House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Education, the Hon Jason Clare MP)

GLOSSARY

OUTLINE

The purpose of the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 (the Bill) is to give effect the Australian Government's Plan for Cheaper Child Care, fulfilling commitments in the 2022 Federal election to make early childhood education and care (ECEC) more affordable for 96 per cent of families currently using child care, with no families being worse off.

The Bill implements a range of measures to increase the level of Child Care Subsidy (CCS) for families, improve child care provider transparency and accountability, improve data and analytics capability, and strengthen payment integrity.

These measures will improve child care affordability, helping to ease cost of living pressures facing families. The measures will also support parents and carers, particularly women, in their choice to enter the workforce or increase their workforce participation. This will have wider benefits for the economy, particularly in terms of its recovery following the disruptions caused by COVID-19. Further, the measures will contribute to the Government's gender equality agenda and support children's school-readiness and long-term outcomes by reducing cost barriers to accessing ECEC.

These changes embody the Government's long-term vision of child care as an economic reform measure and an essential service that meets the needs of families and children. 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) Act 1999 (the Family Assistance Administration Act), which are the two key Acts that provide assistance to families with child care costs through the CCS.

Schedule 1

Amendments to the Family Assistance Act in Schedule 1 to the Bill will impact the rate of CCS that Australian families are entitled to receive. Specifically, these amendments will offer families earning up to $80,000 a CCS rate of 90 per cent, and offer families earning over $80,000 a CCS rate that tapers down by one percentage point for each additional $5,000 of family income until it reaches zero per cent for families earning $530,000 (new CCS base rate).

The existing measure that provides a Higher CCS rate to families with multiple children aged five or under in care will be retained. For second and younger children aged five or under in care, families will receive an additional 30 per cent up to a maximum of 95 per cent, which will continue to apply on top of the former CCS base rate. Families will be entitled to the Higher CCS rate up until a family income of $356,756 (2022-23). If families earn $356,756 (2022-23) or higher, all children in the family will be entitled to the new CCS base rate until it reaches 0 per cent entitlement at $530,000.

These changes are to apply from the first CCS fortnight of the income year starting on 1 July 2023. To ensure that this is possible, the amendments will also give effect to the removal of phase 2 of the existing Higher CCS for families with multiple children, which was previously legislated to commence from July 2023. Phase 2 is being removed as the benefits did not outweigh implementation costs.

Schedule 1 also includes minor amendments to clarify the policy intent of components of the Higher CCS and better reflect the administration of the program.

Schedule 2

Schedule 2 to the Bill seeks to uplift transparency in the child care sector to equip families with more information about the child care services they access. This also ensures the Department of Education (department) has visibility over the financial health of all large providers operating within the child care sector, regardless of their service type. Financial reporting requirements imposed by this transparency regime will enable the department to better identify, monitor and mitigate risks posed to the viability of providers who have a significant sector presence.

Schedule 2 amends the Family Assistance Administration Act to expand existing financial reporting requirements to all types of approved child care providers. The Bill achieves this by amending the current definition of 'large child care provider' to include all providers operating 25 or more approved child care services, regardless of the type of child care service operated. Providers are also captured by this financial reporting mechanism if they operate these 25 services with a related provider, or if they plan to operate these 25 services with a related provider in the future. The Bill imposes a new requirement on these large child care providers to proactively report specified financial information, and details of lease arrangements, to the Secretary of the Department of Education (Secretary).

Schedule 2 also empowers the Secretary to publish specified information received from large child care providers online, such as the name and Australian Business Number of the approved provider, the name of each child care service operated by the provider and information about fees charged by the provider across each of its services over a particular financial year.

The expanded financial reporting obligations for large child care providers will ensure the department has oversight of the financial health of systemically important large child care providers, and families have greater information about the fees they pay to access care. As such, while this transparency regime will enable the department to better identify, monitor and mitigate risks posed to the viability of providers which have a significant sector presence, it will also be an important step for families, providing them with the ability to compare services and use more information to decide where to send their children to care.

Schedule 3

Schedule 3 to the Bill introduces a base level of 36 subsidised hours of child care per fortnight for First Nations children, regardless of activity levels. These changes are to apply from the first CCS fortnight of the income year starting on 1 July 2023. The CCS income test would continue to apply to determine the CCS percentage payable for the 36 hours of subsidised care, that is, families would still be required to pay gap fees for subsidised hours in accordance with their income level. This measure seeks to improve affordability for First Nations families already using child care, as well as supporting increased engagement by First Nations children in ECEC.

Schedule 4

Schedule 4 to the Bill introduces important measures to reduce fraud within child care and provides assurance that the Government's investment supports Australian families. Integrity amendments will introduce the requirement for child care providers to collect gap fees via electronic funds transfer, make good governance an eligibility requirement for provider approval and allow the Secretary to specify the information an attendance report by a provider must contain.

Schedule 5

Schedule 5 to the Bill makes amendments to permit child care providers to offer a discount on child care fees to staff engaged as educators, without this affecting the amount of CCS payable for the educator. The measure will support the retention and attraction of early childhood educators in the child care sector and provides ongoing legislative authority for an ongoing 2021-22 Mid-Year Economic and Fiscal Outlook measure.

Schedule 6 to 8

Schedules 6 to 8 to the Bill make minor amendments to improve or clarify the operation of CCS, including:

•

clarifying the interactions with CCS where providers waive gap fees for families in prescribed events or circumstances;

•

providing additional discretion to allow payment of CCS for absences in exceptional circumstances; and

•

changing the period for passing on CCS amounts to families in limited circumstances.

FINANCIAL IMPACT STATEMENT

Total costs of the measures included in this Bill are expected to be around $4.5 billion over four years from 2022-23, taking into account the savings that will be provided by the increased integrity measures included in this Bill. Final costs of the measures included in this Bill are to be agreed in the upcoming 2022-23 October Budget and will be reflected in the relevant Budget statements.

CONSULTATION

Targeted consultation was undertaken with the sector, via the department's Early Childhood Education and Care Reference Group, from 17 to 24 August 2022. The Group considered an Exposure Draft of the Bill containing Schedules 1, 2 and 4.

Stakeholder views were considered in the final drafting of the Bill and will also, where relevant, be addressed through implementation. The sector were supportive of the increase and its benefit to families.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022

The Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 (the Bill) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Bill

The Bill will amend the A New Tax System (Family Assistance) Act 1999 (Family Assistance Act) and the A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Administration Act) to give effect to the government's Plan for Cheaper Child Care, announced as part of the 2022 election. This includes increasing the rate of child care subsidy (CCS) to reduce the cost of child care for all families earning under $530,000 in household income.

The Bill will also improve transparency in the child care sector by introducing a profit-reporting measure for large child care providers, and allowing for certain information about approved providers to be published online.

To support these changes to the CCS, the Bill will also strengthen integrity measures and optimise certain CCS policy settings, including by:

•

introducing a new activity test result for Aboriginal or Torres Strait Islander children to increase their access to high quality child care;

•

improving compliance options to deal with serious non-compliance by approved providers;

•

providing ongoing authority for the "child care discount for early childhood education and care workforce" measure, which allows child care providers to offer discounts to educators who have children receiving care from the provider;

•

clarifying the impact of fee discounts in prescribed events and circumstances;

•

providing discretion for additional allowable absences in exceptional circumstances; and

•

simplifying the integrity measures in place for the Higher CCS for families with multiple children rates.

Human rights implications

The Bill engages the following rights:

•

the rights of parents and children - articles 3, 18 and 27 of the Convention on the Rights of the Child (CRC);

•

the right to work - article 6(1) of the International Covenant on Economic, Social and Cultural Right (ICESCR);

•

the right to education - article 13(1) of the ICESCR;

•

the right to equality and non-discrimination, particularly on the basis of race - article 26 of the ICESCR and article 2 of the International Convention on the Elimination of All Forms of Racial Discrimination (CERD);

•

the right to protection from arbitrary or unlawful interference with privacy - article 17 of the ICESCR; and

•

minimal guarantees in criminal proceedings - articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR). .

Rights of parents and children

Article 3 of the CRC states that in all actions concerning children, the best interests of the child shall be a primary consideration. Further, article 18 of the CRC requires States Parties to take all appropriate measures to ensure that children of working parents have the right to benefit from child care services and facilities. Finally, article 27 of the CRC recognises the right of every child to a standard of living adequate for the child's physical, mental, spiritual, moral and social development.

The Bill promotes the rights of children, and the best interests of children, by providing greater subsidisation of the costs of child care. The Bill will support working parents to benefit from child care services and facilities. In particular, Schedules 1, 3, 5, 6 and 7 will increase affordability of child care for families. Schedule 1 will increase the rate of CCS for all families on incomes of less than $530,000. Schedule 5 and 6 will lower the costs of child care for families by providing for the out of pocket costs for families to be discounted or waived in certain circumstances. Schedule 7 will provide for CCS to be paid for allowable absences in more circumstances than previously, and Schedule 3 will provide for more hours of subsidised care for Aboriginal or Torres Strait Islander children.

The Bill also promotes the rights of children, and the best interests of children, by increasing access to high quality early childhood education and care. Evidence shows early childhood education and care - when delivered in a quality setting - is a key protective factor, and positively relates to children's developmental outcomes (Australian Early Development Census, 2020). In particular, Schedule 3 will increase the hours of subsidised care available for Aboriginal or Torres Strait Islander children. Schedule 3 is also intended to increase access to high quality early childhood education and care by increasing the affordability of this care.

The Bill is compatible with the rights in articles 3, 18 and 27 of the CRC because it promotes the rights of parents and children.

Right to work

Article 6(1) of the ICESCR recognises the right of everyone to the opportunity to gain their living by work and requires States Parties to take appropriate steps to safeguard this right.

Data shows that child care costs can be a barrier preventing parents, in particular secondary income earners in a couple, from entering the workplace or increasing their participation in the workforce. By reducing the costs of child care, families will have greater freedom of choice regarding their participation in the workplace. In particular, Schedules 1, 3 and 7 will increase the levels of government support available to assist parents with the costs of child care.

The Bill is compatible with the right in article 6(1) of the ICESCR because it promotes the right to work.

Right to education

Article 13(1) of the ICESCR recognises the right of everyone to education.

The Bill increases access to early childhood education by increasing the affordability of CCS. It does this in a number of ways, including by increasing the rates of CCS available for child care provided by an approved provider, and by increasing access to subsidised early childhood education for Aboriginal or Torres Strait Islander children.

