CHAPTER 2
Key issues
Introduction
2.1
The committee's inquiry into the Family Assistance Legislation Amendment
(Job for Families) Bill 2015 (the Bill) attracted considerable interest from
submitters across a range of categories including families, child care providers,
advocacy and interest groups, academics and government departments.
2.2
Certain aspects of the Bill's provisions, most notably the simplified
system of the Child Care Subsidy (CCS) and Additional Child Care Subsidy (ACCS)
replacing the existing system of Child Care Benefit (CCB) and Child Care Rebate
(CCR), attracted praise from most submitters.
2.3
However, other elements of the Bill drew criticism and concerns from
many submitters. Chief amongst these was the Activity Test provision.
2.4
This chapter will explore several of the key issues raised during the
course of this inquiry, focusing on elements highlighted in submissions and
public hearings.
Additional funding and access to early learning and child care
2.5
The Bill is part of the government's Child Care Package, which will see
Commonwealth expenditure of around $40 billion over the forward estimates,
including more than $3 billion of new funding.[1]
2.6
This introduction of further spending was broadly welcomed by submitters
and witnesses to this inquiry:
[Early Childhood Australia] welcomes the package overall and
has been broadly supportive of it. We particularly welcome the additional $3.2
billion in the childcare package, bringing the total investment to $40 billion
over the four years. This brings us closer to international benchmarks for
investment in early learning.[2]
The additional $3.2 billion that the government is intending
to invest to make child care more affordable for families brings an incredible
sigh of relief for many families and many of our Parenthood members.[3]
[Early Childhood Management Services] warmly welcomes the
additional investment in the early learning and care sector through the Jobs
for Families and child care package and the Family Assistance
Legislation Amendment Bill 2015.[4]
Anglicare Australia welcomes the significant investment into
child care that the Jobs for Families package represents. The subsidisation of
child care has two clear objectives: addressing barriers to workforce
participation experienced by parents; and ensuring adequate access to early
childhood education. The package will continue to provide access to child care
for many working families.[5]
2.7
Similarly, Early Childhood Australia (ECA) noted that:
The changes contained in the Child Care Assistance Package
hold significant gravity for children's access and participation in early
learning. It is pleasing to see that the changes are likely to see the total
number of children and families using early childhood education and care grow
following the introduction of the package.[6]
2.8
The Australian Childcare Alliance (ACA), the peak body representing the
early childhood education and care sector, also commented that:
ACA recognises the many positive aspects of this package. We
welcome the relief for families from 1 July 2017 and the increased threshold
from $7500 to $10 000 for middle income families. ACA welcomes the $3
billion additional investment and remain committed to working with Government
to ensure that the best possible outcomes for all children are achieved.
The significant additional investment in the Jobs For
Families package is positive recognition by Government of the value of the ECEC
sector and the part it plays in assisting parents and other primary carers to
maintain workforce participation.[7]
2.9
Minister for Education and Training Senator the Hon. Simon Birmingham
estimated that around one million Australian families would be better off as a
result of the government's Jobs for Families package, in the following income
brackets.
2.10
For lower income families:
From July 2017, about 250,000 families earning $65,710 or
less per year will have access to a subsidy rate of 85 per cent of
their fee, which is up from their current subsidy rate of around 72 per cent.
The majority of these families will be better off (about 104 100) or will
experience no change (about 81 000).[8]
2.11
Low to middle income families:
The subsidy rate tapers from 85 per
cent for families earning more than $65 710 to 50 per cent for those
earning $170 710. In this income bracket, families will, on average, be about
$1500 a year better off. Around 565 400 families will be better off and a
further 32 800 will experience no change in support. These families will
particularly benefit from the removal of the annual $7500 cap, which applies
universally today, but will only apply for families with incomes of more than
$185 710 under the new Package and is being increased to $10 000. Together with
the more generous Child Care Subsidy, this is another win for low to middle
income families.
