drafting errors and ambiguities when the COVID-19 response legislation was drafted and passed last year.’[51] The Opposition moved amendments to the Bill to remove the requirement for providers to charge fees to families unable to attend child care during state and territory COVID-19 lockdowns.[52] The proposed amendments were disagreed to by the House of Representatives.[53] There was no division on the Bill’s second or third reading in the House of Representatives or the Senate.

Prior to its passage through the Parliament, the other non-government parties and Independents had not stated a position on the Bill.

Position of major interest groups

At the time of writing the major ECEC stakeholders have not issued any public statements on the Bill.

Financial implications

The financial impact statement in the Explanatory Memorandum only refers to the amendments which expand the power to make BCPs for disasters and emergencies. It states it is not possible to quantify the financial impact of this expanded power.[54] It is unclear if the other proposed amendments in the Bill will have any financial impact, including the amendments to not require BCPs paid in 2020 be offset against future CCS payments and allowing the Minister’s Rules to specify that some BCPs paid in 2020 are to be considered debts.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[55]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comments on the Bill.[56]

Key issues and provisions

Business Continuity Payments during emergencies and disasters

Part 1 of Schedule 1 of the Bill proposes amendments to allow the Secretary of DESE to make BCPs where a child care provider has been adversely affected by an emergency or disaster.

Existing power to provide Business Continuity Payments

Sections 205A and 205B of the FA Admin Act currently provide for the payment of BCPs to an approved provider. Payments can be made where:

• the provider is required to give a report about children for whom care is provided for a week in respect of one or more enrolments (section 204B of the FA Admin Act requires providers to give reports to the Secretary of care provided to a child)
• the provider does not give the report for the week by the time required for that report under section and
• the Secretary is satisfied that the failure to give the report is due to circumstances prescribed by the Minister’s Rules.[57]

The Minister’s Rules must prescribe a method for the determining the amount of the BCP.[58] Section 205B provides that any BCP must be recovered by setting-off an equal amount of a child care service payment (CCS or another payment by the department) that is to be paid to the provider.

These provisions mean that providers can still receive payments from DESE when circumstances prevent the providers reporting their sessions of care (and receiving CCS)—however, any BCPs paid will be deducted from future CCS payments once the report is provided and the relevant CCS entitlement is calculated.[59]

The provisions allowing for BCPs were not intended to provide for the funding of all child care providers in place of the CCS and ACCS over a period of months, rather the provisions were intended to be used when issues arose with the reporting system. The Explanatory Memorandum for the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 (which introduced the CCS system) stated that these provisions: ‘allow for payments of CCS and ACCS to be made where there are good reasons why approved providers are unable to provide section 204B reports (for instance, where the computer system that facilitates such reporting is down)’.[60]

Business Continuity Payments as part of the COVID-19 Relief Package

The existing provisions were used to provide BCPs as part of the Government’s Early Childhood Education and Care Relief Package in 2020 (see ‘COVID-19 response measures’ section above).[61]

During the period of the Relief Package, providers were unable to upload session reports to the CCS system meaning that they were unable to provide the reports required under section 204B.[62] This meant they could qualify for a BCP under section 205A, provided they met the other conditions set out in the Minister’s Rules.

Amendments proposed in Part 6 of Schedule 1 of the Bill will provide that BCPs paid as part of the Relief Package do not need to be recovered through setting-off CCS payments except in certain circumstances to be prescribed in the Minister’s Rules (such as where the service was not eligible for the BCP).

Amendments

The proposed amendments mean that in emergency or disaster situations, including pandemics, the Secretary will be able to pay BCPs under dedicated provisions. The existing provisions providing for such payments were not intended for the purpose of ongoing emergency funding of child care providers during a crisis. The amendments will also allow the Minister to determine, via legislative instrument, whether CCS should or should not be paid during an emergency or disaster. BCPs paid for emergencies or disasters will not be recovered through offsetting future CCS payments, but BCPs paid where a session of care report was not given will need to be recovered through future CCS payments or other child care service payments.

Key provisions

A New Tax System (Family Assistance) Act 1999

Item 1 inserts proposed subsection 85BA(2A) into the FA Act to clarify that the Minister’s Rules can specify an individual is not eligible for CCS for a session of care provided in certain circumstances relating to a disaster or emergency. Emergency or disaster is to be defined in proposed subsection 205C(2) of the FA Admin Act (inserted by item 17, discussed below). The existing provisions at section 85BA of the FA Act allow the Minister’s Rules to specify circumstances where a session of care would not attract CCS. The amendment makes clear that such circumstances can include emergencies or disasters where a BCP is to be paid. The provisions allow for CCS to be paid concurrently with a BCP or for CCS to be suspended.

