House of Representatives

Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016

Second Reading Speech

Mr Porter (Minister for Social Services)

I move:

That this bill be now read a second time.

The Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 reintroduces major reforms under the government's Jobs for FamiliesChild Care Package.

This package will deliver genuine, much-needed reform for a simpler, more affordable, more accessible and more flexible early education and childcare system and will invest around $40 billion in child care and early childhood education over the next four years, including more than $3 billion in additional funding. This is the single largest investment in early learning and child care that Australia has ever seen.

Almost one million Australian families will benefit as a result of this childcare assistance package. Low- and middle-income families will be the greatest beneficiaries.

Having been announced in the 2015-16 budget, the Jobs for Families Child Care Package would ideally have already been legislated. The government introduced the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015 to the House last year, but that bill lapsed when parliament was prorogued because members opposite had refused to pass the savings needed to fund our increased childcare expenditure, creating a roadblock in the Senate. They have offered only expensive bandaids, unfortunately, to the current broken system and have failed to clearly support any of the real reform that parents desperately need and that the sector has been crying out for.

As a result of the lapsing of that bill and delay in passing savings measures needed to fund the childcare package, the government was unfortunately left with little choice but to defer implementation of the main measures of the Jobs for Families bill from July 2017 to July 2018. However, if the savings needed to fund our package are passed by parliament-that is, the savings contained in the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016, on which I have just spoken-then we will implement these childcare reforms as soon as possible.

The Family Payments Reform Bill brings forward a set of measures which aim to achieve long-term sustainability of the family payment system while continuing to deliver help to families who need it the most.

Together, these reforms will ensure that, in a fiscally sustainable way, we can achieve three important goals:

continue to assist families in raising their children and provide access to quality early learning opportunities over the long-term;
enable and encourage greater workforce participation; and
simplify our childcare payments and social security systems.

The measures contained in this bill represent an important investment in Australia's future, and they will deliver genuine reform.

The bill reflects extensive consultation and expert analysis, and I give thanks to all those, on behalf of the education minister, who contributed to this process. Unlike members opposite, whose election policies ignored previous consultation, squibbed a responsibility of reform and offered high-income earners windfall childcare subsidies, this government will not falter in its determination to deliver a simpler and more accessible, affordable and flexible childcare system. We absolutely understand how necessary this is, because we have listened to the sector and we have listened to parents, who have repeatedly called for reform.

In 2013 the government tasked the Productivity Commission to undertake an inquiry into child care and early childhood learning. The inquiry was the largest review of child care since the 1990s and the commission drew together the views of families, service providers, early childhood education professionals, businesses and other experts to identify the challenges and devise the path forward.

In the 2015-16 budget the government announced its Jobs for Families Child Care Package in response to the Productivity Commission's 2014 report and the government's further consultations with the childcare sector and families. The package was further refined during an extensive regulation impact statement consultation process.

The previous versions of both pieces of legislation have already been examined by their respective Senate committees. Earlier this year the Senate Education and Employment Legislation Committee investigated the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015 and the Community Affairs Legislation Committee investigated the family payment reforms outlined in the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill (No. 2) 2015. Both committees recommended that the respective bills be passed.

The government's Jobs for Families Child Care Package strikes the correct balance between targeted childcare support for hardworking families who depend upon it, a generous safety net to protect those most vulnerable in our community, and ongoing support for high-quality early learning. This is further boosted through our $843 million in federal support in 2016 and 2017 for 600 hours of universal preschool access a year for each child in the year before school.

The key elements of the Child Care Reform Package are:

A new, simpler childcare subsidy, which will improve affordability
The childcare safety net, which will improve accessibility and comprises three elements:

the additional childcare subsidy
the Community Child Care Fund
the Inclusion Support Program

Reducing red tape for services by removing the minimum hours per day and days per week opening requirements for child care services so they can operate more flexibly to meet family needs.

This bill makes significant amendments to the current A New Tax System (Family Assistance) Act 1999 and A New Tax System (Family Assistance) (Administration) Act 1999 in order to introduce the childcare subsidy, additional childcare subsidy, and new approved provider and service requirements from July 2018. The bill provides for a number of transitional provisions that will commence in July 2017 and for the fast-tracked introduction of some enhanced compliance measures from royal assent.

Together these will give effect to the majority of the government's response to the recommendations from the Productivity Commission inquiry.

