Introduction
2.1
In 2018, major reforms to the childcare system came into effect. The reforms were introduced as part of a childcare package that included changes to family assistance payments for childcare. The bill before the committee seeks to make some modifications to this package.
2.2
The Hon Dan Tehan MP, Minister for Education, noted the significant reforms to the childcare sector from the implementation of the package in his second reading of the bill. He stated that:
[t]his childcare package represents the biggest reforms to child care since the introduction of the Commonwealth Child Care Act in 1972.
2.3
The implementation of the childcare package on 2 July 2018 simplified what was a complex childcare system for users and the childcare sector. It delivered major reforms to the sector by introducing two new family assistance payments, the Child Care Subsidy (CCS) and the Additional Child Care Subsidy (ACCS). These new payments replaced or partly replaced a number of the previous payments, including: Child Care Benefit (CCB), Child Care Rebate (CCR), Special Child Care Benefit, Grandparent Child Care Benefit and Jobs, Education and Training Child Care Fee Assistance. Together they formed the Government's Jobs for Families Child Care Package announced in the 2015–16 Budget.
2.4
The package was designed to deliver a more affordable, accessible and flexible childcare system. Since its implementation in 2018, the system has provided subsidies to more than 1.1 million families and supported the childcare needs of 1.6 million children. The Department of Education reported that the package is supported by record funding of $8.6 billion in 2019–20 and this is expected to increase to around $10 billion a year over the next few years.
2.5
Following the package's implementation, the Government received feedback from stakeholders during consultation with families and the childcare sector. The consultation revealed the need for minor adjustments and refinements to aspects of the package. These modifications, contained in the bill, are considered necessary to improve the system for users and the childcare sector.
2.6
The bill seeks to amend the current A New Tax System (Family Assistance) Act 1999 (Family Assistance Act) and A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Administration Act) to make the system easier for users and to enhance its integrity. In addition, the bill addresses unintended consequences arising from the implementation of the child care package and includes corrective and clarifying amendments in order to give effect to the original policy intent of the reforms.
2.7
The intent of the current bill, like its predecessor, is to 'ensure [that] more financial support is targeted to the families who work the most and earn the least' and to reduce the regulatory burden for users.
Schedule 1—Amendments relating to childcare subsidies
2.8
Part 1 — It is proposed that the following amendments will commence at the start of the childcare subsidy fortnight after Royal Assent.
Refining 'absence' from childcare
2.9
Under the current legislation, families are prevented from accessing subsidies in circumstances where a child cannot attend a childcare service due to illness before the child's first, and after their last, physical attendance at a service. This places an unnecessary financial strain on families in circumstances where there are legitimate reasons for absences.
2.10
Items 6 and 9 of the bill concerning absence provisions will provide more flexibility with regard to absences. The introduction of subsections 10(2A) and 10(3A) to the Family Assistance Act would give the Minister the power to prescribe circumstances in which families can still access CCS for an absence.
2.11
These proposed amendments were largely well-received by submitters. Supporters of the proposed amendments viewed these changes as providing more flexibility to the system and removing unintended negative impacts on families.
2.12
Submitters who provided qualified support to the provisions requested further clarification on what constitutes 'specific circumstances'. Goodstart Early Learning (Goodstart) suggested that clarification be included in the subordinate legislation, so that:
...the prescribed absences should largely align with the existing provisions around Additional Absences for CCS and ACCS but should also include public holidays and enrolment cancellation notice period (up to a maximum of two weeks).
2.13
Family Day Care Australia (FDCA) added that relevant stakeholders should be given the opportunity to review any proposed amendments to the Minister's Rules regarding the 'exact nature' of 'prescribed circumstances'.
Treatment of third party payments in calculating CCS
2.14
Items 22 and 23 of the bill seek to amend the Family Assistance Act to allow the Minister to prescribe that certain third party payments will not be taken into account for the purpose of calculating the hourly rate of the CCS. At present, by taking into account third party payments in the calculation of childcare fees before payment is made to a recipient, the third party co-contribution disadvantages some vulnerable families from accessing affordable childcare. The amendments seek to address this unintended consequence for families.
2.15
Items 20, 21, 25-28 of the bill address circumstances where a provider or individual receives an excess amount (where the CCS and a prescribed payment could be greater than the fee charged). The bill's provisions introduce an adjusted activity-tested amount of CCS and set out the method for calculating the adjusted amount of the CCS.
2.16
Items 71 and 72 of the bill would amend the Family Assistance Administration Act by recognising prescribed circumstances in which third party payments may contribute to reduce the cost of an individual's childcare fees. The provisions seek to ensure that a provider does not overcharge an individual who benefits from a prescribed payment. It is designed to prevent providers from artificially inflating fees.