A New Tax System (Family Assistance) (Administration) Act 1999

Paragraph 200B(1)(b) of the FA Admin Act currently provides that a child ceases to be enrolled at a child care service where 14 weeks have passed since the child last attended the service. Item 14 inserts proposed subsection 200B(1A) which allows the Minister’s Rules to prescribe circumstances where weeks wholly or partly covered by a period of emergency or disaster are to be disregarded for the purposes of calculating this 14 week period. This will allow children to retain their enrolment at a service where their attendance has been disrupted by an emergency or disaster.

Item 17 inserts proposed section 205C which provides for BCPs in an emergency or disaster. Under the proposed section, the Secretary can determine that a BCP is to be made to an approved provider for a period if the Secretary is satisfied that:

• a child care service of the provider has been adversely affected by an emergency or disaster
• this adverse effect is likely to have a material adverse financial effect on the provider
• the provider and the service meet any eligibility criteria specified by the Minister’s Rules
• the period is prescribed by the Minister’s Rules and
• the amount of the payment is prescribed by the Minister’s Rules or determined according to a method prescribed by the Minister’s Rules.

An emergency or disaster is defined at proposed subsection 205(2) as:

• an emergency or disaster prescribed by the Minister’s Rules
• a major disaster as defined by the Social Security Act 1991 for the purposes of the Australian Government Disaster Recovery Payment)[63] or
• a Part 2.23B major disaster as defined by the Social Security Act 1991 for the purposes of the Disaster Recovery Allowance (determined by the Minister for Emergency Management).[64]

Unlike BCPs made under the existing provisions, BCPs made under proposed section 205C will not be recovered through later CCS payments or other child care service payments.[65] However, item 6 inserts proposed subsection 71H(1A) which provides that a BCP paid under section 205C to a provider who is ineligible will be raised as a debt due to the Commonwealth (where the provider is only ineligible for part of the payment only that part will be raised as a debt).

Administrative Appeals Tribunal reviews

Part 2 of Schedule 1 proposes amendments to the FA Admin Act so that debts can be raised against providers who have had their approvals cancelled but then continued to receive CCS amounts (which are passed on to families as fee reductions) while the provider has sought a review of the cancellation decision through the AAT. Such debts would be raised if the appeals have been ultimately unsuccessful. Part 2 also proposes amendments so that decisions under family assistance law affecting providers are only subject to a single tier of AAT review.

Debts arising from AAT stay orders

Currently, the AAT can stay (that is, delay) the operation of a decision made under family assistance law pending a review of that decision.[69] Section 73 of the FA Admin Act provides that a debt can be raised for any overpayments made to an individual as a result of such a stay order having been in place and the person continuing to receive a family assistance payment (such as CCS). For example:

• a person applies to the AAT for an AAT second review of an AAT first review of a decision made under family assistance law
• the AAT issues a stay order on the decision allowing the person to continue to receive a family assistance payment while the decision is being reviewed
• following the outcome of the review, the person is deemed not to have been entitled to some or all of the amount of payment made while the stay order was in place
• section 73 then allows the amount the person was not entitled to be paid during this review process to be raised as a debt.

Where a stay order is in place, an AAT decision on a review is also stayed until a person affected by the decision has had the opportunity to seek judicial review of the AAT’s decision by the Federal Court.[70]

Under section 112 of the FA Admin Act, AAT stay orders do not apply in relation to an application for a first review by the AAT, only to second reviews.

Current provisions do not capture payments to providers

According to the Explanatory Memorandum:

… due to a drafting oversight, payments of amounts of CCS made to approved child care providers (as opposed to individuals) are not subject to section 73 – because they are, technically, not payments of CCS, but payments called “fee reduction amounts” (which are not captured by section 73).[71]

This means that in situations where a child care provider has had their approval cancelled but has sought a review of the decision through the AAT, they may continue to receive CCS payments (as fee reduction amounts to pass onto families using the provider’s services), and that these payments cannot be raised as debts even when the decision to cancel the approval is upheld.