The Bill is compatible with the right in article 13(1) of the ICESCR because it promotes the right to education.

Right to equality and non-discrimination

Article 26 of the ICESCR recognises that all persons are equal before the law and the right to non-discrimination on any ground, including race. Article 2 of the International Convention on the Elimination of All Forms of Racial Discrimination (CERD) requires States Parties to pursue a policy of eliminating racial discrimination in all its forms. However, under article 1(4), special measures for the sole purpose of securing adequate advancement of certain racial groups requiring protection shall not be deemed racial discrimination.

Schedule 3 of the Bill introduces a new activity test result of 36 subsidised hours of child care per fortnight for Aboriginal or Torres Strait Islander children. This will provide Aboriginal or Torres Strait Islander children with access to early childhood education per week consistent with the recommended amount for universal access to preschool, even if the individuals caring for the child do not undertake the level of activity that would otherwise entitle them to an activity test result of 36 subsidised hours of child care per fortnight.

Article 1(4) of the CERD recognises that "special measures taken for the sole purpose of securing adequate advancement of certain racial or ethnic groups or individuals requiring such protection as may be necessary in order to ensure such groups or individuals equal enjoyment or exercise of human rights and fundamental freedoms shall not be deemed racial discrimination". Schedule 3 of the Bill is intended to be a special measure to benefit a racial or ethnic group, i.e. Aboriginal or Torres Strait Islander children, as contemplated by article 1(4) of the CERD.

Access to quality early childhood education is known to reduce vulnerability and improve early childhood development. However, Aboriginal or Torres Strait Islander children are currently underrepresented in CCS, with 4.3% of children for whom CCS is received identifying as Aboriginal or Torres Strait Islander, compared with 6.1% of the birth to five years population. Similarly, two in five Aboriginal or Torres Strait Islander children are developmentally vulnerable in one or more domains when they start school compared to one in five non-Indigenous children (Australian Early Development Census, 2021).

Additional protective steps are therefore required to ensure that Aboriginal or Torres Strait Islander children are given equal enjoyment or exercise of human rights and fundamental freedoms. Improved affordability and access to subsidised quality early childhood education is intended to address developmental gaps identified in the Australian Early Development Census. It is therefore a special measure under article 1(4) of the CERD that does not constitute racial discrimination and promotes the right to equality and non-discrimination, in particular on the basis of race.

The Bill is compatible with the right in article 26 of the ICESCR and article 2 of the CERD because it promotes the right to equality and non-discrimination on the basis of race.

Right to protection from arbitrary or unlawful interference with privacy

Article 17 of the ICESCR recognises the right of everyone to the protection of the law against arbitrary or unlawful interference with their privacy.

Schedule 2 of the Bill introduces a mandatory reporting regime requiring large child care providers to report certain financial information to the Secretary of the Department of Education. The vast majority of the large child care providers that will be required to comply with the new regime will be body corporates, and some may be body politics. However, it is also possible that an individual operating as a sole trader may become a large child care provider.

In addition, Schedule 2 of the Bill provides for the publication of certain information relating to approved providers, including information collected under the new mandatory reporting regime. Some approved child care providers are individuals operating as a sole trader. The matters that may be published are:

•

the provider's name;

•

the provider's ABN;

•

the names of child care services the provider operates;

•

information about fees that the provider charges and the increases in such fees;

•

financial information collected under the mandatory reporting regime for large child care providers; and

•

further matters prescribed in the Child Care Subsidy Minister's Rules 2017 (Minister's Rules).

The right to protection from interference with privacy under article 17 may be limited where the limitation is lawful and not arbitrary and where it is reasonable, necessary and proportionate to achieving a legitimate objective. The Bill limits the right to protection from interference with privacy in that it allows for personal information to be published online in certain circumstances.

The Bill's limitation of the right to protection from interference with privacy is aimed at achieving the legitimate objective of increasing transparency within the child care sector and assisting families to make informed choices about child care services for their children. This transparency will facilitate parents being able to choose child care for their child that is safe, of a high quality and affordable. The information that may be published under the new power is information that is relevant and helpful for informing these decisions. Aside from the individual's name, only information about the individual's business life will be published, not any information about the individual's personal or private life. No sensitive information will be published under this new provision.

To the extent that the Bill also allows further matters prescribed in the Minister's Rules to be published, any Minister's Rules made for this purpose will be subject to parliamentary scrutiny and are subject to disallowance if the Senate considers it appropriate. This will allow there to be appropriate consideration of whether any further limitations on the right to protection from interference with privacy are reasonable, necessary and appropriate.

The Bill is therefore compatible with the right in article 17 of the ICESCR because to the extent that it limits the right to protection from interference with privacy, those limitations are reasonable, necessary and proportionate to achieve a legitimate end.

Rights and minimal guarantees in criminal proceedings

Articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR) recognise certain rights and minimal guarantees in criminal proceedings. Civil penalty provisions may engage criminal process rights under articles 14 and 15 of the ICCPR regardless of the distinction between criminal and civil penalties in domestic law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a "criminal" penalty for the purposes of articles 14 and 15 of the ICCPR.

Schedule 2 of the Bill contains a new civil penalty provision for a failure to comply with a new mandatory reporting regime for large child care providers. This allows the Department of Education to enforce compliance with the reporting requirements by pursuing financial penalties rather than through prosecuting criminal offences.

The penalties could be characterised as regulatory in nature as they primarily seek to deter non-reporting and misreporting, and aim to encourage compliance with the new regime. Further, the penalties are restricted to people in a specific regulatory context, rather than being directed to the public at large.

Lastly, the nature of the penalties is proportionate to the size of the industry being regulated, which means that they are not so severe or high as to be considered 'criminal'. The persons who may be subject to a civil penalty under the amendments in Schedule 2 are large child care providers who either:

•

operate 25 or more approved child care services;

•

operate 25 or more approved child care services together with a related provider; or

•

propose to operate 25 or more approved child care services either by themselves or together with a related provider.

Accordingly, they will be large businesses with considerable resources. The penalties are therefore proportionate to the size and resource level of the providers being regulated. The maximum penalty is set at an appropriate level to ensure the penalties retain a deterrent effect for large businesses without being overly punitive.

Accordingly, the civil penalty provisions in the Bill should not be considered "criminal" for the purposes of international human rights law. The Bill is therefore compatible with articles 14 and 15 of the ICCPR because it does not engage those rights.

Conclusion

The Bill is compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

Notes on Clauses

Clause 1: Short title

1. This is a formal provision specifying the short title of the Act.

Clause 2: Commencement

2. The table in this clause sets out the commencement date for when each of the Bill's provisions commence.

3. Sections 1 to 3 of the Bill will commence on the day the Bill receives Royal Assent.

4. Part 1 of Schedule 1 will commence on 1 July 2023.

5. Part 2 of Schedule 1 will commence on the day after the Bill receives Royal Assent.

6. Schedules 2 and 3 will commence on 1 July 2023.

7. Part 1 of Schedule 4 will commence on the day after the Bill receives Royal Assent.

8. Parts 2 and 3 of Schedule 4 will commence on 1 July 2023.

9. Schedule 5 will commence on 1 January 2023 or the day after the Bill receives Royal Assent, whichever is later.

10. Part 1 of Schedule 6 will commence at the same time as Schedule 5.

11. Part 2 of Schedule 6 will commence immediately after Schedule 5.

12. Schedules 7 and 8 will commence the day after the Bill receives Royal Assent.

Clause 3: Schedules

13. This clause gives effect to the provisions in the Schedules to the Bill.

Schedule 1 - Child care subsidy rates

A New Tax System (Family Assistance) Act 1999

Part 1 - Main amendments

14. Part 1 of Schedule 1 to the Bill will reduce the cost of child care for all families earning an adjusted taxable income of $530,000 or less by increasing the rate of subsidy to which they are entitled.

Items 1 to 10: Subsection 3(1); Schedule 3(1) (definition of fourth income threshold ); Subsection 3(1); Subsection 3(1) (definition of lower income threshold ); Subsection 3(1); Subsection 3(1) (definition of second income threshold ); Subsection 3(1); Subsection 3(1) (definition of third income threshold); Subsection 3(1); Subsection 3(1) (definition of upper income threshold )

15. Items 1 to 10 amend or repeal definitions of "income thresholds" that appear throughout subsection 3(1) of the Family Assistance Act.

16. These amendments help give effect to the new higher CCS rates.

17. Items 2, 4, 6, 8 and 10 repeal several definitions ("fourth income threshold", "lower income threshold", "second income threshold", and "third income threshold" respectively), which are now being replaced with new definitions.

18. Items 3 and 9 insert new definitions ("lower income (base rate) threshold" and "upper income (base rate) threshold" respectively), which are now used for the purposes of clause 3 of Schedule 2 to give effect to new higher CCS rates.

19. Items 1, 3, 5, 7 and 9 insert several new definitions ("fourth income (other rate) threshold", "lower income (other rate) threshold", "second income (other rate) threshold", "third income (other rate) threshold" and "upper income (other rate) threshold" respectively), which are now used for the purposes of clause 3A of Schedule 2 to give effect to CCS rates for second and further children in families that have more than one child under the age of 6 in care.

Item 11: Subclause 3(1) of Schedule 2 (table)

20. Item 11 amends the table of "applicable percentages" at subclause 3(1) of Schedule 2.

21. Item 11 helps give effect to new higher CCS rates by modifying the "applicable percentages" that determine the percentage at which their CCS is payable. In general, CCS is calculated by multiplying the sum of the hourly session fees for the week by the applicable percentage. However, it is also subject to the hourly rate cap, which determines the maximum hourly fee that CCS can be calculated from, and the activity test result, which determines how many hours subsidised care per fortnight the individual is entitled to receive. There are also higher applicable percentages available for those eligible for ACCS.

22. The applicable percentage depends on an individual's adjusted taxable income for the income year in which the child care subsidy fortnight starts. Generally, the lower an individual's income, the higher their applicable percentage, and vice versa.

23. Previously, an individual's applicable percentage was determined with reference to the second, third and fourth income thresholds, which will be repealed and replaced with a simpler system, with a single taper down from the lower income (base rate) threshold to the higher income (base rate) threshold.

24. The new table at subclause 3(1) of Schedule 2 provides that:

a.

If an individual's adjusted taxable income is equal to, or lower than, the "lower income (base rate) threshold", the applicable percentage is 90%.

b.

