House of Representatives

Explanatory Memorandum

(Circulated By The Authority of the Minister for Education and Minister for Employment and Workplace Relations the Honourable Julia Gillard MP)

Schedule 3 - Recovery of debts

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

This Schedule amends debt creation provisions relating to payments made by way of child care rebate, which create a debt due to the Commonwealth out of the amount paid where the recipient was not entitled to that rebate under the family assistance law, or out of the overpaid amount of the rebate, where the amount paid was higher than the amount the recipient should have been paid under the family assistance law.

Item 1 makes amendments to sections 65EA, 65EB and 65EC that are necessary for the proper operation of new child care rebate debt provisions in sections 71CAA, 71CAB and 71CAC. Sections 65EA, 65EB and 65EC require the Secretary to make determinations relating to an individual's entitlement to child care rebate for a child for the income year, in respect of which a determination relating to an individual's entitlement for child care benefit by fee reduction, or for a lump sum child care benefit, for the child has been made for that year.

Amendments made by item 1 clarify the periods covered by any of those child care rebate determinations, and the connections between a particular determination and the corresponding determination relating to entitlement to child care benefit, to ensure that any child care rebate debt amount is properly identified.

Item 3 makes amendments to current sections 71CAA and 71CAB to ensure that:

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an amount paid to an individual by way of child care rebate in substitution (amendments made by Schedule 2 introduce payment of child care rebate in substitution) in respect of a child and a period is a debt repayable by the individual to the Commonwealth if the individual is not entitled to that rebate for that child for that period; and

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the difference between the amount paid to an individual by way of child care rebate in substitution in respect of a child and a period and the amount which the individual should have been paid in respect of that child and that period under the family assistance law is a debt repayable by the individual to the Commonwealth.

Item 3 also amends sections 71CAA and 71CAB to ensure that these provisions apply to quarterly payments of child care rebate made under Subdivision AA of Division 4AA of Part 3 to an individual in respect of whom a determination of conditional eligibility for child care benefit by fee reduction for a child is in force under section 50F of the Family Assistance (Administration) Act. The quarterly payments are made to an individual in lieu of the entitlement amount to be determined for the individual in respect of the period of conditional eligibility after the determination relating to the individual's entitlement for child care benefit by fee reduction for the income year within which the quarter falls has been made after the end of that income year.

The amendments in this Schedule made in relation to quarterly payments of child care rebate ensure that:

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an amount paid to an individual by way of quarterly payments of child care rebate in respect of a child during a period of conditional eligibility for child care benefit by fee reduction is a debt repayable by the individual to the Commonwealth if the individual is not entitled to child care rebate in connection with eligibility for child care benefit by fee reduction (that is, for the period of conditional eligibility in an income year in which the quarter falls); and

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the difference between the amount paid to an individual by way of quarterly payments of child care rebate in respect of a child during a period of conditional eligibility for child care benefit by fee reduction and the amount which the individual should have been paid in respect of that child and that period under the family assistance law is a debt repayable by the individual to the Commonwealth.

Further, item 3 makes other amendments to child care rebate debt creation provisions consequential on the amendments required for the purposes of quarterly payments of child care rebate and child care rebate in substitution.

Item 1 - Sections 65EA, 65EB and 65EC

Repeals and substitutes:

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sections 65EA relating to a determination of entitlement, or no entitlement, to child care rebate relating to eligibility for child care benefit by fee reduction; and

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section 65EB relating to determination of entitlement, or no entitlement, to child care rebate relating to eligibility for child care benefit for a past period; and

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section 65EC relating to later determinations of entitlement to child care rebate in respect of an individual and a child for an income year resulting from an additional child care benefit determination relating to the individual, the child and the period in the income year.

New section 65EA Determining entitlement, or no entitlement, to child care rebate - eligibility for child care benefit by fee reduction

New subsection (1) provides that the Secretary must make a determination under this section for an individual and a child for a period in an income year if the Secretary has made a determination under section 51B that the individual is entitled to child care benefit by fee reduction for sessions of care provided to a child during the period or a determination under subsections 51C(1) or (2) that the individual is not entitled to child care benefit by fee reduction for sessions of care provided to the child during the period.