The Explanatory Memorandum further notes:

Amounts of CCS paid to a provider (i.e. fee reduction amounts) for the duration of a multi-tier review process through the AAT and Federal Court can amount to hundreds of thousands or millions of dollars, and presently none of this is recoverable by the Commonwealth where the provider’s appeals are unsuccessful. This is an unintended consequence of the limited scope of section 73 of the Family Assistance Administration Act as currently drafted.[72]

Unclear why such payments should be able to be raised as debts

It is unclear why amounts paid to eligible families, via eligible providers, should be able to be raised as debts owed by the provider where the amounts continue to be paid during administrative review processes. While the approved child care service continues to provide sessions of care to eligible families, the families could remain eligible for CCS and ACCS. If providers have passed on these amounts as fee reductions, they are not the final recipients of the amounts—the amounts have not been ‘paid to’ the provider under the family assistance law.[75]

A similar issue arises in relation to debts raised for fee reduction amounts paid to a provider under subsection 71G(2) of the FA Admin Act—debts can be raised in certain situations where a provider’s approval is cancelled, suspended or varied after a fee reduction amount has been paid to a provider. This can occur despite the provider passing on the fee reduction amount to eligible families for the session of care.

Where a provider has failed to pass on a fee reduction to an eligible CCS or ACCS recipient, then the amount of that fee reduction can be raised as a debt under section 71D of the FA Admin Act. Similarly, debts for an individual where the provider is at fault (for example where the provider makes a false or misleading statement) can be raised against the provider instead, under section 71F of the FA Admin Act.

Single review tier for debts raised against providers

Currently, the FA Admin Act provides for certain decisions made under Part 8 of the Act (relating to the approval of child care providers) to be subject to only a single tier of AAT review—the AAT second review tier conducted by the General Division of the AAT.[76] Decisions under this Part must have been reviewed internally before they can be appealed to the AAT, before being appealable to the Federal Court.[77] These decisions are not reviewable by the Social Services and Child Support Division of the AAT, they go straight to the General Division.  Providers can also apply to the AAT for a single-tier review of decisions under Part 8 made by the Secretary of the Department of Social Services personally, or by another agency head, by the Chief Executive of Centrelink or by the Chief Executive of Medicare personally (where these other individuals have exercised a delegated power).[78]

Part 2 of Schedule 1 of the Bill proposes amendments which will make all decisions under the FA Admin Act relating to child care providers subject to only a single AAT review. This will expand the existing single tier review provisions to include decisions relating to overpayments and debt recovery in relation to an approved provider, and decisions relating to business continuity payments in emergencies or disasters (as provided for by Part 1 of Schedule 1 of the Bill).

The Explanatory Memorandum states that current provisions allowing for a single AAT review of some decisions relating to the approval of providers and a two-tiered review process for other decisions relating to provider debts and overpayments is:

… an unintended outcome, and results in inconsistency of review processes for different decisions affecting approved providers. The process of AAT first review and AAT second review is intended to replicate previous arrangements under which most Centrelink decisions were first appealed to the Social Security Appeals Tribunal, before they would then be reviewable by the AAT, i.e. a two-stage external merits review process. This was, and is, intended to assist in review of family assistance decisions affecting individuals, not businesses.[79]

The amendments will limit the administrative appeals process for child care providers while maintaining the existing two-stage process for individuals.

Key provisions

As noted above, section 73 of the FA Admin Act provides that a debt can be raised for any overpayments made to an individual as a result of an AAT stay order being in place, and the person continuing to receive a family assistance payment. Item 20 amends paragraph 73(c) to expand the operation of the section so that it not only applies in relation to stay orders issued under subsection 41(2) of the Administrative Appeals Tribunal Act 1975 but also to the operation of subsection 43(5) which provides for decisions to be stayed until a person affected by the decision has had the opportunity to seek judicial review of the AAT’s decision by the Federal Court.

Item 21 removes the reference to an amount paid ‘by way of family assistance’ from paragraph 73(c) and replaces it with ‘under the family assistance law’ so that the section applies not only to the specific payments included under the definition of family assistance, but to any amount paid under family assistance law.[80] This will include amounts of CCS and ACCS paid to providers as fee reduction amounts and business continuity payments.

Item 22 repeals and replaces paragraph 111(2)(f) of the FA Admin Act so that decisions defined as ‘child care provider decisions’ (the definition is inserted by item 25), which have been reviewed internally, cannot be appealed to the AAT for a first review (that is, a review by the Social Services and Child Support Division of the AAT). Items 23 and 24 amend paragraph 138(1)(a) and subsection 138(3), respectively, so that ‘child care provider decisions’ which have been reviewed internally can be subject to an AAT single review (review by the General Division of the AAT). Item 25 adds proposed subsection 138(4) which defines a child care provider decision as a decision relating to the debt of an approved provider (under Part 4 of the FA Admin Act), to the approval of a provider of child care services (under Part 8 of the FA Admin Act) or to business continuity payments made in relation to an emergency or disaster under section 205C (see ‘Business Continuity Payments during emergencies and disasters’ section above).