If an individual's adjusted taxable income is above the "lower income (base rate) threshold", but below the "upper income (base rate) threshold", the applicable percentage can be worked out using the formula at subclause 3(2) of Schedule 2.

c.

If an individual's adjusted taxable income is equal to, or above, the "upper income (base rate) threshold", the individual is entitled to receive 0% of the applicable hourly child care subsidy rate. In other words, these individuals are not entitled to any CCS.

25. Previously, in most circumstances, the maximum CCS rate an individual was entitled to receive was 85%. This percentage has now been raised to 90%.

26. This means that individuals earning equal to or less than the lower income (base rate) threshold will now be entitled to higher CCS rates than under the previous system. For example, for a family earning a household income of $75,000 in 2023-24, CCS will generally cover 90% of their child care fees.

Item 12: Subclause 3(2) of Schedule 2 (formula)

27. Item 12 amends the formula used to determine an individual's applicable percentage for the purposes of item 2 of the table at subclause 3(1) of Schedule 2.

28. In other words, if an individual's adjusted taxable income is above the lower income (base rate) threshold, but below the upper income (base rate) threshold, then the individual's applicable percentage is determined using this new formula.

29. Using this new formula, the individual's applicable percentage is worked out by:

a.

subtracting the lower income (base rate) threshold from the individual's adjusted taxable income;

b.

dividing that amount by $5,000; and

c.

subtracting the result from 90.

30. The effect of this amendment is that for individuals earning more than the lower income (base rate) threshold, but below the upper income (base rate) threshold, the applicable percentage will go down by 1% for every $5,000 above the lower income (base rate) threshold they earn.

31. For example, for a family earning a household income of $180,000 in the 2022/23 financial year, CCS will generally cover 70% of their child care fees. This is because the lower income (base rate) threshold in 2022-23 is $80,000. If you subtract $80,000 from $180,000 and divide by $5,000, you get 20. The applicable percentage is therefore 20 subtracted from 90, or 70%.

Item 13: Subclause 3(3) of Schedule 2

32. Item 13 is a minor technical amendment that removes a reference to the "fourth income threshold" which is being repealed from the legislation.

Item 14: Subclause 3(4) of Schedule 2

33. Item 14 amends subclause 3(4) of Schedule 2 to help give effect to the new higher rates of CCS.

34. The lower income (base rate) threshold (previously known as the lower income threshold) has been raised from $65,710 (plus indexation) to $80,000.

35. This means that more families will fall under the lower income threshold and will be entitled to the highest applicable percentage for their CCS entitlement, which is 90%.

36. The upper income (base rate) threshold (previously known as the upper income threshold) has been raised from the lower income threshold plus $284,290, to the lower income (base rate) threshold plus $450,000.

37. This means that more families will fall below the upper income threshold and will be entitled to receive CCS, whereas previously they may not have received any CCS at all.

38. Item 14 also adds a note after the definition of "lower income (base rate) threshold" indicating that typically, this amount will be indexed annually in line with Consumer Price Index increases, but that in 2023, it will not be indexed. Indexation is dealt with under items 19 to 21 below.

Items 15 to 17: Subclause 3A(1) to (5) of Schedule 2; At the end of subclause 3A(1) of Schedule 2; Subclauses 3A(2) to (5) of Schedule 2

39. Items 15, 16 and 17 amend subclauses 3A(1) to (5) of Schedule 2 to help give effect to the rates of CCS that apply to families that have more than one child under six years old in child care.

40. This is done by identifying one or more children defined in clause 3B(1) of Schedule 2 as a "higher rate child" of the individual , who will attract a higher applicable percentage than the individual's other children (whose applicable percentage will be worked out as usual under clause 3). Generally, the higher rate child will be the second or further child under six years of age.

41. Item 16 adds new paragraph 3A(1)(c), which provides that for the higher applicable percentage to apply, the individual's adjusted taxable income must be below the upper income (other rate) threshold, among other things.

42. Item 16 also adds a note which clarifies that, if the individual's adjusted taxable income is equal to or above the upper income (other rate) threshold, then the individual's applicable percentage will be determined as usual under clause 3 of Schedule 2. This is to reflect that individuals who receive over the upper income (other rate) threshold will not be entitled to a higher rate for their second and further child - they will receive the base rate in clause 3 for all of their children.

43. Items 15 and 17 amends subclause 3A(1) to (5) to set out the new method for determining the applicable percentage for a higher rate child.

44. New subclause 3A(2) clarifies that, if an individual's applicable percentage would be higher if worked out under clause 3 rather than clause 3A, then the individual's applicable percentage will be applicable percentage worked out under clause 3 (that is, the higher applicable percentage). This subclause is enacted because it is possible that, after many years, indexation could cause the thresholds to change such that the base rate is actually higher than the other rate for individuals in certain narrow income ranges. If this occurs, then the individuals in those income ranges will receive the "base rate" (actually the higher rate) rather than the "other rate" for all of their children due to subclause 3A(2).

45. New subclause 3A(3) sets out a table which determines the individual's applicable percentage for their higher rate child:

a.

If the individual's adjusted taxable income is equal to or below the lower income (other rate) threshold, the applicable percentage for higher rate children is 95%.

b.

If the individual's adjusted taxable income is above the lower income (other rate) threshold and below the second income (other rate) threshold, the applicable percentage for higher rate children will be worked out using the formula at subclause 3A(4).

c.

If the individual's adjusted taxable income is equal to or above the second income (other rate) threshold and below the third income (other rate) threshold, the applicable percentage for higher rate children is 80%.

d.

If the individual's adjusted taxable income is equal to or above the third income (other rate) threshold and below the fourth income (other rate) threshold, the applicable percentage for higher rate children will be worked out using the formula at subclause 3A(5).

e.

If the individual's adjusted taxable income is equal to or above the fourth income (other rate) threshold and below the upper income (other rate) threshold, then the applicable percentage for higher rate children is 50%.

46. New subclause 3A(4) sets out the formula for working out an individual's applicable percentage for their higher rate child if their adjusted taxable is above the lower income (other rate) threshold and below the second income (other rate) threshold.

47. The individual's applicable percentage for their higher rate child will be either 95%, or the result of the following process, whichever is lower:

a.

subtracting the lower income (other rate) threshold from the individual's adjusted taxable income;

b.

dividing that amount by $3,000; and

c.

subtracting the result from 115 and rounding to two decimal places.

48. In other words, the applicable percentages taper down by 1 percent for every additional $3,000 over the lower income (other rate) threshold the individual earns.

49. New subclause 3A(5) sets out the formula for working out an individual's applicable percentage for their higher rate child if their adjusted taxable income is equal to or above the third income (other rate) threshold and below the fourth income (other rate) threshold.

50. Using this new formula, the individual's applicable percentage is worked out by:

a.

subtracting the third income (other rate) threshold from the individual's adjusted taxable income;

b.

dividing that amount by $3,000; and

c.

subtracting the result from 80 and rounding to two decimal places.

51. In other words, the applicable percentages taper down by 1 percent for every additional $3,000 over the third income (other rate) threshold the individual earns.

52. New subclause 3A(6) sets out the new income thresholds for the purposes of working out an individual's applicable percentage for their higher rate child. These are:

a.

The lower income (other rate) threshold, which is $72,466. The note also clarifies that this amount will be indexed annually in line with increases of the Consumer Price Index, as per Schedule 4.

b.

The second income (other rate) threshold, which is the lower income (other rate) threshold plus $105,000.

c.

The third income (other rate) threshold, which is the lower income (other rate) threshold plus $184,290.

d.

The fourth income (other rate) threshold, which is the lower rate (other income) threshold plus $274,290.

e.

The upper income (other rate) threshold, which is the lower rate (other income) threshold plus $284,290.

53. Overall, the effect of this amendment is that, generally, for higher rate children, the applicable percentage will start at 95%. It will start tapering down at the point where the formula in subclause 3A(4) meets 95% until it reaches the second income (other rate) threshold. It will then continue straight at 80% until it reaches the third income (other rate) threshold, then taper down to the fourth income (other rate) threshold. It will then continue straight at 50% until the upper income (other rate) threshold, at which point it joins the base rate.

54. For example, for a family earning $60,000 in 2022-23 with two children under the age of 6, CCS will cover 90% of their fees for their first child, and 95% of their fees for their second child.

Item 18: Subclause 13(2)(b)

55. Item 18 is a minor consequential amendment that removes the reference to the "lower income threshold" from subclause 13(2)(b) and replaces it with "lower income (base rate) threshold".

56. This amendment is necessary because the term "lower income threshold" is being removed from the legislation. Instead, the new "lower income (base rate) threshold" will be used to work out whether the "low income result" applies to an individual.

57. The "low income result" is one of several possible "activity test results". An individual's activity test result determines how many hours of subsidised care that individual is entitled to in a fortnight. The low income result has the effect that, even if a family's activity level is very low, they can still access up to 24 hours of subsidised care per fortnight due to their low income. Due to these changes, more families will be able to benefit from the low income test result.

Item 19: Clause 2 of Schedule 4 (table item 18)

58. Item 19 removes the reference to the "lower income threshold" from the item 18 of the table at clause 2 of Schedule 4 and replaces it with the "lower income (base rate) threshold" at table item 18 and the "lower income (other rate) threshold" at table item 18A.

59. The effect of this amendment is that the lower income (base rate) threshold, which is used to work out an individual's applicable percentage of child care subsidy, and the lower income (other rate) threshold, which is used to work out an individual's applicable percentage of CCS for their higher rate child, will be indexed in accordance with the table at clause 3 of Schedule 4.

Item 20: Subclause 3(1) of Schedule 4 (table item 18)

60. Item 20 removes the reference to the "lower income threshold" from the item 18 of the table at subclause 3(1) of Schedule 4 and replaces it with the "lower income (base rate) threshold" at table item 18 and the "lower income (other rate) threshold" at table item 18A.

61. The effect of this amendment is that the lower income (base rate) threshold, which is used to work out an individual's applicable percentage of child care subsidy, and the lower income (other rate) threshold, which is used to work out an individual's applicable percentage of child care subsidy for their higher rate child, will be indexed on the first child care subsidy fortnight of the income year using the method provided at subclause 4(2) of Schedule 4.

62. This amendment is necessary because amounts that are not indexed can erode over time due to inflation. For example, $100 in 2020 stretched further than $100 does in 2022.

63. These amendments ensure that the lower income thresholds are indexed so that, as prices and wages rise over time, the thresholds for child care subsidy rise commensurately, rather than eroding away over time.