New subsection (2) provides when a determination of entitlement is made under this subsection. It states that the Secretary must determine the amount of the individual's entitlement for the child and the income year if the Secretary is satisfied that:

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the individual is eligible for child care rebate under subsection 57F(1) of the Family Assistance Act in respect of a child for the income year and the care provided during that period; and

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if the individual were to be entitled to child care rebate for the child for the income year under this subsection the amount of the rebate would be more than a nil amount; and

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an earlier determination under this subsection or subsection 65EB(2) (relating to the rebate for the period in the income year that is relevant to the individual's eligibility for CCB for a past period) has not already been made in respect of the individual and the child for the income year.

The Secretary's determination under subsection (2) must include the amount of rebate the Secretary considers the individual to be entitled to.

A note at the end of new subsection (2) informs the reader that, if a determination under subsection (2) or under subsection 65EB(2) has already been made, a determination of entitlement to child care rebate for a child and an income year may be made under section 65EC.

New subsection (3) provides for when a determination of no entitlement is made under this subsection. It states that if the Secretary is not satisfied that the individual is eligible for child care rebate under subsection 57F(1) in respect of the child and an income year for care provided during the period in the income year (this is the period covered in the individual's determination relating to entitlement to child care benefit by fee reduction for the child, referred to in subsection (1)), or the Secretary is satisfied as to the eligibility for child care rebate but the amount of the entitlement would be a nil amount, the Secretary must determine that the individual is not entitled to be paid child care rebate in respect of care provided to the child during the period.

New section 65EB Determining entitlement, or no entitlement, to child care rebate - eligibility for child care benefit for past period

New subsection (1) provides that the Secretary must make a determination under this section for an individual, a child and care provided to the child during a period in an income year if the Secretary has made a determination under section 52E that the individual is entitled to child care benefit for the period of care provided to the child, or a determination under subsections 52G(1) or (2) that the individual is not entitled to child care benefit for the period in respect of the child.

New subsection (2) provides for when a determination of entitlement is made under this subsection. It states that the Secretary must determine the amount of the individual's entitlement for the child and the income year if the Secretary is satisfied that:

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the individual is eligible for child care rebate under subsection 57F(1) of the Family Assistance Act in respect of a child for the income year and the care provided during the period (that is, the period covered by the corresponding child care benefit determination); and

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if the individual were to be entitled to child care rebate for the child for the income year under this subsection the amount of the rebate would be more than a nil amount; and

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an earlier determination under this subsection, or subsection 65EA(2) (relating to the rebate for the income year that is relevant to the individual's eligibility for CCB by fee reduction for the child) has not already been made in respect of the individual and the child for the income year.

A note at the end of new subsection (2) informs the reader that, if a determination under new subsection (2) or under subsection 65EA(2) has already been made, a determination of entitlement to child care rebate for a child and an income year may be made under section 65EC.

The Secretary's determination under subsection (2) must include the amount of rebate the Secretary considers the individual to be entitled.

New subsection (3) provides for when a determination of no entitlement is made under this subsection. It states that if the Secretary is not satisfied that the individual is eligible for child care rebate under subsection 57F(1) in respect of the child and an income year and the care provided during the period (this is the period covered in the individual's determination relating to entitlement to child care benefit for a past period, referred to in subsection (1)), or the Secretary is satisfied as to the eligibility for child care rebate but the amount of the entitlement would be a nil amount, the Secretary must determine that the individual is not entitled to be paid child care rebate in respect of care provided to the child during the period.

New section 65EC Later determinations of entitlement to child care rebate

New section 65EC requires a replacement child care rebate determination to be made for an individual, a child and an income year where the first determination relating to that year did not include all periods of child care rebate entitlement. It requires a child care rebate entitlement determination to be made in respect of an income year where a determination of entitlement to child care rebate for the individual, the child and the income year was previously made under either new section 65EA or 65EB, or where an earlier determination under new section 65EC was made in respect of the individual, the child and the income year (the earlier rebate determination) (new paragraph 65EC(1)(a) refers).