Delegation of funding agreement powers

The amendments in Part 3 of Schedule 1 of the Bill will enable the Secretary of the DESE to delegate their grant-making powers under section 85GA of the FA Act to an official of a non-corporate Commonwealth entity.

Section 85GA of the FA Act gives the Secretary the power to enter into and administer written agreements under which the Commonwealth makes grants of money for purposes that are related to both child care and: the provision of child endowment or family allowances; and/or giving effect to Australia’s obligations under the Convention of the Rights of the Child.[81] The Secretary of the DESE has responsibility for child care policy and programs while the Secretary of the Department of Social Services has responsibility for income security and support policies for families with children.[82]

The Explanatory Memorandum to the Bill notes the Government has centralised grant administration through the formation of two ‘Grant Hubs’: the Community Grants Hub administered by the Department of Social Services and the Business Grants Hub administered by the Department of Industry, Science, Energy and Resources.[83]

Currently, section 221 of the FA Admin Act, which sets out the Secretary’s delegation powers, only provides for the delegation of most of the Secretary’s powers to ‘officers’ and for specific powers to be delegated to specific office holders or senior executive service officers. Officers are defined as an officer of the Department of Social Services, the DESE or Services Australia, including the head of these agencies, employees, and those engaged to exercise powers or perform the duties/functions of the agency.[84] Section 221 of the FA Admin Act does not allow the Secretary’s powers to be delegated to officers or officials in other agencies or government entities.

Item 27 inserts new definitions for non-corporate Commonwealth entity and official at subsection 3(1) of the FA Admin Act. The definitions refer to the meaning of these terms in the Public Governance, Performance and Accountability Act 2013. Non-corporate Commonwealth entities include departments of state, parliamentary departments and certain listed entities.[85]

Item 29 adds proposed subsections 221(5) and (6) to the FA Admin Act which provide for the Secretary to delegate their powers under section 85GA of the FA Act to an official of a non‑corporate Commonwealth entity. In exercising this delegate power, the official must comply with any directions by the Secretary.

Extension of the first deadline for the 2018–19 income year

Part 5 of Schedule 1 of the Bill proposes to legislate an extension to the first deadline for families to confirm their income for CCS reconciliation purposes. As part of the Early Childhood Education and Care Relief Package, the Government announced that it would extend the first deadline for families to submit their 2018–19 tax returns for CCS reconciliation purposes until 31 March 2021.[86] The Secretary of the DESE had issued an instrument to provide for this extension in June 2020 but the Government has determined it is more ‘appropriate’ to provide for this extension in the FA Admin Act.[87]

The CCS reconciliation process compares a family’s actual adjusted taxable income, as provided in their tax assessment for the financial year, against the estimates they provided during the financial year to determine whether they were paid the correct amount of CCS for that year.[88] Normally, a family has one year from the end of a financial year in which to confirm their income by lodging their tax return or telling Services Australia that they do not need to lodge a tax return for that year. This is the first deadline. Where a family does not meet the first deadline, they cease to be eligible for CCS and ACCS going forward and they may incur a debt for previous amounts of CCS paid where they do not meet the reconciliation requirements within two years from the end of the relevant financial year (the second deadline).[89]

Section 103B of the FA Admin Act provides for the Secretary to extend the first deadline if special circumstances prevent an individual from meeting the CCS reconciliation conditions. This is a discretionary power to be exercised for individuals (not classes of recipients or for all recipients). The Secretary of the DESE issued the Child Care Subsidy (Extension of First Deadline) Instrument 2020 on 26 June 2020. This instrument was to extend the first deadline until 31 March 2021 for each individual who did not meet the CCS reconciliation conditions for 2018–19 before the end of 2019–20.[90] The instrument states it was made under the authority of the FA Admin Act, and refers to subsection 103B(2). However, it is unclear whether section 103B of the FA Admin Act can operate for a class of people in the way this instrument provides.

The Explanatory Memorandum to the Bill notes that ‘the Secretary’s power to extend deadlines is exercised for individuals on a case-by-case basis by Services Australia, and a general extension of the deadline for everyone is more appropriately placed in the primary legislation’.[91] Item 32 adds proposed subsections 103B(4) and (5) providing for the first deadline for the 2018–19 income year to be 31 March 2021.