Item 21: Clause 3 of Schedule 4

64. Item 21 adds new subclause 3(9) to Schedule 4.

65. This new subclause provides that the lower income (base rate) threshold is not to be indexed on the first day of the first child care subsidy fortnight of the income year starting on 1 July 2023. This amendment will ensure that the transition to new child care subsidy rates is as smooth as possible.

66. Without this amendment, the lower income (base rate) threshold would be indexed less than a fortnight after it came into effect. This amendment ensures that the lower income (base rate) threshold will stay at $80,000 for slightly over a year before being indexed for the first time.

Item 22 - Application of amendments

67. Item 22 is an application provision that provides that the amendment made by this Schedule to the Bill will apply in relation to sessions of care provided during CCS fortnights that begin on or after 1 July 2023, meaning that the amendments will begin to apply from the CCS fortnight which starts on 10 July 2023. CCS entitlements are calculated in respect of a particular fortnight, so it is impractical to change the requirements midway through a fortnight.

Part 2 - Other amendments

68. In 2021, the Family Assistance Legislation Amendment (Child Care Subsidy) Act 2021 (2021 Amendment Act) passed both houses of Parliament and received Royal Assent. Part 2 of Schedule 2 to the 2021 Amendment Act is yet to commence. The 2021 Amendment Act made child care cheaper for families with multiple children under six years of age who are eligible for CCS by introducing higher CCS rates for the second and younger children (Higher CCS for families with multiple children). It also included integrity measures to ensure that the higher rates could only be accessed where both children are actually receiving care.

69. Implementing the 2021 Amendment Act in full would have introduced an unnecessary complexity around entitlement to the Higher CCS.

70. The amendments in this Schedule to the Bill will simplify the integrity measures that apply to the Higher CCS for families with multiple children, while still ensuring that there are appropriate integrity measures to ensure that Higher CCS is only available where multiple children in the family are receiving care.

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

Item 23: Paragraph 67CC(2)(d)

71. Item 23 amends paragraph 67CC(2)(d) to the Family Assistance Administration Act.

72. Previously, paragraph 67CC(2)(d) permitted the Secretary to cease an individual's determination of eligibility under subsection 67CC(1) if a session report had not been given to the Secretary for the child for at least 26 consecutive weeks. A determination of eligibility is necessary to qualify for CCS payments.

73. This amendment adds "in relation to which the individual is the claimant" after "session of care", which has the effect that, when the Secretary is considering ceasing a determination of eligibility under subsection 67CC(2), the Secretary will only look at whether the child has received sessions of care for which that relevant individual is the claimant. It would not matter whether or not the child received care for which another individual was receiving CCS.

74. This clarifies the policy intent and aligns the legislation with the administration of this provision within the CCS system.

Item 24: Application of amendments

75. Item 24 is an application provision that clarifies that this new provision may be relied on even if the weeks where the child did not receive care occurred prior to commencement. This means that the new version of the cessation power can be exercised from commencement.

Family Assistance Legislation Amendment (Child Care Subsidy) Act 2021

Item 25: Part 2 of Schedule 2

76. Item 25 repeals Part 2 of Schedule 2 to the 2021 Amendment Act, which contained phase 2 of the Higher CCS for families with multiple children measure. Phase 2 was to commence on 1 July 2023 and provided that families will receive the higher rate of CCS for a child as long as an older child under six years old attended a session of care in the last 14 weeks.

77. Phase 2 is being removed as the benefits did not outweigh implementation costs.

Schedule 2 - Reporting of certain financial information by large child care providers

78. The amendments in Schedule 2 to the Bill will improve transparency in the child care sector by requiring large child care providers to give reports to the Secretary including certain financial information. In addition, they will introduce a new provision authorising the Secretary to publish certain information about any approved child care provider by electronic means.

79. These amendments will assist parents to make more informed choices about which child care service to send their children to.

80. Previously, the Family Assistance Administration Act contained a financial viability scheme that applied to large centre-based day care providers. The concept of a large centre-based day care provider will be replaced by the new term "large child care provider" to ensure that providers who operate many services are required to give financial reports, regardless of the type of service they operate. This will include a provider operating many services, whether in one or a mixture of service types.

81. Part 1 of this Schedule introduces the new financial reporting obligation for large child care provider and makes a number of technical or consequential changes. Part 2 of this Schedule introduces the Secretary's power to publish certain information about approved providers, including financial information collected under the new reporting obligation.

82. This Schedule commences on 1 July 2023.

Part 1 - Reporting of certain financial information by large child care providers

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

Items 1 and 2: Subsection 3(1) (definition of large centre-based day care provider ); Subsection 3(1)

83. Items 1 and 2 of this Schedule to the Bill repeal the definition of "large centre-based day care provider" and introduce a new definition for "large child care provider".

84. Previously, Division 4 of Part 8A of the Family Assistance Administration Act contained a financial viability scheme that applied to large centre-based day care providers. In determining whether a provider was a "large centre-based day care provider", only the number of centre-based day care services that the provider operated was relevant. No other types of services, such as outside hours school care and family day care, were taken into account.

85. This Schedule will remove the concept of a "large centre-based day care provider" and introduce the new concept of a "large child care provider". The definition, which is added by item 4 below, is similar, but all types of approved child care services will be taken into account, not just those that are centre-based day care services.

Items 3 and 4: Section 4A (heading); Subsection 4A(1)

86. Section 4A previously set out the definition of a "large centre-based day care provider" but following these amendments will be used to set out the definition of a "large child care provider".

87. Item 3 repeals the heading of section 4A, which used the term "large centre-based day care provider", and replaces it with the new heading "Meaning of large child care provider". This is to reflect the change in focus to large child care providers regardless of the type of service they operate.

88. Item 4 repeals subsection 4A(1), which defined "large centre-based day care provider" and replaces it with a new subsection 4A(1) defining "large child care provider".

89. New subsection 4A(1) provides that a provider is a "large child care provider", for a financial year, if, for part of that financial year, the provider operates 25 or more approved child care services, or proposes to operate 25 or more child care services. A provider is also a large child care provider if the provider is one of 2 or more related providers that operate 25 or more approved child care services or propose to.

90. This means that a provider will be a large child care provider if, for example, they operate 25 outside school hours care services, or if they operate 10 centre-based day care services and 15 outside school hours care services. It also means that a provider would be a large child care provider if, for example, the provider is currently approved to operate 23 child care services, but has a pending application to add two further child care services to its approval. A provider would also be a large child care provider if it operates 15 child care services, and has a subsidiary that operates 12 further child care services.

91. The new definition is expressed in very similar terms to the previous definition, but removes all references to "centre-based day care services". This is to ensure that all services are taken into account in assessing the size of the provider. The concept of a "related provider" is not being changed.

Items 5 to 9 and 12: Paragraph 194C(e); Division 4 of Part 8A (heading); 203A (heading); Paragraph 203A(1)(a); Section 203B; Section 204J

92. Items 5 to 9 and 12 of this Schedule are technical amendments to change the terminology of "large centre-based day care provider" to "large child care provider". These amendments are made as a consequence of the amendment to section 4A (see items 3 and 4 above).

Item 10: After section 203B

93. Item 10 of this Schedule introduces section 203BA, which is the new reporting obligation for large child care providers.

94. Subsection 203BA(1) provides that a large child care provider must report to the Secretary.

95. Subsection 203BA(2) sets out the requirements for the report, including that it is given in the form approved by the Secretary, and must include the financial information prescribed by the Minister's Rules. By default, a report must be given for each financial year (subparagraph 203BA(2)(b)(i)) and within 3 months after the end of that period (subparagraph 203BA(2)(c)(i)). Sections 2G and 36 of the Acts Interpretation Act 1901 clarify how this is calculated. This would mean that a report would cover the period 1 July to 30 June of the following financial year, and be due immediately before 1 October of the latter year. However, the provision also allows for the Minister's Rules to prescribe a different period for the period covered by the report, and for the giving of the report (subparagraphs 203BA(2)(b)(ii) and (c)(ii)). This will allow the department the opportunity to review the reporting requirement and make amendments to ensure that the regulatory burden is commensurate to the value of the reports in improving transparency in the sector. Any Minister's Rules made under subparagraphs 203BA(2)(b)(ii) or (c)(ii) will be disallowable instruments that must be tabled in Parliament and subject to scrutiny by the Senate Standing Committee for the Scrutiny of Delegated Legislation. They may be disallowed if the Senate considers it appropriate to disallow them. This means that there will be appropriate parliamentary oversight of any Minister's Rules that change the period the reports will cover and when they must be provided by.

96. It is envisioned that the kinds of financial information that may be required to be included in a report would include matters such as the provider's net revenue for the period, net profit for the period and the amount of expenditure that is attributable to rental costs.

97. Subsection 203BA(3) provides that, if a large child care provider does not comply with the reporting obligation, the department may bring civil penalty proceedings against them. The penalty could be up to 60 penalty units. However, Part 4 of the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory Powers Act) applies to civil penalty provisions in the Family Assistance Administration Act (see section 219VA). This means that under paragraph 82(5)(a) of the Regulatory Powers Act, the penalty for a body corporate could be up to 300 penalty units. In the 2022-2023 financial year, the value of a penalty unit was $222.

98. The value of the penalty for this provision is consistent with the penalty for the majority of civil penalty provisions in the Family Assistance Administration Act, which are of a similar level of seriousness to this provision. It has been chosen with regard to importance of benchmarks and the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers published by the Attorney-General's Department and available in 2022 at: https://www.ag.gov.au/legal-system/publications/guide-framing-commonwealth-offences-infringement-notices-and-enforcement-powers.

99. Subsection 203BA(4) is a constitutional basis provision. It provides that, in addition to section 85BA of the Family Assistance Act, the section also has the effect it would have if it only applied to large child care providers that are also constitutional corporations. This is to provide additional clarification of the constitutional basis for the provision.

Item 11: Section 203C

100. Item 11 amends section 203C of the Family Assistance Administration Act. Prior to these amendments, section 203C gave the Secretary the power to engage an auditor to audit a provider if the Secretary had concerns about the financial viability of an approved provider on the basis of information received under section 203A.

101. This amendment expands section 203C so that the Secretary may also engage an auditor if the Secretary has concerns on the basis of information received under the new reporting obligation. This is to ensure that, if the financial reports received under the new reporting obligation contain information suggest that a provider may not be financially viable, the department may take proactive steps to avoid an adverse impact on the sector and on families who rely on care.

