Explanatory Memorandum
(Circulated by authority of the Minister for Education, the Hon Jason Clare MP)OUTLINE
The purpose of the Early Childhood Education and Care (Three Day Guarantee) Bill 2025 (the Bill) is to give effect to the Australian Government's 3 day guarantee, replacing the Child Care Subsidy (CCS) activity test to ensure Australian families are entitled to at least three days of CCS per week for early childhood education and care (ECEC), as well as extending a greater entitlement to subsidised care for families caring for an Aboriginal or Torres Strait Islander child.
This reform is part of the next steps in building a universal early education and care system, expanding access to quality early education across the country. The measure has been informed by the Productivity Commission (PC) and the Australian Consumer and Competition Commission's (ACCC) inquiries into early education, which the Australian Government commissioned to identify a pathway to universal ECEC in Australia. It will improve ECEC affordability, easing cost-of-living pressures for families and supporting ECEC access, particularly for low income families whose children are most likely to benefit from ECEC attendance. It will make accessing subsidies simpler and empower families, particularly women, to choose to work, study, volunteer, or engage in other non-employment related activities.
The Bill makes amendments to the A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act), and the A New Tax System (Family Assistance) (Administration) 1999, (the Family Assistance Administration Act) which are the key Acts that determine families' fortnightly entitlements to CCS and the ACCS (the Additional Child Care Subsidy).
Schedule 1 – Amendments
Amendments to the Family Assistance Act in Schedule 1 to the Bill will impact the number of hours of CCS that families are entitled to receive per fortnight.
The CCS activity test determines the maximum number of hours per fortnight of subsidised ECEC a child is entitled to, based on time spent by parents and carers undertaking 'recognised activities', including paid work, study and volunteering. Families who do not undertake sufficient recognised activity may currently receive 0 or 36 hours of CCS per fortnight (unless an exception applies). The amendments in Schedule 1 will replace the current CCS activity test and provide a guaranteed minimum of 72 hours per fortnight of subsidised ECEC for all families, regardless of the time spent on recognised participation types, and a guaranteed 100 hour entitlement per fortnight for parents caring for an Aboriginal or Torres Strait Islander child.
Amendments to the Family Assistance Act and Family Assistance Administration Act in Schedule 1 to the Bill will also update the language of the activity test. These are solely terminological changes intended to reflect the 3 day guarantee policy settings.
Schedule 2 – Application and saving provisions and transitional rules
Application, saving and transitional provisions in Schedule 2 to the Bill will ensure that the amendments apply to sessions of care provided to a child in a CCS fortnight that starts on or after the commencement of the Bill. This will assist families and providers by ensuring the amendments do not take effect mid-way through a CCS fortnight. These provisions will also ensure that rules and determinations made under relevant provisions remain in effect, and will allow the Minister to prescribe rules relating to the application of amendments, and transition to the new policy settings.
FINANCIAL IMPACT STATEMENT
The amendments in Schedule 1 to the Bill are estimated to have a cost of $426.7 million over five years from 2024-25.
CONSULTATION
Consultation has been undertaken with relevant Commonwealth agencies including the Department of Finance, the Department of the Prime Minister and Cabinet, the Treasury, the National Indigenous Australians Agency, the Department of Social Services and the Department of Employment and Workplace Relations.
Extensive public consultation has been undertaken as part of reviews commissioned by the Government such as the ACCC's inquiry into childcare and the PC's inquiry into ECEC. Broadly, stakeholders and key voices for the sector have welcomed the increased support for families. Both the ACCC and the PC recommended reform of the activity test.
Services Australia has been closely engaged as a critical delivery partner in implementing the amendments, including the ICT system changes to administer the measure and staff and system process changes to calculate and administer CCS payments with providers and families.