House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Minister for Education, the Honourable Sussan Ley MP)

Schedule 1 Amendments

Summary

This Schedule makes amendments to the Family Assistance Act to maintain the Child Care Rebate (CCR) limit at $7,500 per child, per financial year for three income years starting from 1 July 2014, with the indexation of this amount recommencing in line with CPI on 1 July 2017.

This Schedule also makes amendments to the Family Assistance Act to maintain the Child Care Benefit (CCB) income thresholds at the rate applicable as at 30 June 2014, starting from 1 July 2014 for three income years, with the indexation of this amount recommencing in line with CPI on 1 July 2017.

Background

CCR is a payment assisting eligible individuals with the cost of child care fees for sessions of care provided by an approved child care service. The amount of CCR an individual may receive for a child for an income year is 50 per cent of the difference between the amount that the individual is liable to pay for care provided to the child and the sum of the individual's CCB entitlement (if any) and JETCCFA (if any) relating to that child, up to the maximum limit legislatively set at $7,500 for 2013-14 (CCR limit). The legislation currently provides for the CCR limit amount to be indexed by CPI on 1 July 2014.

CCB is a means tested payment that provides financial assistance to help families with child care costs. To qualify for CCB, recipients need to meet an income test, with the maximum rate currently payable for adjusted taxable income under $41,902. The legislation currently provides for the CCB income thresholds to be indexed by the Consumer Price Index on 1 July each year.

Explanation of the changes

A New Tax System (Family Assistance) Act 1999

Item 1 - Paragraph 84F(ea)

Section 84F specifies the amounts of the CCR limit applicable in respect of a child and an income year. These amounts are relevant to the calculation of the amount of CCR for a quarter (under section 84AA) and for an income year (under section 84A) and the amount of CCR relating to CCB in substitution (under section 84DA) and the amount of CCR for a week (under section 84AAA).

Paragraph 84F(ea) currently specifies the limit of $7,500 for the income years ending on 30 June 2012, 30 June 2013 and 30 June 2014.

Item 1 amends paragraph 84F(ea) to specify a CCR limit of $7,500 for three additional income years, being the income years ending on 30 June 2015, 30 June 2016 and 30 June 2017.

Item 2 - New subclause 3(5B) of Schedule 4

This item inserts a new heading and a new subclause 3(5B) of Schedule 4, to provide that the CCB lower income threshold and the CCB upper income threshold are not to be indexed on 1 July 2014, 1 July 2015 and 1 July 2016. A note to subclause 3(5B) states that indexation of the income thresholds resumes on 1 July 2017.

Item 3 - Heading to subclause 3(6A) of Schedule 4

This item substitutes the heading to subclause 3(6A) of Schedule 4 to remove the previous reference to specific income years.

Item 4 - Subclause 3(6B) of Schedule 4

This item extends the non-indexation of the CCR limit in subclause 3(6B) of Schedule 4 to include the income years starting on 1 July 2014, 1 July 2015 and 1 July 2016.

Item 5 - Note to subclause 3(6B) of Schedule 4

This item amends the note to subclause 3(6B) of Schedule 4 to state that indexation of the CCR limit resumes on 1 July 2017.

Item 6 - New subclause 3(6C) of Schedule 4

This item inserts a new subclause 3(6C) of Schedule 4 which provides that when indexation of the CCR limit resumes on 1 July 2017, the amount of CCR limit which is to be indexed is $7,500.

Family Assistance Legislation Amendment (Child Care Budget Measures) Act 2011

Item 7 - Repeal item 5 of Schedule 1

This item repeals item 5 of Schedule 1 of the Family Assistance Legislation Amendment (Child Care Budget Measures) Act 2011 . This item implemented a provision with the same effect as new subclause 3(6C) of Schedule 4 to the A New Tax System (Family Assistance) Act 1999 (see item 6, above), applying to the indexation of the CCR limit that would have resumed on 1 July 2014 but for the changes introduced by this Bill. Accordingly, item 5 of Schedule 1 of the Family Assistance Legislation Amendment (Child Care Budget Measures) Act 2011 is no longer required.