Part 2 - Publication of certain financial information given by large child care providers

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

Item 13: Subsection 3(1)

102. Item 13 introduces a definition for "ABN" into the definitions section of the Family Assistance Administration Act. It provides that "ABN", which is short for Australian Business Number, has the same meaning as in section 41 of the A New Tax System (Australian Business Number) Act 1999. This is consistent with the ordinary usage of the term ABN in business contexts.

103. This definition is needed because new section 162B, inserted by item 14 below, will give the Secretary the power to publish information about a provider, including the provider's ABN.

Item 14: After section 162A

104. Item 14 introduces new section 162B into the Family Assistance Administration Act.

105. New section 162B gives the Secretary the power to publish certain information about an approved provider online. It is envisioned that this information may be published on www.startingblocks.gov.au, which is administered by the Australian Children's Education and Care Quality Authority (ACECQA) on behalf of the Commonwealth and state and territory governments to make it easier for parents to make informed decisions about what child care services to use.

106. The information that may be published online includes the provider's name, ABN, the names of their child care services, information about the fees they charge that is collected under the family assistance law, any increases in fees over time and any other information prescribed by the Minister's Rules.

107. For an approved provider that already operates 25 or more child care services (whether by itself or with a related provider), the Secretary may also publish financial information collected through a report under the new reporting obligation in section 203BA (introduced by item 10 above).

108. The power to prescribe additional information that may be published in the Minister's Rules is included to provide the department with some flexibility in case it becomes clear that further transparency is needed. This may, for instance, include information about particular expenses, acting as cost-drivers for child care fees, where it is the public interest for this to be made transparent for families. Any Minister's Rules made under section 162B(1)(g) will be disallowable instruments that must be tabled in Parliament and subject to scrutiny by the Senate Standing Committee for the Scrutiny of Delegated Legislation. They may be disallowed if the Senate considers it appropriate to disallow them. This means that there will be appropriate parliamentary oversight of any Minister's Rules prescribing further information that may be published.

109. Subsection 162B(2) is a formal provision that clarifies that the publication of information under subsection 162B(1) is authorised by law for the purpose of the Privacy Act 1988 and any law of a State or Territory in relation to privacy.

110. Subsection 162B(3) is a constitutional basis provision. It provides that, in addition to section 85BA of the Family Assistance Act, section 162B also has the effect it would have if it only applied to approved providers that are also constitutional corporations. This is to provide additional clarification of the constitutional basis for the provision.

Schedule 3 - Activity test for Aboriginal or Torres Strait Islander children

111. The amendments in this Schedule to the Bill will provide for an activity test result of at least 36 for Aboriginal or Torres Strait Islander children. The activity test result for an individual determines the maximum number of hours of CCS subsidised care the individual is able to access in each CCS fortnight. The CCS income test will continue to apply to determine the CCS percentage payable for any subsidised hours of care, that is, families would still be required to pay gap fees for subsidised hours in accordance with their income level.

112. Access to quality early childhood education is known to reduce vulnerability and improve early childhood development. However, Aboriginal or Torres Strait Islander children are currently underrepresented in CCS, with 4.3% of children for whom CCS is received identifying as Aboriginal or Torres Strait Islander, compared with 6.1% of the birth to five years old population. Similarly, two in five Aboriginal or Torres Strait Islander children are developmentally vulnerable in one or more domains when they start school, compared to one in five non-Indigenous children (Australian Early Childhood Development Census, 2021).

113. This measure aims to address the developmental gap between Aboriginal or Torres Strait Islander children and non-Indigenous children by giving all Aboriginal or Torres Strait Islander children access to early childhood education that is consistent with the recommended amount for universal access to preschool.

A New Tax System (Family Assistance) Act 1999

Item 1: Subsection 3(1)

114. Item 1 amends subsection 3(1) of the Family Assistance Act, which contains the definitions used in the Family Assistance Act. It inserts new definitions for the terms "Aboriginal or Torres Strait Islander child", "Aboriginal or Torres Strait Islander child result" and "Aboriginal or Torres Strait Islander person".

115. These terms are used to determine who is eligible for the new Aboriginal or Torres Strait Islander child activity test result under new clause 15A of Schedule 2 to the Family Assistance Act, which is inserted by item 3 below. The definitions added by this item provide cross-references to where the full definitions may be found in new clause 15A.

Item 2: Subclause 11(1) of Schedule 2 (at the end of the table)

116. Item 2 inserts a new row into the table at subclause 11(1) of Schedule 2 to the Family Assistance Act.

117. The table sets out the different activity test results that may apply to an individual. The activity test result the individual is entitled to is the highest result in the column of the table that applies to the individual in respect of a child. There are separate columns for CCS, ACCS (transition to work) and the other three forms of ACCS.

118. This new row states that the Aboriginal or Torres Strait Islander child result in clause 15A may also apply to individuals receiving CCS or ACCS (transition to work) in respect of a child. The other forms of ACCS are not included as the first item of the table sets out an activity test result of 100 for other types of ACCS. The Aboriginal or Torres Strait Islander child activity test result is 36, which will never be higher than 100. It is therefore unnecessary to insert it into the column for the other types of ACCS.

Item 3: At the end of Division 1 of Part 5 of Schedule 2

119. Item 3 inserts new clause 15A, which sets out the new Aboriginal or Torres Strait Islander child result and when it applies.

120. Subclause 15A(1) provides that the "Aboriginal or Torres Strait Islander child result" is 36. This means that those to whom the result applies will be able to access at least 36 hours per CCS fortnight of CCS-subsidised care. They will be able to access more than 36 hours if there is a higher activity test result in the table in clause 11(1) of Schedule 2 to the Family Assistance Act that applies to them.

121. Subclause (2) sets out when the Aboriginal or Torres Strait Islander child result applies. It states that the result applies to an individual for a CCS fortnight if:

a.

the individual is eligible for CCS for the child in the fortnight;

b.

the child is an Aboriginal or Torres Strait Islander child; and

c.

the Secretary has been notified that the child is an Aboriginal or Torres Strait Islander child. The notification must be in the manner approved by the Secretary.

122. The conditions for the individual to be eligible for CCS for the child are set out in section 85BA of the Family Assistance Act and include that the child must be an FTB child or regular care child of the individual or the individual's partner (which requires the child to be in the care of the individual or their partner for a certain proportion of time) and that the individual or the individual's partner has a liability to pay for care in respect of the child.

123. Notifying the Secretary that a child is an Aboriginal or Torres Strait Islander child will be optional, but the activity test result will not be available unless the Secretary has been notified.

124. Subclause (3) defines an "Aboriginal or Torres Strait Islander child". There are three ways a child may be an Aboriginal or Torres Strait Islander child. The first is where the child meets the three part test of descent, identification and community acceptance as set out in paragraph (a). The second is where the child is biologically related to an Aboriginal or Torres Strait Islander person, whether or not the child is in the care of an Aboriginal or Torres Strait Islander person. This enables the inclusion of children who may be too young to have formed a sense of cultural identity. The third is where the child is a member of a class prescribed by the Minister's Rules. This is to provide some flexibility to expand the definition in case it is identified as being too narrow.

125. Subclause (4) defines an "Aboriginal or Torres Strait Islander person" as someone who meets the three part test of descent, identification and community acceptance.

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

Item 4: At the end of section 67FB

126. Item 4 inserts a new subsection into section 67FB of the Family Assistance Administration Act. Section 67FB imposes a notification requirement on individuals. It requires them to notify the Secretary of events that may affect their eligibility for CCS or ACCS.

127. The new subsection (4) will clarify that there is no obligation to notify the Secretary that the child is an Aboriginal or Torres Strait Islander child. Notification of Aboriginal or Torres Strait Islander status is optional, although, without notification, the Aboriginal or Torres Strait Islander activity test result cannot be applied in respect of a child.

Item 5 to 7: Paragraph 105C(1)(b)

128. Items 5 to 7 amend paragraph 105C(1)(b). Section 105C of the Family Assistance Administration deals with the timing of increases to entitlement on internal review. The general principle that underlies section 105C(1)(b) is that if an individual is late to notify the department of a matter that would increase their entitlement, they may only receive backpay for at most 4 weeks prior to that notification. This creates an incentive to notify, and an appropriate limit on how much backpay the Commonwealth may be liable to pay.

129. The same principle is intended to apply to Aboriginal or Torres Strait Islander status. That is, if a person has been receiving CCS in respect of an Aboriginal or Torres Strait Islander child, but only notifies the Secretary on a particular day, they can only be backpaid for the additional amount they could have received up to the start of a CCS fortnight that is no more than 4 weeks prior to the notification.

130. Subsection 105C(1) previously applied where there was an obligation to notify the Secretary of a matter under subparagraph 105C(1)(b)(i). There is no obligation to notify of Aboriginal or Torres Strait Islander status under section 67FB (see item 4 above) so an additional subparagraph was needed to ensure that section 105C also applies to a notification of Aboriginal or Torres Strait Islander status.

Item 8: Application of amendments

131. Item 8 is an application provision that provides that this amendment will apply to sessions of care provided during CCS fortnights that begin on or after 1 July 2023, meaning that the amendments will begin to apply from the CCS fortnight which starts on 10 July 2023. CCS entitlements are calculated in respect of a particular fortnight, so it is impractical to change the factors that affect entitlement midway through a CCS fortnight.

Item 9: Application of amendments

132. Item 9 empowers the Minister to make transitional rules relating to amendments made by this Schedule 3. This may be used where existing administrative data could be drawn upon to apply the new activity test result in respect of some individuals, removing the need for a separate Secretary notification from these individuals. Such rules are a legislative instrument for the purposes of the Legislation Act 2003.

133. Subitem (2) is a technical provision that provides that the transitional rules made under this item may not create an offence or civil penalty, confer certain regulatory powers, impose a tax, appropriate an amount from the Consolidated Revenue Fund, or directly amend the text of an Act.

Schedule 4 - Dealing with serious non-compliance

134. This Schedule contains measures that will strengthen the payment integrity of the CCS scheme.

135. Increases to CCS rates, set out in Schedule 1 to the Bill, will increase the Commonwealth's spending on child care and make fraud within the sector more attractive. The amendments in Schedule 4 to the Bill are aimed at managing this risk and will ensure families enjoy cheaper child care without compromise to the payment integrity of, or public confidence in, the CCS scheme.