2.17
A large number of submitters welcomed the proposed amendments to the treatment of third party payments, including a number of submitters who expressed qualified support. KU Children Services noted that the amendments would help to 'ensure that the cost of childcare is not a barrier to accessing childcare for [...] vulnerable [or] disadvantaged children'.
Expansion of third party payments to include non-government entities
2.18
A number of submitters who expressed qualified support for the amendments requested that the Minister's Rules be clarified or expanded to include third party payments from non-government organisations and philanthropic funds to reduce out-of-pocket costs for vulnerable children and families.
2.19
Early Childhood Australia (ECA) argued that non-government third party payments should be treated the same as state and territory payments to remove the punitive treatment of vulnerable families in receipt of non-government third party payments. It was suggested that other benefits would be derived from broad application including no changes to the DHS/Centrelink system, no additional costs to the taxpayer, and decreased co-payment for families and/or increased number of hours of early learning.
Late attendance reports and late enrolment notices
2.20
Items 39, 40, 43 to 46 and 48 of the bill seek to amend subsections 67CD(1), 67CF(1), 67CH(1) and section 200A of the Family Assistance Administration Act to ensure that individuals can still access CCS and ACCS payments and are not adversely affected by a provider when an attendance report is not provided within required timeframes. The amendments also allow the provider to vary, substitute or withdraw an attendance report even when a report is submitted late. Items 69, 77 and 80 clarify the operation of these changes.
Clarifying the apportioning of partner income in calculating CCS
2.21
Item 29 of the bill would amend the Family Assistance Act to ensure the calculations of CCS 'reflects the financial capacity of the individual and their partner to meet the costs of childcare'.
Clarifying attendance reporting requirements
2.22
Item 75 seeks to amend section 204B of the Family Assistance Administration Act to reflect the original policy intent by clarifying attendance reporting to include all care provided to children in a week by approved providers.
Simplifying CCS claims
2.23
Items 35 to 38, 41, 42, 50 and 51 of the bill seek to simplify the process of making a claim for CCS by amending and repealing various provisions in the Family Assistance Administration Act. The amendments clarify the requirements that must be met to claim CCS by stipulating that bank account and tax file number (TFN) details be provided at the time the claim is made, and not at another time, which can result in a debt. Currently, an individual has 28 days after the CCS claim is submitted to provide these details. This can result in a debt to families when CCS payments are made during this time.
Concerns regarding increased complexity and administrative burden
2.24
The committee received a number of submissions which opposed the proposed amendments to simplify CCS claims. These submitters raised concerns that rather than simplifying CCS claims, the amendments would add increased complexity and an additional burden on users.
2.25
Submitters who oppose the removal of the 28 day window period argued that removing this measure would be detrimental for vulnerable families. Early Learning and Care Council of Australia (ELACCA) explained:
Currently, families making a claim for CCS have 28 days to provide a [TFN] or bank account details. In the current legislation, the provision of this information is required for the individual’s CCS claim to be effective, which affects their CCS eligibility. However, their eligibility is already verified, and this information is only required for the payment (and reconciliation) of subsidies. If the information is not provided within the 28 day window, a family is deemed CCS ineligible and may incur a debt with their provider
The proposed changes may reduce administrative burden for the Department of Human Services but will increase the administrative burden for families. The reduced flexibility will have a disproportionately negative impact on families experiencing vulnerability or disadvantage, such as women and children escaping domestic and family violence who may not have ready access to their personal information.
2.26
To avoid families from incurring debts, ELACCA recommended that the provision of TFN and bank account details be separated so 'they are not required for a CCS claim to be effective and their late or non-provision does not impact a person's CCS eligibility'.
Including ABSTUDY as an eligible payment for ACCS (grandparent)
2.27
Currently, ABSTUDY recipients are excluded from accessing ACCS (grandparent) payments because ABSTUDY payments are not listed as a social security payment eligible under paragraph 85CJ(1)(d) of the Family Assistance Act. The amendments proposed in items 16 and 17 of the bill would enable the Minister’s Rules to include ABSTUDY, and any other government payments, on the list of payments for the purpose of determining ACCS (grandparent) eligibility. The implementation of the amendments contained in the bill would also remove ‘barriers for a particular class of individuals’ from receiving ACCS (grandparent) where they meet the eligibility criteria.