This new section applies when, after the first determination relating to child care rebate entitlement relevant to a period of care in an income year was made under new section 65EA or 65EB, an additional child care benefit determination is made in respect of the individual, the child and the income year under section 51B or subsection 51C(1) (relating to entitlement to child care benefit by fee reduction) or section 52E or subsection 52G(1) (relating to entitlement to child care benefit for a past period) for one or more sessions of care provided to the child during a period in the income year, as a result of which the amount of the entitlement to child care rebate for that income year would increase (new paragraphs 65EC(1)(b) and (d) refer). In that situation, the Secretary is required to make a new determination of entitlement to child care rebate for the individual, the child and the income year under new section 65EC to replace the previous determination.

For example, a new determination may be made where an additional child care benefit entitlement determination relevant to the same income year is made. Once the first determination of entitlement to child care benefit has been made for the individual, the child and the income year (for example, a determination under section 51B), a determination of entitlement to child care rebate is to be made under either new section 65EA or 65EC, as appropriate. If another (additional) determination of entitlement to child care benefit is subsequently made for the individual, the child and the income year (for example, under section 52E), this may make the individual entitled to child care benefit for additional periods of care not included in the scope of the previous child care benefit determination. Therefore, a replacement determination relating to entitlement to child care rebate for the individual, the child and the income year is required to be made under section 65EC for child care rebate for the additional periods, if the replacement determination would result in the increase of the child care rebate entitlement amount for the income year.

If a child care benefit entitlement determination is changed as a result of a review process, the child care rebate entitlement determination may need to be reviewed (for example, to reduce the child care rebate entitlement amount). The replacement mechanism in new section 65EC does not operate to change a child care rebate entitlement determination following a change in the child care benefit entitlement resulting from review (new paragraph 65EC(1)(c) refers). In such a case, the child care rebate entitlement determination has to be reviewed under Part 5.

New subsection 65EC(2) provides that, where there has been a determination made under this section, an earlier determination ceases to have force.

Item 2 - Transitional - entitlement to child care rebate

A transitional provision which clarifies that determinations relating to child care rebate (made under sections 65EA, 65EB or 65EC before their amendment by item 1 and in force immediately before the commencement of item 2) are to be treated as if they had been made under these sections as amended by item 1.

Item 3 - Sections 71CAA and 71CAB

Repeals sections 71CAA and 71CAB and substitutes new sections 71CAA, 71CAB and 71CAC.

New section 71CAA - debts arising in respect of child care rebate where no entitlement

New section 71CAA creates a debt where an amount by way of child care rebate was paid where there is no entitlement to the rebate. The circumstances in which a 'no entitlement' child care rebate debt is created are as follows.

No entitlement to rebate arising from CCB by fee reduction (quarterly rebate paid)

New subsection (1) creates a debt due by an individual to the Commonwealth if an amount has been paid to the individual by way of child care rebate for a quarter (under Subdivision A of Division 4AA of Part 3) in respect of a period during which the individual is conditionally eligible for child care benefit by fee reduction in respect of a child, and the individual is not entitled to rebate in respect of the child and the period.

Note 1 at the end of new subsection (1) specifies that, for the purposes of paragraph (1)(b), the individual will not be entitled to child care rebate if a determination of no entitlement to the rebate has been made under subsection 65EA(3) in respect of the child and the period. Note 2 clarifies that a determination of no entitlement under that subsection could arise as a result of a decision substituted on review under Part 5.

No entitlement to rebate arising from CCB by fee reduction due to review

New subsection (2) creates a debt due by an individual to the Commonwealth if an amount has been paid to the individual by way of child care rebate for an income year (as determined by a determination of entitlement under subsection 65EA(2) or 65EC(1)) in respect of a child and a period of care covered by a determination under section 51B or subsection 51C(1) (relating to the individual's entitlement for CCB by fee reduction for the child), and the individual is not entitled to the rebate for the child and that period. This section covers the situation where a determination of entitlement to child care rebate under 65EA(2) or 65EC(1) was reviewed under Part 5 with the effect that there is no entitlement.

No entitlement to rebate arising from CCB for a past period

New subsection (3) creates a debt due by an individual to the Commonwealth if an amount has been paid to the individual by way of child care rebate for an income year in respect of a child and a period of care (as determined by a determination of entitlement under subsection 65EB(2) or 65EC(1)) as a consequence of a determination relating to the individual's entitlement for CCB for a past period covered by a determination under section 52E or subsection 52G(1)), and the individual is not entitled to the rebate for the child and that period. This section covers the situation where a determination of entitlement to child care rebate under subsections 65EB(2) or 65EC(1) was reviewed under Part 5 with the effect that there is no entitlement.

