Explanatory Memorandum
(Circulated by authority of the Minister for Education and Youth, the Honourable Alan Tudge MP)OUTLINE
The purpose of the Family Assistance Legislation Amendment (Child Care Subsidy) Bill 2021 (the Bill) is to give effect to a key measure impacting the rate of child care subsidy (CCS) that Australian families are entitled to receive.
Specifically, the measures relate to removing the existing CCS cap that limits the amount of CCS some families can receive in a year, and increasing the rate of CCS for families with multiple children under six years of age who are eligible for CCS.
The Bill implements the Government's changes to CCS announced in the 2021-22 Budget, building on the success of the Australian Government's Child Care Package implemented in July 2018.
These changes will maintain the integrity of the CCS and will reduce out-of-pocket child care costs for those families who currently pay the most - those with multiple children aged under six years.
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 families with assistance with child care costs, primarily through the CCS.
Amendments to the Family Assistance Administration Act in Schedule 1 to the Bill remove the annual cap from the Family Assistance Law so that from 1 July 2022 (or an earlier date fixed by Proclamation) there will no longer be a limit on the amount of child care subsidy that families, over a specified income, can receive each year. The effect of these amendments is that no family will have a limit on the amount of CCS that they can receive each year.
Amendments to the Family Assistance Administration Act in Schedule 2 to the Bill provide for increased child care subsidy from 11 July 2022 (or an earlier date fixed by Proclamation) for families with multiple children under six who are eligible for CCS. The amendments will increase the rate of CCS by 30 percentage points for second and subsequent children aged under six, up to a maximum subsidy rate of 95 per cent. The oldest child aged under six years will continue to receive the current CCS rate based on the family's combined income. The measure will be implemented through a two-phased approach to ensure implementation can occur as soon as possible but allowing sufficient time for the necessary system build to support the measure.
Part 1 of Schedule 2 to the Bill outlines the changes to the Family Assistance Act and Family Assistance Administration Act for Phase 1 of this measure. In Phase 1, families will receive the higher rate of CCS for a child as long as there is an older child under six years of age with CCS eligibility, with CCS eligibility ceasing after 26 consecutive weeks of no sessions of care being provided by an approved child care service. The Secretary may also cease CCS eligibility at any time if the Secretary considers an individual does not intend that the child be enrolled in or attend a child care service.
Part 2 of Schedule 2 to the Bill outlines the changes to the Family Assistance Administration Act for Phase 2 of this measure. Phase 2 is designed to be the ongoing policy setting and provides that families will receive the higher rate of CCS for a child as long as there is an older child under six years who has attended a session of care in the last 14 consecutive weeks.
FINANCIAL IMPACT STATEMENT
In 2022-23, the cost of the changes provided for in this Bill will be $635.5 million (fiscal balance terms), taking the total estimated child care spend to $11 billion in 2022-23. From phase two, fully implemented in 2023-24, the cost of the changes provided for in this Bill will be $655.9 million (fiscal balance terms) in 2023-24, taking the total estimated child care spend to $11.5 billion.