CCS reconciliation deadlines

Part 7 of Schedule 1 to the Bill proposes amendments to the FA Admin Act allowing for CCS reconciliation to occur more than two years after the financial year in which payments were made. This late reconciliation can result in debts amounts being reduced but an individual will not be entitled to receive any underpayments calculated through the reconciliation process.

As discussed in the previous section, where a family does not meet the first CCS reconciliation deadline, they cease to be eligible for CCS and ACCS and may incur a debt for previous amounts of CCS paid. All weeks in the financial year for which the reconciliation deadline was not met become subject to a ‘no entitlement determination’—meaning the family is considered to have not been eligible for any CCS or ACCS amounts in that year.[92] Debts will be raised against the person for any amounts paid but debt recovery does not commence until the second reconciliation deadline has passed (two years after the end of the relevant financial year).

If the family meets the reconciliation requirements before the second deadline then:

• they can become eligible for CCS and ACCS going forward
• the no entitlement determinations are reviewed and actual entitlements calculated based on the reported income and
• the family may receive a top-up amount (where there was an underpayment of CCS or ACCS) or they may have a debt raised against them (where there was found to have been an overpayment).[93]

If the family does not meet the reconciliation requirements before the second deadline then those no entitlement determinations stand and cannot be reviewed.[94] Debts raised because of those no entitlement determinations must be recovered.[95]

The amendments in Part 7 will allow for those no entitlement determinations to be reviewed where a family meets the reconciliation requirements after the second deadline. However, no top‑up amounts can be paid for underpayments of CCS or ACCS calculated as part of this post‑second deadline reconciliation. Debts raised can be reduced through this process and refunds may be made for excess debt amounts already recovered. As the Explanatory Memorandum states, the amendments ‘… will ameliorate the consequences of meeting the reconciliation requirements after the second deadline’.[96]

Key provisions

Item 41 repeals and substitutes paragraph 67CB(4)(b) of the FA Admin Act to allow individuals who meet the reconciliation conditions for a particular financial year after the second deadline to again be considered entitled to CCS for that financial year. This allows for no entitlement determinations to be reviewed once an individual has met reconciliation conditions after the second deadline. Item 43 inserts a note after subsection 67CB(4) indicating that any CCS payments for the income year will be capped if the reconciliation conditions are met after the second deadline—the note refers to subsection 105D(2A) which is inserted by item 49.

Item 45 removes a limit on determining underpayments of CCS and ACCS entitlements where an individual has not met the reconciliation conditions before the second deadline. Item 46 inserts a note after subsection 67EC(4) to indicate that CCS and ACCS underpayments will be capped if the reconciliation conditions are met after the second deadline.

Item 48 removes a limit on CCS reconciliation conditions being met after the second deadline for a relevant income year.

Item 49 inserts proposed subsection 105D(2A) to the FA Admin Act which limits the amount of CCS an individual is entitled to through a review of their entitlement when they have met the reconciliation conditions after the second deadline. Any amount determined through the review process cannot be more than the amount the individual was entitled to before no entitlement determinations were made as a result of their failure to meet the first reconciliation deadline. This effectively means an individual cannot receive any top-up for an underpayment calculated through post-second deadline reconciliation process.

Item 50 amends subsection 105E(3) to remove a limit on the reconciliation process occurring after the second deadline.

Arrangements relating to COVID-19 response measures

Part 6 of Schedule 1 of the Bill includes a number of items relating to the application of various parts of the FA Admin Act as they relate to the period of the Early Childhood Education and Care Relief Package from 6 April to 12 July 2020 (the relevant period).

Relief Package period does not count towards the 14-week non-attendance limit

Normally, a child would cease to be enrolled at a child care service where there has been a 14‑week period since the child last attended a session of care at that service. Item 34 provides a week during the relevant period does not count towards this 14-week period.

Reporting requirements during Relief Package period

As noted above in the ‘Business Continuity Payments during emergencies and disasters’ section, child care providers are required to report on sessions of care provided to a child in each week (section 204B of the FA Admin Act). During the Early Childhood Education and Care Relief Package Period, providers were unable to report sessions of care and were provided with BCPs. Item 35 removes the requirement to report sessions of care that occurred during the relevant period. However, for the purposes of the BCP eligibility requirement at paragraph 205A(1)(a) of the FA Admin Act, child care providers are taken to have been required to report during the relevant period.