136. These amendments require providers to have appropriate arrangements in place to ensure they and their staff comply with the family assistance law, collect fees electronically and specifying the information required in a session report to claim CCS.

Part 1 - Arrangements to comply with family assistance law

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

137. Providers must already have appropriate arrangements in place to ensure that they, and any persons with management or control of the provider, and employees or contractors of the service, comply with the family assistance law. The family assistance law consists of the Family Assistance Administration Act, the Family Assistance Act, legislative instruments made under them and Schedules 5 and 6 to the A New Tax System (Family Assistance and Related Measures) Act 2000. This requirement was previously part of the fit and proper person test in section 194E of the Family Assistance Administration Act.

138. This amendment will promote the importance of having appropriate arrangements in place to ensure compliance with the family assistance law, by making this requirement a specific provider and service eligibility rule, rather than simply a consideration in the fit and proper person test.

139. The intent of this amendment is not to change the substance of the provider's obligation. Instead, it is to ensure that obligation is given an appropriately important status and sufficient weight in administrative decisions, including consideration of applications for provider approval (under section 195B) and whether to cancel a provider approval (under section 195H).

Item 1: After paragraph 194C(d)

140. Item 1 introduces a new provider eligibility rule into section 194C.

141. The rule is that the provider must have arrangements in place to ensure each of the following people comply with the family assistance law:

a.

the provider;

b.

any person with management or control of the provider;

c.

any person who will be a person with management or control; and

d.

any person that a person above is responsible for managing.

142. This would include all staff of, and persons otherwise engaged by, the provider where their work relates to the provision of child care. This will include educators in the family day care system, whether they are engaged as employees or as independent contractors.

143. Such arrangements would typically be documented through a provider's policies or procedures. These arrangements should cover all provider obligations under the family assistance law, including, but not limited to:

a.

the obligation to submit accurate record reports (section 204B of the Family Assistance Administration Act);

b.

the obligation to ensure the individual pays the provider the difference between the sum of the hourly session fees and the fee reduction amount (section 201B of the Family Assistance Administration Act); and

c.

record keeping obligations (Part 8A Division 3 of the Family Assistance Administration Act).

144. This rule was already a requirement through the fit and proper person test, but the obligation is being moved to the provider eligibility rules to ensure it is given appropriate weight in administrative decisions.

Item 2: After paragraph 194D(d)

145. Item 2 introduces a new service eligibility rule into section 194D. While similar to item 1, the rule relates to a service of the provider and reflects the ability of the Secretary (under section 196B) to vary the provider's approval and add a service to that approval.

146. The provider of the service must have arrangements in place to ensure that each of the following people comply with the family assistance law:

a.

the provider;

b.

any person with management or control of the provider;

c.

any person who will be a person with management or control; and

d.

any person that a person above is responsible for managing.

147. This is intended to cover the same people and the same obligations listed above under item 1.

148. This rule was already a requirement through the fit and proper person test, but the obligation is being moved to the provider eligibility rules to ensure it is given appropriate prominence in administrative decisions.

Item 3: Paragraph 194E(1)(g)

149. Item 3 repeals paragraph 194E(1)(g). This paragraph was the obligation to have arrangements in place to ensure compliance with the family assistance law.

150. This obligation has been moved into sections 194C and 194D. This is because it is an indispensable requirement for providers that must be met. Implementing this obligation through the fit and proper person test was less effective, as there are many fit and proper person considerations that must be weighed against each other to determine compliance. Providers must have appropriate arrangements in place to ensure the family assistance law is complied with, regardless of whether they meet the other fit and proper person criteria or not.

Item 4: Application of amendments

151. Item 4 is an application provision that sets out when the amendments in Part 1 of Schedule 4 to the Bill apply.

152. Subitem (1) provides that, in respect of an application for approval of a provider, the amendments apply to applications made after commencement, and to application made before commencement that had not been decided at the time of commencement.

153. Subitem (2) provides that, in respect of an application to vary a provider's approval to add a service, the amendments apply to applications made after commencement, and to application made before commencement that had not been decided at the time of commencement.

154. Subitem (3) deals with continued satisfaction of a provider's conditions of continued approval, and particularly, the condition that the provider must continue to satisfy the provider eligibility rules and each service must continue to satisfy the service eligibility rules. It provides that the amendments apply to providers that were approved prior to commencement, from the commencement date. That is, the providers must comply with the new eligibility rules from the date they come into effect.

155. Subitem (4) provides that subitem (3) is enacted for the avoidance of doubt and does not limit the conditions of continued approval.

Part 2 - Electronic payment of gap fees

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

156. This amendment will require providers to collect monies owed by the individual responsible for the care provided to a child, being the difference between session fees and the CCS applicable for the sessions (known as the "gap fee"), by an electronic funds transfer system.

157. There is a strong correlation between fraudulently reporting care that is not occurring and failure to collect gap fees. The amendment will ensure bank records can be tested to determine whether the gap fee has been paid.

158. The amendment will also reduce administrative burden for providers, as receipting cash payments is time consuming for a child care provider, and helps to ensure the safety of children and child care provider staff, as cash will not be held on the premises.

159. Most parents prefer and choose to pay their child care electronically, and most software systems used by providers allow a wide range of payment options, including bank transfer, direct debit, PayNow, credit and debit card, BPAY and EFTPOS.

160. However, in exceptional circumstances electronic payments may not be practicable for a service of a provider, such as where the necessary infrastructure does not support electronic payments, including where remoteness or natural disaster create an impediment. Accordingly, there will be a power for the Secretary to determine exceptions that apply at a service level.

161. For family day care services, this will involve gap fees being paid directly to the provider via electronic funds transfer.

162. Exceptions may also be applicable for individuals in some circumstances. The addition allows the Minister to determine the circumstances in which the Secretary may decide an exemption applies to an individual in respect of the requirement for payment to be by an electronic funds transfer system.

Item 5: Subsection 201B(1)

163. Item 5 is a technical amendment to ensure that the obligation to collect gap fees electronically is subject to any directions that the Secretary has made on the basis of exceptional circumstances (see item 7 below).

Item 6: Subsection 201B(1)

164. Item 6 inserts ", using an electronic funds transfer system" after "pays the provider" in subsection 201B(1). This has the effect that, in addition to requiring providers to take all reasonable steps to recover the gap fee, providers must also take all reasonable steps to ensure the gap fee is paid by electronic means.

165. The term "electronic funds transfer system" will include payment by credit card, debit card and EFTPOS, direct deposit payments, direct debit payments and electronic bill payment through systems, such as BPAY or PayPal. However, it will not include payment by cash or by cheque.

166. A failure to comply with subsection 201B(1) is an offence with a penalty of 80 penalty units under subsection (2), and a civil penalty provision with a penalty of 60 penalty units under subsection (3). This reflects the important role that subsection 20B(1) plays in upholding the payment integrity of the CCS scheme. In addition, a failure to comply with subsection 201B(1) is a breach of the provider's conditions for continued approval under subsection 195A(2), which means that, if a provider does not comply, they may be subject to a sanction under subsection 195H(1).

Item 7: After subsection 201B(1)

167. Item 7 inserts a provision that will allow exemptions from the general obligation to collect gap fees electronically.

168. Subsection (1A) will allow the Secretary to decide that a particular individual is not required to pay the gap fees via electronic funds transfer in the circumstances prescribed in the Minister's Rules.

169. Subsection (1B) is new power for the Secretary to direct, in respect of a particular service, that an amount may be paid in a different way to an electronic funds transfer system if there are exceptional circumstances. If the Secretary gives the direction, the amount is to be paid in accordance with the direction.

170. This provision recognises that some services, such as where the necessary infrastructure does not support electronic payments, including where remoteness or natural disaster, create impediments. Under section 222 of the Family Assistance Administration Act, a direction under subsection (1B) must be in writing.

171. New subsection (1C) provides that a direction under subsection (1B) is not a legislative instrument. Directions will apply to a service or services, and will be administrative, rather than legislative, in character. Therefore, subsection (1C) is merely declaratory of the law, rather than providing an exemption for the purposes of the Legislation Act 2003.

Part 3 - Information for session reports

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

172. The amendments in this Part will require a session report given under section 204B of the Family Assistance Administration Act to contain the information prescribed by the Secretary's Rules.

173. Section 204B requires an approved provider to give a report for each week for each child it provides care to in that week. Subsection (2) previously provided that the report must include the information required by the Secretary relevant to determining whether the individual is eligible for CCS and the amount they are eligible for, and any other information required by the Secretary. The information is required to be given in a form and manner approved by the Secretary.

174. This amendment will allow the Secretary to specify in Secretary's Rules the other information required, rather than leaving this requirement to be managed administratively.

175. The amendment will provide greater clarity for providers about what information is required to be included in a session report by ensuring this is clearly set out in legislation available on the Federal Register of Legislation.

Item 8: Paragraph 204B(2)(c)

176. Item 8 amends paragraph 204B(2)(c) to provide that a session report must contain the information prescribed by the Secretary's Rules. This will provide greater clarity as to the exact requirements of a session report.

Item 9: Application of amendment

177. Item 9 is an application provision that provides that the amendment applies in relation to a report for a week that starts on or after the commencement of this item. Session reports under section 204B are given in respect of a particular week, and so it is impractical to change the requirements midway through a week. This application provision has the effect that the requirements will change from the first Monday after commencement.

Schedule 5 - Child care discount for early childhood workforce

178. The amendments in this Schedule to the Bill will provide for a permissible educator discount that providers may offer to their educators. This measure has already been implemented on a short-term basis through Minister's Rules made under subsection 201B(1A) of the Family Assistance Administration Act. However, subsection 201B(1A) is not well adapted to implementing long-term measures. In addition, implementing this measure through primary legislation provides greater opportunity to clarify the fringe benefits tax (FBT) implications of the permissible educator discount.

179. In general, CCS is paid as a percentage of the amount an individual is liable to pay for the session of care. This means that if the individual receives a discount on their fees for the session of care, the amount of CCS they are entitled to would generally also be reduced on a commensurate basis.

180. Under this measure, approved providers will be permitted to give discounts on their child care fees for their educators without that discount reducing the amount of CCS the staff may benefit from.

181. The objective of this measure is to reduce staff shortages in the ECEC sector by attracting and retaining existing educators, particularly those with young children.

