Explanatory Memorandum
(Circulated by authority of the Minister for Education, the Hon Jason Clare MP)NOTES ON CLAUSES
Clause 1: Short title
1. This is a formal provision specifying the short title of the Act, the Early Childhood Education and Care (Three Day Guarantee) Act 2025 (the Act).
Clause 2: Commencement
2. The table in this clause sets out the commencement date for the Bill's provisions.
3. The Bill will commence on 1 January 2026 or the day after this Bill receives Royal Assent, whichever is later.
Clause 3: Schedules
4. Clause 3, for the avoidance of doubt, provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.
Schedule 1—Amendments
A New Tax System (Family Assistance) Act 1999
5. Schedule 2 to the A New Tax System (Family Assistance) Act 1999 (Family Assistance Act) is used to calculate the amount of Child Care Subsidy (CCS) or Additional Child Care Subsidy (ACCS) that an individual is entitled to. Currently, one element of this calculation is the activity test which is used to determine the number of subsidised Early Childhood Education and Care (ECEC) hours an individual is entitled to. The activity test is based on the amount of activity (including paid work, study and volunteering) the individual and the individual's partner do in a fortnight.
6. Schedule 1 to this Bill replaces the activity test with a 3 day guarantee and increased hours of subsidised ECEC. The 3 day guarantee ensures that all individuals eligible for CCS are entitled to a minimum of 72 hours of subsidised ECEC per fortnight. As it is common in the ECEC sector to require individuals to book their child into care for 12 hour sessions, 72 hours per fortnight is equivalent to three days of subsidised ECEC per week.
7. Currently, under the activity test, an individual could have an activity test result of less than 72 hours, such as 0 hours, 24 hours, or 36 hours. Schedule 1 amends the Family Assistance Act to establish the 3 day guarantee and remove references to an entitlement to subsidised care that is lower than 72 hours. An individual engaged in more than 48 hours of recognised participation types in the CCS fortnight will be entitled to the 'increased hours result' of 100 hours. The Bill also guarantees that individuals caring for an Aboriginal or Torres Strait Islander child are entitled to a minimum of 100 hours of subsidised care per fortnight.
8. Schedule 1 also makes terminological changes to the Family Assistance Act and Family Assistance Administration Act , such as substituting activity test result with subsidised hours. These are solely terminological changes that are intended to reflect the new policy settings of the 3 day guarantee. Under Schedule 1 all families are entitled to 72 subsidised hours per fortnight, leaving only one higher entitlement (100 hours) for individuals participating in more than 48 hours of work or study. To reflect that engagement in activity is no longer a core component of the Act, or a core determinator of families' subsidised hours, the terminology of the activity test (including activity test result, activity, recognised activity result, deemed activity test result, activity-tested amount, and adjusted activity-tested amount) has been removed and replaced with terminology that aligns with the 3 day guarantee policy settings.
Items 1, 4 5 and 9: Subsection 3(1)
9. Items 1, 4, 5 and 9 amend subsection 3(1) to insert various definitions for concepts that are being introduced by this Bill. These new definitions are the 3 day guarantee, deemed subsidised hours, the increased hours result, recognised participation type and subsidised hours. The 3 day guarantee is established by new subclause 11(1A). The new definitions of deemed subsidised hours, increased hours result, recognised participation type and subsidised hours are solely terminological changes made to align with 3 day guarantee policy settings and replace the terms deemed activity test result, recognised activity result, recognised activity and activity test result.
Items 2,3, 6, 7 and 8: Subsection 3(1) (definition of activity test result ); Subsection 3(1) (definition of deemed activity test result ); Subsection 3(1) (definition of low income result ); Subsection 3(1) (definition of recognised activity ); Subsection 3(1) (definition of recognised activity result )
10. Items 2, 3, 6, 7 and 8 repeal redundant definitions in subsection 3(1). As described above, the terms activity test result, deemed activity test result, recognised activity and recognised activity result have been replaced with terms that better align with 3 day guarantee policy settings. Item 6 removes the definition of low income result because the minimum number of hours per fortnight of subsidised care under the 3 day guarantee is higher than the low income subsidised hours result of 24, making the low income result redundant. The individuals that benefited from the low income result will instead receive the higher guaranteed hours result of 72.
Items 10, 18, 19, 24, 28, 29, 30, , 31, 32, 34, 51, 52, and 53: Clause 1 of Schedule 2 (method statement, step 1); Subparagraph 4(1)(a)(i) of Schedule 2; Subclause 4(2) of Schedule 2; Clause 8 of Schedule 2 (method statement, step 1); Paragraph 10(1)(a) of Schedule 2; Subclause 10(2) of Schedule 2; Part 5 of Schedule 2 (heading); Division 1 of Part 5 of Schedule 2 (heading); Clause 11 of Schedule 2 (heading); Subclause 11(5) of Schedule 2; Division 2 of Part 5 of Schedule 2 (heading); Clause 16 of Schedule 2 (heading); Subclause 16(1) of Schedule 2
11. These items amend various provisions of the Family Assistance Act to replace activity test result with subsidised hours. An eligible individual's baseline subsidised hours will either be 72 (the 3 day guarantee) or 100 hours per fortnight (the increased hours result, or any other higher result found in the subclause 11(1B) table).