It is anticipated that many of the
around 55 700 families in this income bracket who may receive a reduced amount
of support will either increase their activity or move to lower cost child care
services.[9]
2.12
Upper income families:
The Child Care Subsidy tapers to 50 per cent for family
incomes of $170 710. It then remains at 50 per cent until
family income reaches $250 000. Around 142 400 families
earning between these amounts will be better off under the new Package, while a
further 19 500 will experience no change. About 16 600 will receive a
reduced level of child care support, mainly because they are paying child care
fees in excess of average costs.[10]
2.13
High income families:
For high income families earning $250 000 or more, the
subsidy reduces from 50 per cent to 20 per cent at $340 000 and
above. As a result, around 59 500 families earning more than $250 000 a year
will receive less Child Care Subsidy under the proposed arrangements. In this
income bracket, around 7 200 families will experience no change while about 3 800
families will be better off.[11]
2.14
As the government's figures show, most Australian families will be
better off – or at a minimum face no change – as a result of this package's
introduction, and the Bill's focus on increasing workforce participation and
engagement should further see families better off if they are able to increase
their workforce participation accordingly.
2.15
Additional studies have since been released by interest groups. An ANU
study commissioned by ECA conceded that:
There are major differences in the data between that used
here and that we understand was used by the Commonwealth. The Commonwealth will
have a superior data base with the full population of formal childcare families
and exact price and hours information for child care use.[12]
2.16
Whilst the findings of this report differed to the department's own
modelling, it still found that the package will benefit most families who use
formal child care.
2.17
As part of its submission to the inquiry, SNAICC attached Deloitte
Access Economics research that looked at the transition of indigenous BBFs to
the child care subsidy, without recognising the benefits of the Additional
Child Care Subsidy and the Community Child Care Fund. Both of these programmes
are designed to address the very needs highlighted by the Deloitte Report:
CHAIR: It did not go to analysing the additional child care
subsidy—is that correct?
Ms Sydenham: No it did not.
CHAIR: Or the community child care fund?
Ms Sydenham: That is right and that is because there was not
seen to be sufficient information that is publicly available at the moment to
be able to do that modelling.[13]
2.18
Numerous submitters pointed out that early childhood education is a
vital component of children's development and that, in particular, children
from disadvantaged families benefit the most from attendance at high-quality
early childhood education and care facilities.[14]
2.19
The Australian Children's Education and Care Quality Authority (ACECQA),
the independent national authority established to lead the implementation of
the National Quality Framework (NQF), referred to:
... established research that shows quality early childhood
education and care leads to better health, education and employment outcomes
later in life, as well as broader social and emotional development. Quality
children's education and care is also integral to realising long term economic
gains through building human capital, improving workforce productivity and
reducing public spending on health, welfare and justice.[15]
2.20
As the department noted in its submission:
The overarching goal is to create a more sustainable system
that:
-
encourages greater workforce
participation and productivity, and better meets families' needs;
-
addresses children's learning and
development needs, particularly those who are vulnerable or at risk of poor
long-term development outcomes; and
-
improves budget sustainability in
the longer term.[16]
The Child Care Subsidy
Provisions
2.21
The Bill introduces the new Child Care Subsidy (CCS), which replaces the
existing Child Care Benefit (CCB) and Child Care Rebate (CCR). The Department
of Education and Training (the department), in its submission, described the
CCS as the 'centrepiece' of the Jobs for Families Package.[17]
2.22
The department outlined the main functions of the CCS:
The Child Care Subsidy will replace the current Child Care
Benefit and Child Care Rebate with a single payment based on family income. The
Child Care Subsidy will:
-
be paid directly to service
providers, based on a family's fortnightly entitlement; and
-
be better targeted and provide
more assistance to low and middle income families.
[...]
The Child Care Subsidy will provide the greatest rate of
subsidy to families earning the least and provide more hours of subsidy to
families who work the most.
The Child Care Subsidy paid will be a percentage of the
actual fee charged by the child care service (up to the relevant percentage of
the hourly fee cap).[18]
2.23
Eligibility for the CCS paid to families is established according to the
following principles:
An individual's eligibility for the Child Care Subsidy is
outlined in Clause 85BA of the Bill, in summary an individual is eligible for
the subsidy if at the time the care was provided:
-
the child is a FTB child, or
regular care child of the individual or their partner; and
-
the child is 13 years old or under
and does not attend secondary school; and
-
the child meets immunisation
requirements; and
-
the individual or their partner
meets residence requirements (outlined in Clause 85BB); and
-
the individual or their partner
has incurred a liability to pay for the child care; and
-
the care is provided in Australia
and is not part of a compulsory education programme.[19]
2.24
The level of payment made to families is then calculated on the basis of
three factors:
-
the family income, which determines the subsidy percentage;
-
the hours of recognised activity (including work, training, study
or other recognised activity) undertaken by the parent(s), which determines the
fortnightly hours attracting the subsidy; and
-
the actual hourly fee charged by the service and the hourly fee
cap for the service type being utilised, which determines the subsidy amount.[20]
2.25
The family income, as noted, determines the percentage of the CCS to
which the family is entitled. The following table outlines the percentage of
the CCS to which families in each income bracket is entitled:
Source: Department of Education and Training, Submission 30,
p. 9.