In Home Care related amendments
2.28
Items 11, 12 18, 24 and 66 seek to amend the Family Assistance Act and Family Assistance Administration Act to incorporate In Home Care (IHC) concepts into Family Assistance Law and make available CCS to parents and providers. The authority for IHC currently resides in the Minister's Rules and the amendment seeks to incorporate it into primary legislation. The clarification regarding eligibility criteria recognises the possibly complex or extensive additional needs of recipients and the lack of availability of other types of care options appropriate to their circumstances.
Transitional provisions for IHC educators for remote and very remote families
2.29
Isolated Children’s Parent’s Association of Australia (ICPAA) expressed concerns that the transitional provisions to assist remote and very remote families to access IHC would not continue beyond January 2020. These provisions, which exempt IHC educators from the requirement that they have a Certificate III qualification in early childhood education and care, was designed to address the difficulties in attracting and retaining early childhood teachers in remote and very remote areas. ICPAA requested an extension of these transitional provisions for another two years to address the ongoing difficulties in attracting and retaining IHC educators in geographically isolated areas.
2.30
Another issue raised in the ICPAA’s submission concerned the lack of care for school-aged children up to the age of 15 years. As IHC is targeted at non school-aged children (0-5 years), this can cause difficulties for families with school-aged children who cannot afford to pay for boarding school or stay home to care for them. To address these challenges, ICPAA requested that families in such circumstances be able to recruit IHC educators with a Certificate III in educational support or equivalent to care for school-aged children (such as distance education students) where no teacher is physically present during formal school hours. ICPAA requested that families in such situations be able to access the CCS. This would enable parents to work while their school-aged children receive appropriate care, which is the policy intent of the childcare package.
Clarifying indexation in calculating CCS
2.31
Items 30 to 32 of the bill seek to amend the Family Assistance Act to require indexation of the CCS hourly rate caps, CCS lower income threshold, and by requiring the CCS annual cap to take place on the first day of the first CCS fortnight of the relevant income year. The amendments recognise that the final CCS fortnight of an income year 'may traverse two different income years (a CCS fortnight may begin in one income year and end during the next income year)'. It also seeks to provide consistency to CCS payments across a single fortnight and avoids fluctuations in CCS payments in an income year.
Clarifying applications for AAT first review
2.32
Items 54, 58 and 59 of the bill would amend section 111 of the Family Assistance Administration Act to clarify that decisions made under section 105 (Secretary initiated review) must first go through an internal review before an application can be made to the AAT. These amendments are consistent with existing policies and practices.
Reference to State/territory body in relation to ACCS (child wellbeing)
2.33
Under the current system, when a provider gives a certificate in relation to a child at risk of abuse or neglect under the Family Assistance Act (or applies to the Secretary for a determination), the provider is also required to give notice to an 'appropriate State or Territory body' in accordance with the Family Assistance Administration Act. This has caused some confusion due to the ambiguity of the term 'appropriate State or Territory body', with some providers conflating it with mandatory reporting to a state or territory department or agency that deals with child protection matters.
2.34
Items 14, 15, 33, 34, 74 and 81 of the bill seek to bring clarity to the use of the term by replacing it with ‘appropriate State/Territory agency’ in the Family Assistance Act and Family Assistance Administration Act.
Circumstances where a provider is eligible for ACCS (child wellbeing)
2.35
Item 13 seeks to correct an inconsistency between subsection 85CA(2)(a) and subparagraph 85CA(2)(b)(i) of the Family Assistance Act to ensure the provision aligns with its policy intent, so that:
...a provider is eligible for ACCS (child wellbeing) regarding a session of care provided to a child where they are not able to identify an individual who is eligible for CCS (rather than ACCS (child wellbeing)).
Other technical amendments
2.36
Among some of the technical amendments proposed under the bill, are items 1 to 3, which amend sections 3 to 9 of the Family Assistance Act to incorporate the prescription for a session of care into the Minister’s Rules instead of keeping it in a separate legislative instrument. The proposed change would make it easier for childcare providers to comply with Family Assistance Law requirements when the prescription of what constitutes a ‘session of care’ is made more accessible in a central reference point, in the Minister's Rules.
2.37
Other items include a savings provision and a provision to provide powers for the Minister’s and Secretary’s Rules to be made to ensure documents already incorporated by reference into the Minister’s and Secretary’s Rules will refer to the latest version at all times. Other items relate to correcting cross-referencing errors and removing redundant paragraphs in the Family Assistance Administration Act.
2.38
Part 2 — The following amendments commence on 13 January 2020.