A New Tax System (Family Assistance) Act 1999

Item 1: Subclause 2(2) of Schedule 2

182. Item 1 amends subclause 2(2) of Schedule 2 to the Family Assistance Act. Subclause 2(2) defines the term "hourly session fee" for the purpose of calculating CCS. CCS is calculated on the lower of the "hourly session fee" and the rate cap that applies (see subclause 2(1) of Schedule 2).

183. Subclause (2) previously provided that the "hourly session fee" is the amount the individual is liable to pay for the session, divided by the number of hours, and reduced by any other payment or reimbursement fringe benefit. This amendment will amend that definition so that the "hourly session fee" is the amount the individual is liable to pay, or would have been liable to pay, disregarding the permissible educator discount.

184. This has the effect that CCS will be calculated on the hourly session fee that applied before the permissible educator discount. This ensures that the permissible educator discount does not reduce the amount of CCS that the individual is entitled to.

Item 2: At the end of subclause 2(2) of Schedule 2

185. Item 2 inserts a note after subclause 2(2) of Schedule 2 to provide that providing a permissible educator discount under section 201BA may not attract fringe benefits tax (FBT) in some circumstances.

186. Subsection 47(2) of the Fringe Benefits Tax Assessment Act 1986 (FBT Assessment Act) provides that a benefit offered by employers to their current employees is an exempt benefit if:

a.

the benefit is a residual benefit provided to a current employee in respect of their employment, and

b.

the benefit consists of the care of children of the current employee in a child care facility, and the facility is located on the business premises of the employer or a related company. The permissible educator discount will generally be an exempt benefit under subsection (2) because it consists of the care of children in a child care facility on the employer's business premises.

187. If these requirements are met, a provider would not be obliged to pay FBT on any permissible educator discounts they provide to their current employees who are educators.

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

Item 3: Subsection 3(1)

188. Item 3 is a formal provision that inserts a definition for the term "permissible educator discount" into subsection 3(1) of the Family Assistance Administration Act. Subsection 3(1) contains definitions of terms used in the Family Assistance Administration Act.

189. The new definition provides that "permissible educator discount" has the meaning in subsection 201BA(1).

Item 4: At the end of subsection 201B(1)

190. Item 4 inserts a note to the end of subsection 201B(1). The note acts as a cross reference from subsection 201B(1) to new subsection 201BA(3). Subsection 201B(1) requires providers to take all reasonable steps to ensure that individuals pay the provider the difference between the sum of the hourly session fees and the CCS entitlement for the week.

191. This new note will provide clarification that providers are not required to collect the amount of any permissible educator discount as part of their obligation under subsection 201B(1), as these discounts are not recoverable.

Item 5: After section 201B

192. Item 5 inserts new section 201BA into the Family Assistance Administration Act. Section 201BA provides for the new permissible educator discount.

193. Subsection 201BA(1) provides that a provider may allow an individual a discount if:

a.

the individual, or the individual's partner, is employed, contracted or otherwise engaged by the provider to work as an educator at one of the provider's child care services; and

b.

the service is not a family day care service or an in home care service.

194. It would not be appropriate to extend this discount to educators who work at family day care services or in home care services as this would conflict with the child swapping rules in paragraphs 8(1)(d) and (da) of the Minister's Rules. The child swapping rules provide that there is no eligibility for CCS for children of family day care or in home care educators if that care occurs on the same day that the educator is providing care.

195. Subsection 201BA(2) provides that the amount of the permissible educator discount that may be allowed must be no more than 95% of the pre-discount fee for the individual. This means that the maximum discount available is 95% of the "out of pocket" costs for the individual.

196. Subsection 201BA(3) provides that the amount of the permissible educator discount is not recoverable from the individual. A note has been inserted to indicate the likely FBT implications of the discount and point to relevant provisions of the FBT Assessment Act. Any discount given to a current employee (as defined in subsection 136(1) of the FBT Assessment Act) under the new provisions may be exempt from fringe benefits tax where the child care facility has applied the permissible educator discount for a current employee, which is not recoverable from the employee, and the conditions in subsection 47(2) of the FBT Assessment Act are otherwise met.

197. Subsection 201BA(4) provides the meaning of "pre-discount fee". This term is used to set a maximum amount for the permissible educator discount. "Pre-discount fee" is defined as being the difference between the sum of hourly session fees for the week (due to item 1, this refers to the amount the individual would have been liable to pay, disregarding any discount under new section 201BA), and the sum of the fee reduction amount (effectively, the CCS applicable for the week) and any payment prescribed in the Minister's Rules.

198. Effectively, the pre-discount fee is what would have been the out of pocket costs for the individual, if the permissible educator discount was not applied.

Example

199. Educator A is employed as an educator at a child care facility. Educator A enrols their child to attend child care for 3 days per week at the child care facility at which they are employed. The total weekly fee usually charged by this service is $320. The child care facility receives a notice of a fee reduction decision in respect of Educator A for the amount of $256. The pre-discount fee is therefore $64.

200. The child care facility chooses to offer Educator A the maximum permissible educator discount and therefore Educator A's weekly fee is 5% of $64, or $3.20. The permissible educator discount (of $60.80) is not recoverable from Educator A. The child care facility notifies Educator A that they will provide child care services for the child for $3.20 (being the amount after the permissible educator discount has been applied) and Educator A will be issued with weekly invoices setting out the following:

a.

the total weekly fee of $320;

b.

Educator A's CCS fee reduction amount of $256;

c.

the total discount of $60.80 as permitted under section 201BA of the Family Assistance Administration Act (the permissible educator discount); and

d.

the amount payable by Educator A of $3.20 per week.

201. In this scenario, the care of Educator A's child is provided by Educator A's employer (the child care facility). For FBT purposes, the employer has provided a residual benefit of $60.80 to Educator A. This benefit is an exempt benefit under subsection 47(2) of the FBT Assessment Act because:

a.

it is a residual benefit provided to a current employee in respect of their employment; and

b.

the benefit consists of the care of a child of the current employee in a child care facility located on the premises of the employer or a company related to the employer.

Item 6: Application of amendments

202. Item 6 is an application provision that provides that the amendment applies in relation to a week that starts on or after the commencement of this item. CCS is calculated based on session reports for a week and paid on a weekly basis, so it is impractical to change the requirements midway through a week. This application provision has the effect that the new educator discount provision will apply from the first Monday after commencement.

Schedule 6 - Discount on fee for sessions of care in prescribed circumstances

203. The amendments in this Schedule to the Bill will improve upon a measure in the legislation that provided providers with an exemption from the obligation to enforce fee liability in circumstances prescribed under subsection 201B(1A) of the Family Assistance Administration Act.

204. This measure was introduced at the beginning of the COVID-19 pandemic as a way to provide fee relief to families. It was particularly aimed at benefiting those families who were unable to provide care because of pandemic-related risk, but needed to keep paying for care to avoid the risk of losing their child care place.

205. On a number of occasions, events and circumstances were prescribed in the Minister's Rules to give fee relief to those affected by COVID-19 or other natural disasters. These had substantial positive impacts for families using child care. However, subsection 201B(1A) only affected the provider's obligation to take all reasonable steps to enforce fee liability. Families were technically still liable under their complying written arrangements to pay their full fees, less CCS.

206. The improved measure will allow providers to actually give a discount on fees in a prescribed event or circumstance, without this affecting the individual's CCS entitlement. This means that any future fee relief for a prescribed event or circumstance will be more beneficial by actually lowering liability, and aligns with the treatment of the permissible educator discount for child care workers also included within this Bill.

Part 1 - Main amendments

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

Item 1: Subsection 201B(1A)

207. This item repeals subsection 201B(1A) of the Family Assistance Administration Act. Subsection 201B(1A) contained the previous measure, allowing the Minister to prescribe events or circumstances in which the provider was exempted from the obligation to enforce payment of fees under subsection 201B(1). It is no longer needed, as it is being replaced by a new measure that will facilitate less ambiguous fee relief for families in prescribed events or circumstances.

Item 2: Before section 201C

208. Item 433 introduces new section 201BB, which sets out the new measure for fee relief in prescribed events and circumstances.

209. Subsection 201BB provides that a provider may allow an individual, or their partner, a discount on the pre-discount fee if:

a.

the Minister's Rules prescribe a particular event or circumstance; and

b.

each session of care that is discounted is during the period in the Minister's Rules; and

c.

any other conditions prescribed by the Minister's Rules are met.

210. It is anticipated that this power will be used in similar circumstances as when the previous subsection 201B(1A) was used. For example, it may be used where, due to a pandemic or a natural disaster, such as bushfires or floods, children are restricted from attending care. An example of a condition that may be imposed under paragraph (1)(c) is that the child did not attend any part of the session of care. It is more likely that new section 201BB will be used to provide fee relief for families who are unable to use care.

211. Subsection (2) provides that the discount that may be applied may be the whole, or a part, of the pre-discount fee. It will be a matter for the provider's discretion whether to provide fee relief and, if so, how much.

212. Subsection (3) provides that, if the provider gives a discount, the amount of the discount is not recoverable.

213. Subsection (4) provides the meaning for the "pre-discount fee". In effect, the pre-discount fee is the out of pocket cost for the individual for child care in the week. That is, it is the sum of hourly session fees (due to item 8, this refers to the amount the individual would have been liable to pay, disregarding any discount under new sections 201BA or 201BB), less any CCS or ACCS they are entitled to under a fee reduction decision, less any other payment prescribed by the Minister's Rules, less any permissible educator discount applied (see Schedule 5 to the Bill above).

Items 3 to 5: Paragraph 201C(1)(b); Paragraph 201C(1A)(b); Subsection 201C(1B)

214. These items insert new provisions into section 201C. Broadly, section 201C ensures that child care providers are not permitted to increase their fees for a certain subset of their clientele only, as a way of maximising CCS revenue with a minimal risk of commercial pressure from families. For example, ACCS is generally paid at a rate of 100% of fee liability. ACCS parents may not be concerned if their fees are raised because they are covered by ACCS, but subsection 201C(1) prevents providers from charging ACCS clients more than their CCS clients.

215. New paragraphs 201C(1)(b) and (1A)(b) and new subsection 201C(1C) will prevent the provider from charging a higher fee while prescribed circumstances discounts are available under subsection 201BB than they charged before the prescribed circumstance began. This will prevent providers from engaging in CCS-revenue maximisation strategies by reporting a fee that is different from the genuine commercial fee they charge.