2.26
Furthermore, the Bill amends the annual subsidy cap for families:
currently Child Care Rebate is capped at $7500 per child in all families annually,
regardless of income. Under the Bill, those families on an annual income of
$185 710 or less will not have their level of subsidy capped at all; families
whose income is above that level will have a subsidy cap of $10 000 per child.[21]
2.27
Family eligibility for the CCS is further determined by an activity test
which, the department argued, 'more closely align[s] the hours of subsidised
care with the combined hours of work, training, study or other recognised
activity undertaken'.[22]
2.28
In two-parent families, the child's subsidy will be based on the
activity level of the parent with the fewest hours of activity each fortnight. Families
(whether single or two parent) where one parent does not reach the eight hour
minimum threshold of recognised activity per fortnight will attract zero hours
of subsidised early learning and care. However, families who do not meet the
activity test will be eligible for 24 hours of subsidised care per fortnight if
the family's total annual income is $65 710 or less.[23]
2.29
The table below explains the number of hours of subsidised care to which
each child is entitled depending on their family's level of activity:
Source: Department of Education and Training, Submission 30,
p. 10.
2.30
The department notes that a 'broad range' of activities will meet the
activity test requirements. The Bill defines a 'recognised activity' as:
An individual engages in recognised activity if the
individual engages in any one or more of the following:
- paid work (whether or not as an employee);
- a training course for the purpose of improving the
individual's work skills or employment prospects or both;
- an approved course of education or study; or
- an activity prescribed by the Minister's rules.[24]
2.31
A list of recognised activities will be provided under the Minister's
rules. The department notes that the list will be a 'modified version' of
Option 1.2 of Chapter 7 in the Regulation Impact Statement.[25]
2.32
The department emphasised that recognised activities will have:
... a clear focus on workforce participation and be expanded to
include unpaid work experience and a broad definition for voluntary work,
making it easier for individuals and families to meet the activity test.[26]
2.33
As explained by Minister Hartsuyker during his second reading speech:
The child care safety net aims to give our most vulnerable
children a strong start. Amongst other measures, it will provide families on
incomes of less than $65 710 who do not meet the activity test of up to 24
hours per fortnight of subsidised childcare. This is equivalent to two weekly
six-hour sessions. These 24 hours will be provided at the highest rate of
subsidy, 85 per cent, which is an increase on the current rate of about 72
per cent.[27]
2.34
As the Minister noted during his press conference on 23 November 2015:
We're not forcing child care providers to change their
models. We are encouraging them by removing some of the current requirements
they have in terms of the hours per day and days per week that they must
operate and by providing very generous government subsidies in future. What I
hope is that child care providers will recognise that if they are serious about
providing early learning opportunities to children, then 12 hours of
entitlement which we're giving to low income families regardless of their
workforce activity should provide for at least two days of learning potential
and opportunity for those children. Nobody seriously thinks that a three year
old is sent along for 12 hours of education in one day. Of course it's more
analogous to look at school days which would mean that should last for at least
a couple of days.
2.35
The department explained the rationale of this amendment is to encourage
workforce participation amongst parents:
Closer alignment between the hours of subsidised care and the
hours of recognised activity will create a stronger incentive for parents to
increase their workforce participation if they want to access more subsidised
child care.[28]
2.36
Families will be able to estimate their activity hours over a
three-month period, in order to more accurately reflect the activity level for
those with casual or irregular working hours.[29]
2.37
In response to the Government's expectation that the hours child care
centres bill families be more closely aligned to the hours of care needed and
used by a family, ECA said:
Most services are opening before 7 am or at 7 am and closing
between 6 pm and 7 pm. The idea of that is that it gives parents the
flexibility to drop off early and to still get to work or to pick children up.