Minister can make rules for raising BCP debts

Item 36 provides that the Minister may, via legislative instrument, make rules determining circumstances in which BCPs paid during the relevant period will be raised as a debt. This item is to apply despite section 70 of the FA Admin Act which provides that BCPs paid under section 205A can only be raised as debts where a provision of the FA Admin Act or the Data-matching Program (Assistance and Tax) Act 1990 expressly provides for it. The Explanatory Memorandum does not provide any guidance as to the circumstances in which such debts will be raised.

BCPs will not be recovered from CCS payments

Item 37 provides that BCPs made during the relevant period are not to be recovered through setting them off against future CCS payments. As discussed in the ‘Business Continuity Payments during emergencies and disasters’ section above, section 205B of the FA Admin Act requires that BCPs are to be recovered through child care payments.

Retrospective authority for restrictions on charging fees during the Relief Package period

Item 38 makes clear that three provisions in the Minister’s Rules are taken to be, and to have always been, valid exercises of the power to make the Minister’s Rules under subsection 85GB(1) of the FA Act. The provisions in the Minister’s Rules are:

• paragraph 8(1)(h)—sessions of care provided while a provider was receiving a BCP as part of the Relief Package are not eligible for CCS
• paragraph 8(1)(i)— providers that charged a fee for sessions of care during the Relief Package period are not eligible for CCS and
• section 47AA—it was a condition for continued approval that a provider did not charge fees for sessions of care during the Relief Package period.

The provisions were added to the Minister’s Rules by the Child Care Subsidy Amendment (Coronavirus Response Measures No. 3) Minister's Rules 2020, issued on 27 April 2020.

As noted above, the Minister for Education and Youth informed the Senate Scrutiny of Bills Committee that there was a risk that the previous Minister did not actually have the authority to make these amendments:

Advice to Government indicates that there is a risk that the specific measures enacted by paragraphs 8(1)(h) and (j) and section 47AA of the Minister's Rules may not be fully authorised by the powers in the family assistance law to make Minister's Rules.[97]

These amendments were key to the implementation of the Relief Package. For some providers, not being able to charge fees during the Relief Package period significantly affected their financial situation with some services experiencing an increase in attendance but a reduction in revenue from government payments.[98] While the Relief Package was implemented quickly and in response to a crisis event, it is concerning that the Minister may have acted without legal authority in regards to this component of the package.

The Government has also recognised that these provisions could amount to an acquisition of property, which, under paragraph 51(xxxi) of the Constitution, must be on just terms. The Minister advised the Senate Scrutiny of Bills Committee:

… the Government recognises the theoretical possibility that imposing a condition on a provider that it not charge fees while in receipt of BCPs and other Government support, or rendering an individual ineligible for CCS while their provider is providing free child care, could amount to an 'acquisition of property' in Constitutional terms. Item 39 of Schedule 1 to the Bill provides that, if that is the case, and the acquisition is not on just terms as required by paragraph 51(xxxi) of the Constitution, the Commonwealth must pay the person reasonable compensation.[99]

Item 39 provides that if the operation of Part 6 of Schedule 1 of the Bill causes an acquisition of a person’s property on other than just terms, the Commonwealth is liable to pay the person a reasonable amount of compensation. If the amount of compensation is not agreed upon, the person can institute proceedings in the Federal Court of Australia or the Supreme Court of a state or territory.

Other provisions

The amendments in Part 4 of Schedule 1 of the Bill make technical corrections to the Family Assistance Legislation Amendment (Improving Assistance for Vulnerable Families) Act 2020.

Item 52 (Part 8 of Schedule 1 of the Bill) amends the FA Admin Act to allow for the Secretary to set the date of effect for a provider approval earlier than the day the application was made, where the Secretary determines there are special circumstances that make it appropriate. The Explanatory Memorandum provides the example of technical errors with the department’s Provider Entry Point IT system.[100]

Item 53 (also Part 8 of Schedule 1 of the Bill) repeals subsections 197AB(2) and (4) of the FA Admin Act so that providers who voluntarily suspend their services approval under the Education and Care Services National Law (state and territory legislation which sets out the National Quality Framework and other regulatory requirements for child care providers) will be taken to have voluntarily suspended their approval for CCS under family assistance law. Provider may choose to voluntarily suspend the approval of one of their services so they can cease operation of the service temporarily without being in breach of regulatory requirements. The Explanatory Memorandum gives the example of provider undertaking building improvements at one of their premises.[101]