Item 11: Clause 1 of Schedule 2 (method statement, step 1)
12. Item 11 omits a redundant part of the method statement for working out CCS entitlement that refers to what happens where the activity test result is zero. This is because the introduction of the 3 day guarantee ensures that all families eligible for CCS now receive a baseline entitlement of 72 subsidised hours, regardless of their participation in work, study or other recognised participation types. Under the previous arrangements, individuals with low or no recognised activity received limited or no subsidy, which acted as a barrier to accessing ECEC. This amendment removes the need for provisions related to a zero activity test result.
Items 12, 14, 16, 17, 21, 23, 25, 26, 27: Clause 1 of Schedule 2 (method statement, step 5, paragraph (a)); Clause 1 of Schedule 2 (method statement, step 6); Clause 4 of Schedule 2 (heading); Subclause 4(1) of Schedule 2; Paragraph 4A(1)(a) of Schedule 2; Paragraphs 4A(2)(a) and (b) of Schedule 2; Clause 8 of Schedule 2 (method statement, steps 4 and 5); Clause 10 of Schedule 2 (heading); Subclause 10(1) of Schedule 2
13. These items amend various provisions of the Family Assistance Act to replace activity-tested amount with basic subsidy amount; and to replace activity-tested with basic subsidy. These are solely terminological changes intended to align language with the 3 day guarantee policy settings.
Items 13, 15, 20, 22: Clause 1 of Schedule 2 (method statement, step 5, paragraph (b)); Clause 1 of Schedule 2 (method statement, step 7); Clause 4A of Schedule 2 (heading); Subclause 4A(2) of Schedule 2
14. These items amend various provisions of the Family Assistance Act to replace activity-tested with subsidy and to replace adjusted activity-tested amount with adjusted subsidy amount. These are solely terminological changes intended to align language with the 3 day guarantee policy settings.
Item 33: Subclause 11(1) of Schedule 2
15. Item 33 repeals and substitutes subclause 11(1) of Schedule 2 to establish the 3 day guarantee. New subclause 11(1) provides that for the purpose of working out an amount of CCS or ACCS for an individual in relation to sessions of care provided to a child, an individual's subsidised hours for a CCS fortnight is the highest of the 3 day guarantee, or any other result specified in the table in new subclause 11(1B) for the amount that applies to the individual in relation to the child. The 3 day guarantee result has not been included in the subclause 11(1B) table, to reflect the fact that the 72 hour result is a guaranteed baseline entitlement, with subclause 11(1B) defining entitlements to additional hours.
16. New subclause 11(1) explains how the new subclause 11(1B) table is intended to be read for the purpose of working out an amount of CCS or ACCS for an individual. An individual's subsidised hours is the highest of the 3 day guarantee or any other result specified in an item of the table in subclause 11(1B) for the amount that applies to the individual in relation to the child. For example, an individual receiving ACCS (child wellbeing), under Item 1, would be entitled to a 100 hour result for the purposes of receiving ACCS (child wellbeing). An individual receiving CCS who is not entitled to an increased hours result under Item 1, may be entitled to a Minister's rules result that provides them a 100 hour result under Item 2, in which instance the higher result is used. This means individuals receiving ACCS (child wellbeing), ACCS (temporary financial hardship), and ACCS (grandparent) will continue to receive 100 subsidised hours, as under the current policy settings. Individuals receiving ACCS (transition to work) can receive the 3 day guarantee result of 72 hours (set out in new subclause 11(1A)), or the increased hours result (set out in new subclause 12(1)), depending on their engagement in recognised participation types.
17. Item 33 also inserts a new subclause 11(1A) to define the 3 day guarantee as 72. The 3 day guarantee provides eligible individuals with a baseline entitlement to 72 hours of subsidised care per fortnight. As it is common in the ECEC sector to require individuals to book their child into care for 12 hour sessions, 72 hours per fortnight is equivalent to 3 days of subsidised ECEC per week. However, an individual is not required to use their entitlement of 72 hours per fortnight in this way. For example, an individual might use 4 days in the first week of the CCS fortnight, meaning they would have the equivalent of 2 days remaining in the second week of the fortnight.
18. An individual engaged in more than 48 hours of a recognised participation type in the CCS fortnight will be entitled to an increased hours result of 100 (set out in new subclause 12(1)). This is intended to recognise that individuals engaging in more than 48 hours of work or study may require additional subsidised hours.
19. If an individual is not engaged in more than 48 hours of a recognised participation type in the CCS fortnight, they will be entitled to the higher of the 3 day guarantee or any other result that applies to them.
Items 35, 42, 47: Clause 12 of Schedule 2 (heading); Subclause 12(4) of Schedule 2; Subclause 12(7) of Schedule 2
20. These items amend various provisions of the Family Assistance Act to replace recognised activity with increased hours. These are solely terminological changes intended to align language with the 3 day guarantee policy settings.