Most children are not at the centre for the entire operating period.[30]
Reactions
2.38
Most submitters to this inquiry welcomed the simplification of this
element of the child care system, noting that the current system is confusing.
2.39
ECA noted that, for those who qualify for the CCS, the rate of payment
is an increase over the existing CCB:
ECA recognises that the current Child Care Benefit is usually
paid at a much lower rate than is proposed under Child Care Subsidy, for those
eligible to receive the payment. The new Subsidy may therefore provide a
greater level of assistance to families on very low incomes. This is welcome
and supports the principles of supporting children's learning and development
needs and targeting childcare fee assistance to those who need it the most
including disadvantaged and vulnerable families and children.[31]
2.40
ECA noted, however, that this increase in payment rate is countered by
stricter eligibility rules:
... there is a group of children who were previously eligible
for Child Care Benefit who will no longer be able to access the Child Care
Subsidy at all. Many of these children are in families which do not have high
incomes (though are above the $65 710 limit) and are still considered to be
vulnerable against independent indicators like the Australian Early Development
Census (AEDC). Evidence shows that these are the children that would
significantly benefit from access to quality early learning.[32]
2.41
Similarly, the Social Research Centre at the University of New South
Wales noted that the simplification, and means-testing basis, of the CCS are
improvements to the existing system:
The move to a single means-tested subsidy is welcome, and the
introduction of a benchmark fee addresses concerns about the inflationary
effects of the Child Care Rebate. The new income threshold and lower CCS rate
(from 50% to 20%) for higher income families is also welcomed as a recognition
that families earning above $250 000 can afford to pay a greater proportion of
the cost of child care.
The proposed Child Care Subsidy, and its benchmark fee and
activity test, will make child care more affordable for most low- to
middle-income families with predictable, secure and standards
hours employment.[33]
2.42
Not-for-profit early learning and care provider Early Childhood
Management Services (ECMS) also supported the new subsidy's design, noting its
relative simplicity:
We fully support the streamlined means-tested subsidy
providing increased assistance to lower income working families. Paying the
subsidy directly to service providers not only strong supports access and
participation, it also cuts red tape, making the subsidy system more efficient
and simple for families and service providers.[34]
2.43
Submitter responses to the Bill's activity test provisions tended to be
quite divisive. While some submissions recognised the Bill's primary focus of
encouraging workforce participation, others held concerns about the impact of the
reduced level of subsidised care for children whose families do not meet the
activity test.
2.44
The increased annual cap on subsidies for families earning above $185 710
annually – and removal of the cap for families earning less than that – was
also broadly supported by submitters. Asked about the opinion of the membership
of parent advocacy group The Parenthood regarding this amendment, executive
director Ms Jo Briskey said:
We are very supportive of that. The $7500—especially in
relation to mums' and women's participation in the workforce—has kept women
working only three days a week, because when you exceed three days a week you
hit your cap and you are paying full fee. Having that scrapped altogether for
those families under $185 000 and increased to $10 000 for those other families
is very welcome.[35]
2.45
The Australian Childcare Alliance was also supportive:
We welcome the relief for families from 1 July 2017 and the
increased threshold from $7500 to $10 000 for middle income families.[36]
2.46
Further, the department noted that:
Add quote from DoE, page 9, par 40:
This change will better target assistance to low and middle
income families, particularly those who need to use more child care to work
more.[37]
Committee view
2.47
Whilst recognising the challenge that tightened eligibility and sessions
of care present to the child care sector, the committee cannot dismiss the
evidence - the Jobs for Families child care assistance package will target
support to those who depend upon it in order to work or work more through the activity
test; eliminate the $7500 cap for most families and lift it to $10 000 for
families on higher incomes; increase the rate of subsidy from 72% to 85% for
those on the lowest income; and provide an exemption from the activity test for
those on the lowest incomes. Even stakeholders who seek changes to the package concede
that, as ECA did, 'most working families will be better off as a result of the
package'.[38]
2.48
Research highlights the importance of targeted early childhood education
for vulnerable families and how it can set a child on a positive learning
trajectory for life. Such families in conjunction with families who require
childcare due to work schedules are the prime intended beneficiaries of subsidies,
as opposed to those seeking childcare for lifestyle reasons. The Committee was
concerned that rather than support poorer families, The Parenthood was
supportive of 50 per cent subsidies being given to families on over half a
million dollars income.