No entitlement to rebate arising from CCB by fee reduction or for a past period - other situations

New subsection (4) creates a debt due by an individual to the Commonwealth if an amount has been paid to the individual by way of child care rebate for an income year, or for a quarter in an income year, in respect of a child and a period and the individual is not entitled to the rebate for that year (or for the quarter) in respect of the child.

This subsection does not apply in the circumstances to which new subsections (1), (2), (3) or (5) apply.

This section may apply where an amount has been paid to an individual by way of child care rebate by fee reduction or for a past period, or for a quarter as a result of an error where there has been no determination of entitlement, or determination of no entitlement, to such rebate made in respect of the individual, the child and the period (eg a period of conditional eligibility, or a past period or a quarter), or when an amount has been paid where there is a determination of no entitlement to a rebate in respect of the individual, the child and the period.

No entitlement to rebate arising from CCB by single payment/in substitution

New subsection (5) creates a debt due by an individual to the Commonwealth if an amount has been paid to the individual by way of child care rebate in respect of a child and a period (as determined by a determination of entitlement under subsection 65ECA(2)), as a consequence of a determination relating to the individual's entitlement for CCB by single payment/in substitution in respect of the child and the period (determination under section 53D or subsection 53E(1)), and the individual is not entitled to the rebate for the child and the period. This section covers the situation where a determination of entitlement to child care rebate under 65ECA(2) was reviewed under Part 5 with the effect that there is no entitlement.

New subsection (5) also creates a debt due by an individual to the Commonwealth if an amount has been paid to the individual by way of child care rebate in substitution in respect of a child and a period (otherwise than in accordance with a determination under subsection 65ECA(2)) and the individual is not entitled to the rebate for the child and the period. This may apply where an amount has been paid to an individual by way of child care rebate in substitution as a result of an error where there has been no determination of entitlement, or of no entitlement, to such rebate made in respect of the individual, the child and the period, or when an amount has been paid where there is a determination of no entitlement to such a rebate in respect of the individual, the child and the period.

New section 71CAB - Debts arising in respect of child care rebate where overpayment

New section 71CAB creates a debt where an amount by way of child care rebate has been paid to the individual and the amount paid is higher than the amount to which the individual is entitled. The circumstances in which a debt arises relating to overpayment of child care rebate is created are as follows.

Overpayment of rebate arising from CCB by fee reduction - for a quarter

New subsection (1) deals with overpayments of quarterly payments of child care rebate for child care benefit by fee reduction.

New subsection (1) provides that if an amount (the received amount) has been paid to an individual by way of child care rebate for a quarter under section 65EAA in respect of a period during which the individual is conditionally eligible for child care benefit by fee reduction in respect of a child and the received amount is greater than the amount of the rebate to which the individual is entitled under subsection 65EA(2) or 65EC(1) in respect of the child and that period (the correct amount), the difference between the received amount and the correct amount is a debt due to the Commonwealth by an individual.

A note at the end of new subsection (1) informs the reader that a determination of entitlement under subsection 65EA(2) or 65EC(1) could arise as a decision resulting from a review under Part 5.

Overpayment of rebate arising from CCB by fee reduction - for an income year

New subsection (2) deals with overpayments of child care rebate for child care benefit by fee reduction.

New subsection (2) provides that if an amount (the received amount) has been paid to an individual by way of child care rebate in respect of a child for an income year in respect of a period of care covered by a determination relating to CCB by fee reduction for the individual and the child, and the received amount is greater than the amount of the rebate to which the individual is entitled under subsection 65EA(2) or 65EC(1) in respect of the child and the period (the correct amount), the difference between the received amount and the correct amount is a debt due to the Commonwealth by an individual.

A note at the end of new subsection (2) informs the reader that a determination of entitlement under subsection 65EA(2) or 65EC(1) could arise as a decision resulting from a review under Part 5.