Increasing the timeframe before enrolments cease
2.39
Item 88 of the bill amends subparagraph 200B(1)(b)(iii) of the Family Assistance Administration Act to extend the enrolment lapse time from eight to 14 weeks to avoid the regulatory burden of re-enrolment for children returning to care and in need of CCS. This amendment is a response to feedback from families and childcare providers that the eight week timeframe for an enrolment to lapse was too short and placed an additional unnecessary burden on families and providers. The amendment is designed to address these concerns by ensuring that ‘a child continues to be enrolled with a service if they attend at least one session of care during each school holiday period throughout the year’.
2.40
The proposed amendment received positive feedback from a large number of submitters. Submitters welcomed the reduction in the administrative and regulatory burden for families and providers of vacation care, including for multicultural families or families who travel overseas for extended periods.
2.41
ICPAA noted that this proposed amendment would particularly benefit families in geographically isolated areas. In these areas, it can be difficult to recruit and retain In Home Care educators. The increased timeframe would allow remote and rural families more time to find a replacement educator without losing their designated place within the In Home Care program.
2.42
The Department of Human Services stated that these changes would remove 'unnecessary increased contact with the Department at the commencement of each school term by parents having to re-activate their child's enrolment'.
2.43
Part 3 — The following amendments commence on
13 July 2020.
Removing the prescribed 50 percent limit in relation to ACCS (child wellbeing)
2.44
Currently, under section 85CA of the Family Assistance Act, a person is eligible for ACCS (child wellbeing) for a session of care if they meet a number of criteria. One of these is that a certificate be given under subsection 85CB by an approved provider (subsection 85CB(1)) if it considers that a child is or was at risk of serious abuse or neglect. However, there is a limit to the number of certificates a provider can issue. If the provider issues certificates to more than 50 per cent of children receiving its services, then any additional certificates issued will not take effect. A separate process would need to be taken by the provider to increase the 50 per cent limit.
2.45
This default 50 per cent limit has created an unnecessary regulatory burden for approved providers and childcare services and caused delays for at-risk children accessing supported childcare.
2.46
Item 89 of the bill amends subsection 85CB(4) of the Family Assistance Act to remove this unnecessary regulatory burden and improve timely access for vulnerable children and families to appropriate care through ACCS (child wellbeing).
2.47
This amendment received broad support from submitters. They recognised that it would provide timely care for children at risk of abuse or neglect, especially in low socioeconomic areas where 'vulnerability and disadvantage is more prevalent'.
Schedule 2—Amendments to ensure the integrity of the childcare subsidy system
2.48
Amendments proposed in Schedule 2 deal with the suspension and cancellation of service providers or childcare services and align the requirements closer with state and territory laws to enhance the Commonwealth's childcare subsidy integrity framework.
Provider or service approval may be voluntarily suspended
2.49
Item 17 of the bill introduces a new section (197AA) into the Family Assistance Administration Act to bring consistency between the Family Assistance Law and the Education and Care Services National Law (National Law—state and territory licencing regime for operating childcare services). It also gives the Secretary the power to have an approved provider or childcare service suspended for a certain period upon the provider's request. This usually applies when a provider carries out building improvements or other capital works on their premises.
2.50
Currently, although there is provision under National Law for approved providers to request a voluntary suspension without breaching the National Law's requirements, there is no such equivalent under Family Assistance Law. The amendments will ensure that, in circumstances where an approved provider or childcare service is suspended or cancelled under National Law, access to Commonwealth childcare subsidies will also be suspended or cancelled. Other amendments deal with specifications of written request, the Secretary's approval requirements regarding suspension start and end dates, and notice of revocation of suspension if the Secretary is satisfied of its reasonableness.
Date of effect of approval
2.51
Items 13 and 15 of the bill remove the requirement that the start date at which an approval of a provider's service comes into effect must be a Monday. The amendment only requires that the date be no earlier than the date the application for approval was submitted. The amendment seeks to bring more flexibility and remove any delays to families accessing CCS or ACCS.
Working with children checks
2.52
Currently, under section 195D of the Family Assistance Administration Act, a provider must ensure that an individual providing care at its childcare service must have a working with children card under a law of the state or territory where the service is located. As some states and territories issue physical working with children cards and others electronically register individuals who are required to have working with children checks, this has resulted in some ambiguity in the way the section has been interpreted. In addition, the current legislation only requires that a provider give the Secretary details of working with children cards. It does not require them to ensure that care is only provided by individuals with current working with children checks.
2.53
To ensure the safety of children, item 14 of the bill would amend section 195D of the Family Assistance Administration Act to require that providers ensure that the people providing care on the provider's behalf must hold current working with children checks.
Suspension, cancellation or variation for multiple infringement notices
2.54
The amendment proposed to section 197B of the Family Assistance Administration Act would allow the Secretary to vary, suspend or cancel a provider's approval or a provider's approval in respect of one or more of its services if the provider has received 10 infringement notices within a 12 month period. This amendment enables the Secretary and Commonwealth to more effectively respond to providers who have been found to have persistently breached compliance requirements.