2.49
By focussing subsidies where they are most needed and reducing them for
families on higher incomes, the Jobs for Families package targets taxpayer
support to encourage workforce participation, while providing a safety net for
those families on lower income, and exemptions to ensure ongoing access to 15
hours of preschool a week under the Universal Access agreement.
2.50
Encouraging greater workforce participation is a primary aim of the Jobs
for Families package, and the committee is of the view that the activity test
provisions of the Bill are a fair and equitable way to ensure that the Child
Care Subsidy is targeted best at the families who will need and use it the
most.
The Additional Child Care Subsidy
Provisions
2.51
The CCS is supplemented by the Additional Child Care Subsidy (ACCS),
which is particularly targeted at children and families deemed to be genuinely
disadvantaged, with the aim of minimising barriers for these children to
accessing early childhood education.[39]
2.52
As the Department of Education outlined in its submission (page 23), the
ISP:
...will provide increased programme funding support by 25 per
cent including an increased payment for services to engage an additional
educator from about $17 to $23 per hour. The programme will also provide
greater flexibility for families by allowing services to access up to 25 hours
of assistance per week with daily limits being removed and significant
streamlining of processes for services.
2.53
The following table explains how the ACCS will be applied:
Source: Department of Education and Training, Submission 30,
p. 15.
2.54
The department's submission outlines the ways in which the ACCS differs
from the existing Special Child Care Benefit:
-
services will be required to refer
a child who is 'at risk' to an appropriate state/territory body to help ensure
the child's welfare and wellbeing;
-
services can certify a child to be
'at risk' for up to six weeks in any 12 month period, with this certification
being reviewable (whereas, currently child care service providers can certify a
child to be 'at risk' for up to 13 weeks in a financial year, with this
certification being non-reviewable);
-
further periods of 'at risk'
assistance will be assessed and approved by DHS (for maximum of 13 week
blocks). If it is evident in consultation with the relevant state/territory
body that the child's situation will not change for a period of time longer
than 13 weeks, the Secretary may certify additional periods of 'at risk'
without the need for child care service providers to make additional
applications to DHS (hence removing the administrative burden of the current
process in these cases);
-
families who have had a child
assessed as 'at risk' for a period of six months or more will be exempt from
the activity test for a further period of 18 months, after the 'at risk'
entitlement ceases. This exemption recognises the need to provide ongoing
support in instances where the underlying reasons that led to an 'at risk'
event are medium to long-term in nature;
-
simpler Priority of Access
requirements will be introduced to ensure the highest priority children can
access child care. There will be two priority categories with 'a child at risk
of serious abuse or neglect' receiving the Additional Child Care Subsidy to be
Priority 1 (and children of families who meet the activity test through paid
employment to be Priority 2); and
-
services will be limited to
certifying 'at risk' to 50 per cent of children in care at the child care
service on any one day. Any additional children that child care service
providers identify as 'at risk' can be approved by DHS. This is an increase to
the current rule under the Special Child Care Benefit (where services are
limited to 18 per cent of the total Child Care Benefit, Special Child Care
Benefit and Grandparent Child Care Benefit paid to the service in the quarter
before last).[40]
2.55
The department's submission further notes that the department is
'currently developing the list of circumstances in which a child may be
considered at risk of serious abuse or neglect'. The completed list will be
incorporated into the Minister's rules. The Minister's rules will also provide
a legal basis to grant or reject an ACCS 'at risk' claim.[41]
2.56
The department further explained this at the public hearing:
People in child protection will automatically get access to
the 120 per cent. I think it is the next group down that I talked about where
it might not be on the radar for the relevant state and territory bodies. This
was a recommendation out of the Productivity Commission. They said that if
children are at risk, there needs to be some process of telling the state body
that this child is in a difficult circumstance. It is not at a child protection
stage, but by notifying the state or territory they might know other pieces of that
child's life that they can put together to have a more holistic picture around
that child and that family.[42]
2.57
The department is also currently developing the list of circumstances in
which a family may be eligible for the Temporary Financial Hardship subsidy.