Our objective is to help parents who want to work, or who want to work more, while still focusing on early childhood education.

Having two parents in paid employment has become the preferred choice for most families because of the changes in our society and economy over many years. More affordable access to quality child care puts the opportunity of work within far better reach of more families.

The Jobs for Families Child Care Package is designed to support more families, including jobless families, to increase their participation in work, training, study or volunteering. The government's significant investment is targeted to those who need it most-low- and middle-income families who are juggling work and parenting responsibilities.

We want families to choose their child care around their work, rather than limit their work hours to suit their child care. It is estimated that the package will encourage more than 230,000 families to increase their involvement in paid employment.

The package is also designed to place downward pressure on childcare costs for families and to ensure the government's significant investment in child care is more sustainable into the future.

Childcare subsidy

The centrepiece of the Jobs for Families Child Care Package is the new childcare subsidy. From July 2018, the childcare subsidy will replace the current childcare benefit and childcare rebate with a single, means-tested subsidy.

The childcare subsidy will be better targeted than current childcare payments, providing more assistance for low- to middle-income families.

This reform is fundamentally fair. Low-income families will receive a childcare subsidy rate of 85 per cent of the actual fee paid (up to an hourly fee cap). That decreases to a 20 per cent subsidy for very high income families who are currently receiving a 50 per cent rebate. The childcare subsidy rate tapers from 85 per cent to 20 per cent to ensure the package is most generous to those who earn the least.

To make child care fairer, the coalition's reforms include abolishing the $7,500 childcare rebate annual cap that currently applies to all families. This will ensure that low- and middle- income families are not limited by a cap on the amount of child care they can access. Families earning more than around $185,000 will also benefit from an increased annual cap of $10,000.

The new childcare subsidy will be paid directly to childcare service providers to make the system simpler for families.

An activity test will ensure that taxpayers' support for child care is targeted to those who depend on child care to work or work additional hours. The three-step activity test will align the hours of subsidised care more closely with the combined hours of work, training, study or other recognised activity undertaken, and provide for up to 100 hours of subsidy per fortnight. The bill provides that at least eight hours of activity a fortnight results in access to 36 hours of subsidised child care a fortnight; more than 16 hours of activity a fortnight results in access to 72 hours of subsidised care a fortnight; and more than 48 hours of activity a fortnight results in the maximum amount of subsidised care of 100 hours a fortnight.

These reforms are fundamentally fair-they provide the greatest hours of support in child care to the families who work the most hours, and the greatest subsidy and financial support to the families who earn the least.

Families whose children are attending a preschool program in a childcare service during the year before school will be exempt from the childcare subsidy activity test for the period of the preschool program. This is meant to complement the federal government's $843 million support for 600 hours of preschool for each child in the year before school.

Additional child care subsidy

We know children from disadvantaged backgrounds benefit most from quality early childhood education and care, and that is why we are providing additional support to those who need it most. The childcare subsidy I have just spoken of will be supplemented by an additional childcare subsidy to provide extra childcare support for disadvantaged and vulnerable children, whether they be children at risk of serious abuse or neglect, families experiencing temporary financial hardship, grandparents on income support with primary carer responsibilities for their grandchildren, or parents seeking to return to work, study or training.

The childcare safety net aims to work alongside other state, territory and federal government payments and programs that are designed to give our most vulnerable children the additional support they need. Amongst other measures, it will provide low-income families who do not meet the activity test up to 24 hours per fortnight of subsidised care-this is equivalent to two weekly six-hour sessions. These 24 hours will be provided at the highest 85 per cent rate of subsidy, which is an increase on the current rate of about 72 per cent.

Getting children into quality child care maximises the early learning opportunities for children who may not be getting all the support they need at home. It also improves a family's ability to break a cycle of poverty and intergenerational welfare dependence by minimising barriers to participation and providing access to early learning.

The Productivity Commission's report identified that existing programs that support disadvantaged and vulnerable families are complex, inefficient, poorly targeted and open to abuse. This is particularly the case in relation to the Community Support Program, special childcare benefit and the jobs, education and training childcare fee assistance payment.

These payments and programs, along with the current Budget Based Funded Program and grandparent childcare benefit, will be replaced by the additional childcare subsidy payments and other elements of the childcare safety net. Together, these will comprise a more integrated and targeted set of funding programs that leverage the increased Commonwealth investment in child care to provide the best early learning outcomes, particularly for those who need it most.