Suspension, cancellation or variation if approval suspended / cancelled under National Law
2.55
The amendment contained in item 17 of the bill would insert a new section 197AB into the Family Assistance Administration Act. The amendment would bring Family Assistance Law regarding the suspension of a childcare provider's approval to operate a childcare service into greater alignment with the National Law. The amendment seeks to have a provider's approval suspended under Family Assistance Law for the matching period of suspension under the National Law. This amendment does not apply to voluntary suspension. A similar amendment is proposed to the Family Assistance Administration Act (with the insertion of a new section 197L). This would align more closely with the National Law in relation to the cancellation of a provider's approval (or the approval of a childcare service of the provider). Items 2, 16, 25 and 26 of the bill provide minor amendments to clarify when a suspension can occur, the publication of information regarding a suspension or cancellation, and the recovery of debt payments from the provider following the application of sections 197AB and 197L of the Family Assistance Administration Act.
Cancellation for ceasing to operate a childcare service
2.56
Currently, the term 'ceases to operate' is not defined in Family Assistance Law. This has resulted in some ambiguity about its meaning with regards to the mandatory decision-making requirements of the Secretary in relation to the cancellation of an approved provider if the provider no longer operates an approved childcare service (or a variation of an approval in respect of one). The proposed amendments to sections 197H and 197J of the Family Assistance Administration Act seek to provide clarity by including the meaning to the term 'ceases to operate' used in the Minister's Rules. Items 9 and 10 also amend section 138 of the same Act so that a provider under section 197H or 197J is unable to apply to the AAT for single review of that decision. This amendment restores the original intent of the package.
52 week limit for review of provider debt decisions
2.57
Items 5 to 8 of the bill seek to amend sections 109D and 111A of the Family Assistance Administration Act to give providers a timeframe of 52 weeks to seek review of decisions regarding debt raised against them.
Simplifying recovery of public funding where provider at fault
2.58
The bill seeks to replace section 71F of the Family Assistance Administration Act which deals with debt recovery arising from overpayment of CCS or ACCS to an individual as a result of a provider's mistake. The amendment simplifies the debt recovery process by requiring repayment to the Commonwealth directly from the provider without the need for a Secretary's determination.
2.59
A number of submitters raised concerns with regards to the proposed amendment. FDCA contended that the proposed amendment is 'far too vague' and that the legislation 'must be more overt in its specification of what constitutes failure to comply with family assistance law' or 'more explicit in terms of outlining the nature of a breach of family assistance law'. In addition, FDCA expressed its doubt as to whether current systems governing the administration of childcare family assistance payments could 'adequately differentiate between debts incurred as a result of CCSS administrative error, parent/ family error in estimating entitlement or service provider error'.
Recovery of public funding arising from certain reviews of decisions
2.60
Item 3 amends section 73 of the Family Assistance Administration Act so that the process of a second AAT review concerning the recovery of debt due to the Commonwealth also extends to decisions on AAT single review. The EM explains this amendment:
This is an important integrity measure, ensuring that where public funding has been expended in circumstances where, ultimately, it should not have been expended, that public funding can be recovered.
2.61
The intention of this measure is to recover funds directly from the provider and not from the individuals who are accessing care from the provider.
Committee view
2.62
The committee recognises the positive benefits delivered to families and communities from the implementation of the child care package. The measures contained in the package provide more assistance to the most vulnerable families and communities and enable families seeking to improve their workforce participation, whether by working more or undertaking activities (including studying, training, or volunteering) with options for paid work.
2.63
The committee commends the significant work undertaken by the government to reform the childcare sector. The major reforms came into effect with the implementation of the childcare package in 2018. While the reforms have delivered significant benefits to families, the bill seeks to make a number of amendments designed to restore the policy intent of the package, clarify a number of provisions, and to address unforeseen consequences. The committee recognises that these measures are necessary to deliver a more responsive and robust childcare system.
2.64
The committee acknowledges the commitment of the Department of Education to ‘undertake further consultation on the development of the new Minister’s and Secretary’s Rules with the childcare sector’. To this end, the committee encourages the department to take into account the views of submitters to this inquiry, including in relation to IHC educators in rural and remote areas.
2.65
The committee is of the view that the measures contained in the bill will enable families to more easily participate in paid work by making childcare assistance more accessible, affordable and responsive to the needs of families and their circumstances.
2.66
The committee recommends that the Senate pass the bill.
Senator the Hon James McGrath
Chair