This list may include the 'sudden and unexpected death of a spouse/partner or
child', 'unexpected loss of employment and residing in 'an officially declared
disaster area'.[43]
Reactions
2.58
Many submitters applauded the policy intentions and outlines of the
ACCS, although several expressed concern that the definitions and inclusions
were not drawn broadly enough.
2.59
While expressing some concern at the detail of the definitions – still
being developed at the time of their submission – community service organisation
and child care centre operator Mission Australia supported the Bill's
provisions as part of the broader Child Care Safety Net, noting that 'A subsidy
equal to the actual fee (up to 120% of the hourly fee cap) for children at risk
of abuse or neglect is a valuable protection'.[44]
2.60
Early learning and care provider Goodstart Early Learning (Goodstart) also
noted their broad support for the provisions, noting that:
Goodstart welcomes the Government's recognition that extra
support is needed to help address cost barriers for the following groups:
-
children at risk of serious abuse
or neglect (ACCS – at risk);
-
families experiencing temporary
financial hardship (ACCS – TFH);
-
grandparents on income support who
are the primary carer of their grandchildren (ACCS – Grandparent); and
-
parents transitioning to work from
income support (ACCS – TTW).[45]
2.61
Goodstart further noted that:
The Safety Net Programs within the Bill provide a suite of
measures to assist children with identified additional needs. Goodstart
welcomes the additional funding for these programs and looks forward to working
with the Government to develop detailed guidelines to ensure maximum access for
children and flexibility for families.[46]
2.62
ECA were also supportive of the measure, arguing that:
For children with additional needs that have access to early
learning under the new package, there is an extra inclusion support subsidy,
which is a fantastic initiative. We congratulate the government on that.[47]
2.63
However, Goodstart also argued that 'the legislation needs clarification
and amendments to ensure that the way these subsidies are implemented meet the
needs of some of the most vulnerable children in our society'.[48]
2.64
Similarly, ACA were in favour of the ACCS but maintained that the
working definitions used to determine when a child could be considered to be
'at risk' need to be established through consultation with stakeholders,
including state and territory authorities, to ensure that they are broad enough
to accomplish their objectives:
ACA strongly supports the introduction of an Additional Child
Care Subsidy (ACCS), which incorporates some aspects of the existing Inclusion
Support Program, to provide targeted additional support to families by
providing access to early childhood education and care for children who need it
most. However, it is important that the definition of 'at risk' children is
broad enough to ensure that no child 'slips through the cracks', and the
circumstances and timeframes will vary markedly for each and every family.[49]
2.65
Recognising stakeholder questions about the Minister's rules and
development of those rules, it is important to highlight the following
explanation in the department's submission:
Many of these rules are currently being developed by the
Department, and will be finalised with input from, and in consultation with,
relevant stakeholders. It is also important to note that all Minister's rules
and Secretary's rules identified in Appendix 1 will be legislative instruments
Family Assistance Legislation Amendment (Jobs for Families Child Care Package)
Bill 2015 subject to disallowance by either house of the Parliament under the Legislative
Instruments Act 2003 (Cth).[50]
Committee view
2.66
The committee recognises that additional assistance will always be
required for children from disadvantaged families or at risk of serious abuse
or neglect, and believes that the proposed Additional Child Care Subsidy –
which forms part of the broader Child Care Safety Net – will provide
much-needed support for children and their families in such situations.
Conclusion
2.67
The Jobs for Families package as a whole aims to encourage and enable
families seeking to increase their workforce participation, whether by working
more or undertaking activities (including studying and training) that will
improve their options for participating in paid work.
2.68
One component of the package is to improve access to and affordability
of early childhood education and care. The committee recognises that access to
high-quality early childhood education and care is of substantial developmental
benefit to children in addition to its role in helping to facilitate parents'
workforce engagement.
2.69
As the department's submission notes, the emphasis of the Bill is on
providing '... the greatest rate of subsidy to families earning the least and
provide more hours of subsidy to families who work the most'.[51]
This approach, the committee believes, is in line with community expectations,
whereby subsidies and assistance are targeted at those whom they will most
benefit and reducing the subsidisation of those with the means to pay a greater
proportion of the costs themselves.
Recommendation 1
2.70
The committee recommends that the Senate pass the Bill.
Senator
Bridget McKenzie
Chair
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