Item 36: Subclause 12(1) of Schedule 2
21. Item 36 repeals and substitutes subclause 12(1) of Schedule 2. New subclause 12(1) provides for an increased hours result, which applies to an individual for a CCS fortnight if the individual engages in more than 48 hours of a recognised participation type in the CCS fortnight. This is intended to recognise that individuals engaging in more than 48 hours of work, study or other recognised participation types may require additional subsidised hours.
Items 37, 38, 39, 41, 43, 44, 45, 46, 48: Subclause 12(2) of Schedule 2 (heading); Subclause 12(2) of Schedule 2; Paragraphs 12(2)(d) and (e) of Schedule 2; Subclause 12(4) of Schedule 2 (heading); Subclause 12(4) of Schedule 2; Paragraph 12(4)(a) of Schedule 2; Paragraphs 12(4)(a) and (b) of Schedule 2; Subclause 12(7) of Schedule 2 (heading); Subclause 12(7) of Schedule 2
22. These items amend various provisions of the Family Assistance Act to replace recognised activity with recognised participation type; and to replace references to activity and activities with participation type and participation types. These are solely terminological changes intended to align language with the 3 day guarantee policy settings.
Item 40: Subclause 12(3) of Schedule 2
23. Item 40 repeals and substitutes subclause 12(3) of Schedule 2 to replace references to associated activities with associated participation types. These are solely terminological changes intended to align language with the 3 day guarantee policy settings.
Item 49: Clause 13 of Schedule 2
24. Item 49 repeals the clause that dealt with the low income result because it is now an obsolete concept. The intention of the low income result was to help low income families engaging in lower levels of activity. The 3 day guarantee provides that all families eligible for CCS (including a low income family) will now receive a baseline entitlement of 72 hours per fortnight, making the low income result obsolete.
Item 50: Subclause 15A(1) of Schedule 2
25. Item 50 will increase the entitlement for an Aboriginal or Torres Strait Islander child from 36 hours to 100 hours. The 3 day guarantee provides a baseline entitlement of 72 hours per fortnight for all families. Families caring for an Aboriginal or Torres Strait Islander child will be entitled to a higher entitlement of 100 hours per fortnight.
26. There is evidence that the activity test has a negative impact on Aboriginal and Torres Strait Islander children and their participation in ECEC. The intention of this amendment is to improve the affordability and accessibility of ECEC for families with Aboriginal and Torres Strait Islander children, by providing an entitlement to a minimum of 100 hours of subsidised care.
A New Tax System (Family Assistance) (Administration) Act 1999
Items 54, 55, 56 and 57: Subparagraphs 67CE(1)(b)(ii) and 105D(2)(a)(ii); Subparagraphs 105E(1)(c)(ii) and (3)(c)(ii); Paragraphs 108(5)(b) and 111(2A)(b); Paragraph 157(2)(k)
27. These items amend various provisions of the A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Administration Act) to replace activity test result with subsidised hours and activity with participation type. These are solely terminological changes intended to align language with the 3 day guarantee policy settings.
Schedule 2—Application provision and transitional rules
Item 1: Application of amendments
1. Item 1 is an application provision that provides that the Family Assistance Act and Family Assistance Administration Act as amended by Schedule 1 of the Bill will apply in relation to sessions of care provided to a child in a CCS fortnight that begins on or after the day of commencement of this Act. This provision clarifies that the new entitlement structure and related amendments will take effect for sessions of care provided in the CCS fortnights beginning on or after the commencement date of the Act. This ensures a clear transition point for families and providers, allowing them to prepare for the new arrangements and avoid confusion regarding entitlement. What was previously called the activity test result, and will be known as subsidised hours, is an allotment of hours that can be used at any time during the CCS fortnight, depending on what suits the individual. It is not practicable for a person's entitlement to change midway through the CCS fortnight. Therefore, the application provision ensures that the changes apply to sessions of care provided from the start of the first CCS fortnight after commencement.
2. Item 1 also includes a transitional provision for the CCS fortnight in which the commencement of the Bill occurs. For the purposes of applying the Family Assistance Administration Act on or after the commencement of the Bill, in relation to sessions of care provided to a child in a CCS fortnight that starts before the commencement of the Bill, item 1 provides that a reference to subsidised hours is taken to include a reference to an activity test result; and any reference to a participation type is taken to include a reference to recognised activity. This is necessary because when the Act commences, there will still be many entitlement decisions calculated on the basis of an activity test result for which the affected individual has review rights. Subitem 1(2) ensures that those reviews will still operate as intended, despite the change in terminology.
Item 2: Transitional Provision
3. Item 2 is a technical provision that provides that any rules made under paragraph 12(2)(d), 12(3)(a) or (b) or 12(4)(a) or (b) of Schedule 2 to the Family Assistance Act continue to be in force as if the rules were made under the relevant paragraph as amended by this Bill. A similar provision applies to determinations made under paragraph 11(3)(b), subclause 12(5) or paragraph 16(1)(c) of Schedule 2 to the Family Assistance Act.
Item 3: Transitional rules
4. Item 3 empowers the Minister to make transitional rules relating to amendments made by Schedule 1. This power may be used to make rules prescribing matters of a transitional nature (including prescribing any saving or application provisions).