Overpayment of rebate arising from CCB for a past period

New subsection (3) deals with overpayments of child care rebate for child care benefit for a past period.

New subsection (3) provides that if an amount (the received amount) has been paid to an individual by way of child care rebate in respect of a child for an income year in respect of a period of care covered by a determination relating to CCB for a past period in respect of the individual and the child, and the received amount is greater than the amount of the rebate to which the individual is entitled under subsection 65EB(2) or 65EC(1) in respect of the child and the period (the correct amount), the difference between the received amount and the correct amount is a debt due to the Commonwealth by an individual.

A note at the end of new subsection (3) informs the reader that a determination of entitlement under subsection 65EB(2) or 65EC(1) could arise as a decision resulting from a review under Part 5.

Overpayment of rebate arising from CCB in substitution

New subsection (4) deals with overpayments of child care rebate for child care benefit in substitution.

New subsection (4) provides that if an amount (the received amount) has been paid to an individual by way of child care rebate in respect of a child for a period covered by a determination relating to child care benefit by single payment/in substitution in respect of the individual and the child and the received amount is greater than the amount of the rebate to which the individual is entitled under subsection 65ECA(2) in respect of the child and the period (the correct amount), the difference between the received amount and the correct amount is a debt due to the Commonwealth by an individual.

A note at the end of new subsection (4) informs the reader that a determination of entitlement under subsection 65ECA(2) could arise as a decision resulting from a review under Part 5.

New section 71CAC - debt arising in respect of child care rebate paid to wrong account

New section 71CAC replicates current subsection 71CAB(2) which creates a debt out of the payment representing child care rebate for an income year made to an incorrect account. New subsection 71CAC is essentially the same, except for the omission of the references to 'an income year' to ensure that a debt arises in this situation regardless of whether the payment was made in respect of an income year or any other period.

Item 4 - Subsection 82(3) (paragraph (a) of the definition of debt)

Makes a consequential amendment to the definition of debt in subsection 82(3) to include a reference to new section 71CAC.

Item 5 - Application

Inserts application provisions.

The amendments made by items 1 and 2 apply in relation to care provided by an approved child care service to a child on or after 1 July 2008. Items 1 and 2 make amendments to sections 65EA, 65EB and 65EC dealing with the making of determinations relating to an individual's child care rebate entitlement. These amendments are consequential on the amendments made by items 3 and 4, in so far as they are relevant to payments of quarterly rebate amounts (made under Subdivision AA of Division 4AA of Part 3) and payments of the rebate arising from determinations of child care benefit by fee reduction and determinations of child care benefit for a past period, which apply to those payments if they are made on or after 1 July 2008 (subitems 2(a) and (2(b) refer).

Amendments made by items 3 and 4 (child care rebate debt creation provisions) apply in relation to payments of quarterly rebate amounts made, or purportedly made, under Subdivision AA of Division 4AA of Part 3 on or after 1 July 2008 (subitem 2(a) refers). The payments made on or after 1 July 2008 are made in lieu of the individual's entitlement which will be determined for the income year 2008-2009 during the 2009-2010 income year (after the corresponding child care benefit by fee reduction determination for the individual and the income year has been made). A debt may ordinarily arise once an individual's entitlement to CCR for the income year for which the quarterly payments were made has been determined/considered after 1 July 2009. Consequently, these provisions do not operate retrospectively.

Amendments made by items 3 and 4 (child care rebate debt creation provisions) apply in relation to payments of child care rebate arising from child care benefit by fee reduction or from child care benefit for a past period made or purportedly made in respect of care provided on or after 1 July 2008 (subitem 2(b) refers). Child care benefit and child care rebate determinations relating to care provided in an income year 2008-2009 are made after the end of that income year, that is, after 1 July 2009. Consequently, this application provision does not operate retrospectively.

Amendments made by items 3 and 4 (child care rebate debt creation provisions) apply to payments of child care rebate in substitution made or purportedly made under subsection 65EF(2D) in respect of care provided on or after 1 July 2007 (subitem 2(c) refers). Schedule 2 of this Bill introduces payment of child care rebate in substitution, to be made after the day of Royal Assent, in respect of care provided on or after 1 July 2007. Therefore, this application provision, does not operate retrospectively.