The new payments will remain linked to immunisation requirements that were strengthened under the very successful No Jab, No Pay policy from 1 January 2016.

Elements of the Jobs f or Families Child Care Package outside the legislation

The Jobs for Families Child Care Package also includes a number of other important measures that are not formally part of the bill being introduced today. We have already progressed those elements of the package that do not require the passage of legislation:

the new $543 million Inclusion Support Program, which provides a 25 per cent increase in funding, commenced in July 2016. This program is already providing greater support for children with disability to access child care and early learning opportunities.
The Nanny Pilot Program, which commenced in January 2016, will continue until implementation of the full measures in this package in July 2018. In response to feedback on the trial so far, we have lifted the maximum per-child subsidy from $5.95 an hour to $8.50 an hour since 1 June 2016.

$20 million over two years for the Connected Beginnings program, commenced in July 2016. That supports the integration of early childhood, maternal and child health and family support services, with schools in a number of Indigenous communities experiencing disadvantage designed to improve children's preparation for school.

Strengthened compliance arrangements

Unfortunately, there are those who seek to use government support to the childcare system for personal gain. This government is determined to ensure that its massive investment of around $40 billion over four years is used for fee relief for families, as it was intended.

We know that compliance measures are effective. Last year, we introduced new rules to eliminate the costly abuse of payments through a process known as 'child swapping' in the family day care sector. The Australian government's focus on noncompliance (mainly but not solely focussed on family day care) is showing very clear results. The government's action has resulted in a significant reduction of fraud in the childcare system-indeed, by around $421 million in the last financial year. Between 1 July 2015 and 19 August 2016, the Department of Education and Training imposed sanctions and penalties on 109 services, including suspending and cancelling 65 services' approval to access childcare subsidies.

By contrast, under the previous government in the two years to June 2013, there were no cancellations, no suspensions, and only two fines were issued. Compliance checks under Labor actually fell from 763 to 523. This is a paltry effort compared to the present government's 1,300 checks undertaken in 2013-14, 2,900 in 2014-15 and more than 3,100 checks so far in 2015-16.

This government will continue its tough stance on compliance and it is fast-tracking some of the strengthened compliance arrangements in this legislation to ensure they take effect from royal assent.

Currently, once a childcare provider is approved by a state or territory regulator, the Commonwealth has limited grounds for not approving fee assistance for parents using that service. Compliance measures being brought forward in this legislation will include the power for the minister to make legislative instruments to place a pause on childcare service applications for fee assistance. Such a pause may be made in relation to a particular service type for a defined period.

This measure will help us to address excessive growth within a particular childcare service type, specifically where there are concerns about proven or alleged noncompliance with family assistance law.

Closure and tran sitional arrangements for child care payments

The bill includes consequential amendments and will provide transitional provisions to support the replacement of existing childcare payments with the childcare subsidy and additional childcare subsidy.

Review and evaluation

Given the significant nature of this reform, it is important that its implementation and impact is understood. To that end, there will be ongoing monitoring and review of the package. An integral part of the strategy will be post-implementation review and an impact evaluation.


By way of conclusion, this bill, and the Jobs for Families early education and childcare package more generally, will deliver significant and greatly needed reform through a simpler, more affordable, more flexible and more accessible childcare system.

Consistent with being financially responsible, the government is determined to achieve budget repair. The Jobs for Families Child Care Package is to be implemented using savings contained in the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016. The family payment measures are sensible, they are practical and they are aimed at ensuring the sustainability of our system.

The government has clearly outlined its fully funded, long-term reform plan which delivers support for children and families, and a sustainable system for taxpayers. Our early education and childcare reforms have been the subject of extensive consultation and will direct the greatest support to those families working the most hours and earning the least.

In contrast to the unfunded, rehashed election promise of members opposite, the coalition has a fully funded package that strikes the right balance between targeted early education and childcare support for working families who depend upon it, a generous safety net to protect those most vulnerable in our community and ongoing support for high-quality learning.

I congratulate the education minister for his work in delivering this legislation. I urge members to support both bills to ensure the government can support families most in need through a sustainable system that will deliver quality learning experiences for all of our children for the present and into the future. I commend this bill to the House.

Debate adjourned.