216. New subsection 201C(1B) will prevent the provider from charging an individual to whom a permissible educator discount is allowed from charging a higher fee than the provider would ordinarily charge an individual. Without this subsection, it would be possible for providers to maximise revenue by increasing their fees to get more CCS and then providing a discount, such that the parent did not have to pay any of the increase. If they did so, the reported fee would not genuinely reflect the fees the provider charges.

Item 6: Subsections 201C(2) and (3)

217. This item provides for a technical amendment to ensure that all of the new provisions in section 201C are enforceable through means of the existing offence provision in subsection (2) and the civil penalty provision in subsection (3).

Item 7: Application of amendments

218. This item provides that the amendments in this Part apply in relation to sessions of care provided in a week that starts on or after the commencement of this item.

219. CCS is paid on a weekly basis, from Monday to Friday. This means it makes more sense for an amendment that affects CCS entitlement to commence at the start of a CCS week (that is, on a Monday).

Part 2 - Other amendments

A New Tax System (Family Assistance) Act 1999

Item 8: Subclause 2(2) of Schedule 2

220. This item makes technical amendments to insert references to the new section 201BB into subclause 2(2) of Schedule 2 to the Family Assistance Act.

221. Subclause 2 deals with the calculation of CCS entitlement. CCS entitlement is calculated on the basis of the amount the individual is liable to pay for sessions of care. These amendments will ensure that any prescribed circumstances discount is disregarded for the purpose of liability. That is, CCS will be calculated on the amount they would have been liable to pay if no discount had been applied under new section 201BB.

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

Items 9 and 10: Subsection 201B(1) (note); At the end of subsection 201B(1)

222. These items add a new note under subsection 201B and clarify the numbering for the notes. The note provides that if the provider allows the individual a prescribed circumstances discount, the amount of the discount is not recoverable.

Item 11: Application of amendments

223. This item provides that the amendments in this Part of Schedule 6 to the Bill apply in relation to sessions of care provided in a week that starts on or after the commencement of this item.

224. CCS is paid on a weekly basis, from Monday to Friday. This means it makes more sense for an amendment that affects CCS entitlement to commence at the start of a CCS week - that is, on a Monday.

Schedule 7 - Additional absences

225. The amendments in this Schedule to the Bill will provide the Secretary with additional discretion to pay CCS for absences in exceptional circumstances.

226. Under section 85BA of the Family Assistance Act, CCS may be payable for sessions of care provided by an approved child care provider to the child of an eligible individual. Section 10 of the Family Assistance Act sets out when a session of care is provided. This includes where the child attends the session of care, and when the child does not attend the session of care but the session is an allowable absence under subsection 10(2) or (3).

227. Where a child is starting or ceasing care, a family will generally arrange this well in advance around their child's expected attendance to ensure they are not paying gap fees for sessions that the child will not be attending. Where services are provided with notice of an enrolment starting or ceasing, they are required to promptly provide notice to the Secretary under sections 200A and 200D of the Family Assistance Administration Act, with strict liability offences and civil penalties applicable where these notice requirements are not met. Where there are genuinely unexpected absences before the child's first attendance or after the child's last attendance day, there are prescribed circumstances in which CCS could be payable for absences for a short period of time (see for example, section 5B of the Minister's Rules).

228. This Schedule will introduce new subsection 10(5) into the Family Assistance Act, which will set out another category of allowable absences for which CCS may be paid. This category includes sessions of care that are provided before the child's first attendance at the service or after the child's last attendance at the service, but where there are exceptional circumstances in existence in relation to the child or a family member of the child.

229. This Schedule commences on the day after the Bill receives Royal Assent.

A New Tax System (Family Assistance) Act 1999

Item 1: Paragraph 10(1)(b)

230. Item 1 amends paragraph 10(1)(b) of the Family Assistance Act to also refer to new subclause (5).

231. Subsection 10(1) of the Family Assistance Act provides that a session of care is provided when the child is enrolled and attends the session (or part of it), or where the child does not attend the session but the service is taken to have provided the session of care under a deeming provision.

232. Previously, subsections (2) and (3) were the only available deeming provisions, but now new subsection (5) will be introduced (see item 2 below). Item 1 provides that subsection (5) will also have the effect of deeming a session of care to have been provided, even though that session is not attended.

Item 2: At the end of section 10

233. Item 2 inserts new subsections (5) and (6) into section 10 of the Family Assistance Act.

234. Subsection (5) is a new deeming provision that provides that a session of care is taken to have been provided, meaning that CCS is payable for the absence in certain circumstances.

235. These circumstances are where:

a.

the absence does not fall within subsection (2) or (3) only because the absence is an absence before the child's first attendance at the service or after the child's last attendance at the service;

b.

the Secretary is satisfied that exceptional circumstances exist in relation to the child, the individual who cares for the child, that individual's partner or another individual with whom the child lives;

c.

the Secretary makes a determination that there are exceptional circumstances.

236. Previously, no CCS was payable for absences before the child's first attendance or after the child's last attendance. This amendment will provide the Secretary with discretion to pay CCS for an absence in exceptional circumstances only.

237. An exceptional circumstance would be unusual or 'out of the ordinary'. An example of when exceptional circumstances would exist is where an individual is forced to relocate at short notice to escape family violence and was unable to provide notice to their former child care service for an extended period. In this scenario, the individual may have already paid gap fees for absences after their child's last attendance day and the Secretary would have discretion to consider whether CCS should remain payable for those absences. An exceptional circumstance would not apply where non-compliance was involved.

238. Under section 222 of the Family Assistance Administration Act, a determination under paragraph (5)(c) must be in writing.

239. Subsection (6) provides that a determination under paragraph (5)(c) is not a legislative instrument. Determinations will apply on an individual by individual basis, and therefore will be administrative, rather than legislative, in character. Therefore, subsection (6) is merely declaratory of the law, rather than providing an exemption for the purposes of the Legislation Act 2003.

Item 3: Application of amendments

240. Item 3 provides that the amendments in this Schedule will apply in a week that starts on or after the commencement of this item.

241. CCS is paid on a weekly basis, from Monday to Friday. This means it makes more sense for an amendment that affects CCS entitlement to commence at the start of a CCS week (that is, on a Monday). This application provision has the effect that the Secretary's discretion to consider allowable absences under subsection 10(5) of the Family Assistance Act will be available from the first Monday after the amendment commences.

Schedule 8 - Extending period for passing on fee reduction amounts

242. CCS is the entitlement of individuals, but in most circumstances is paid by the Commonwealth to the approved child care provider. The approved provider is then required to pass on the CCS amount to the eligible individual within 14 days under section 201A of the Family Assistance Administration Act. If the approved provider fails to do so, they commit an offence with a penalty of 80 penalty units and are liable to a civil penalty of 60 penalty units.

243. The amendments in this Schedule to the Bill will add some flexibility to this requirement so that it can be used in rare circumstances where there could be adverse impacts to the individual if the CCS amount is passed on within 14 days. These amendments permit the Secretary to direct that the period of 14 days for passing on a CCS amount is extended by an appropriate period.

244. This Schedule commences on the day after this Bill receives Royal Assent.

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

Item 1: Paragraph 67EA(b)

245. Item 1 is a consequential amendment to section 67EA, which is the simplified outline of Division 5 of Part 3A of the Family Assistance Administration Act. Section 67EA previously provided that the provider must pass on CCS to an individual within 14 days. This will be amended to clarify that the provider must pass on CCS within 14 days, unless the Secretary has directed that that the period be extended.

Item 2: Section 71D

246. Item 2 is a consequential amendment to section 71D, the simplified outline of Part 3A Division 5 of the Family Assistance Administration Act. Section 71D previously provided that, if an approved provider does not pass on CCS within 14 days, the amount of CCS becomes a debt to the Commonwealth.

247. Item 2 amends section 71D so that, if the Secretary has extended the period of 14 days for passing on a fee reduction amount, the amount does not become a debt until the extended period has ended.

Item 3: After subsection 201A(2)

248. Item 3 is a substantive amendment which inserts three new subsections into section 201A of the Family Assistance Administration Act.

249. New subsection (2A) provides that, if the Secretary is satisfied that there might be an adverse impact on the individual if the fee reduction amount is not passed on or remitted within 14 days, the Secretary may extend the 14 day deadline by a period the Secretary considers appropriate.

250. It is envisioned that this amendment may be used in rare circumstances, such as where a provider has been paid an amount for a child's absence before the service is unexpectedly closed for an extended period due to extensive water damage from a burst pipe. It may take longer than 14 days to determine whether child enrolments will continue and, therefore, whether a family's CCS entitlement will be retrospectively altered. If the provider were to pass amount on within 14 days and the individual spent the amount, this could cause hardship for the individual later on when the individual was given a debt notice for the overpaid portion, particularly for an individual on a low income. This provision will allow the Secretary to put a pause on amounts being passed on until the impact on the service and individual is clear, before the individual becomes financially affected. The provider would still have the discretion to pass on the amounts within 14 days if it considered this appropriate.

251. New subsection (2B) provides that, if the Secretary gives a direction under subsection (2A), subsection (1) has effect according to the extended period. Subsection (1) is subject to a criminal and civil penalty under subsections (3) and (4) respectively. This amendment will ensure the continuation of the general obligation that all entitlements get passed on to the individual who was entitled to the amount, and that there are appropriate sanctions for providers that do not pass on or remit amounts.

252. New subsection (2C) clarifies that the period of 14 days may be extended multiple times if needed.

Item 4: Subsection 201A(6) (heading)

253. Item 4 is a technical amendment that replaces the word "remittal" with the word "remittance" for consistency with the other language used in the Family Assistance Administration Act. This corrects a minor drafting error in section 201A.

Item 5 and 6: Subsection 201A(6); At the end of section 201A

254. Items 5 and 6 make consequential amendments to the requirement to give notice of remittal to the Secretary.

255. Section 201A(1) provides that a provide who receives notice of a fee reduction amount - generally, an individual's CCS entitlement for the week - must pass on the amount within 14 days or, if it is not reasonably practicable to do so, remit the amount to the Secretary. If the provider remits the amount, they must give notice of the remittance to the Secretary.

256. Previously, that notice was required to be given no later than 14 days after notice of the fee reduction amount is given. However, if a direction is in place extending the period of 14 days, this may not be practicable. Accordingly, items 5 and 6 make changes so that, if the Secretary has extended the period by direction, the notice of remittance does not need to be given until the end of the extended period.

Item 7: Application of amendments

257. Item 7 is an application provision. It states that the amendments apply in relation to fee reduction decisions made on or after the commencement of the Schedule.