WARNING:
This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 29 October 1996.
CONTENTS
Child Care Legislation Amendment Bill 1996
Date Introduced: 10 October 1996
House: House of Representatives
Portfolio: Health and Family Services
Commencement: Generally, at Royal Assent; however,
Schedule 1 (which effects amendments to the Child Care Act
1972) is to commence on 1 July 1997. It should also be noted
that because of the administrative arrangements relating to the
Child Care Cash Rebate, the actual date of effect to changes to the
Childcare Rebate Act 1993 will be the week beginning 7
April 1997.
The Child Care Legislation Amendment Bill 1996 (the Bill)
proposes to implement the following Budget-related measures:
- discontinue the operational subsidy to community based long day
care centres, to take effect from 1 July 1997; and
- amend the Childcare Rebate Act 1993 to: reduce the
Childcare Cash Rebate from 30 per cent to 20 per cent for families
with taxable income in the current year higher than the family
income cut offs for Part A of the Family Tax Initiative (which is
currently $70,000 per annum for a family with one child.)
The Child Care Act 1972
The Child Care Act 1972 provides the legislative basis
for Commonwealth Government funding of child care. It was enacted
by the Liberal-Country Party Government of William McMahon, in
recognition of the increase in labour force participation by women,
and the consequent need to provide affordable quality child care to
their children. It was indicative of that Government's policy that
the Act was administered by the Department of Labour.(1)
Originally, the Act introduced capital and recurrent funding of
'local' child care centres. Operational subsidies were subsequently
extended to other types of child care services, including Family
Day Care (FDC), Occasional Care, and Outside School Hours Care.
The funding arrangements are part of the Children's Services
Program (CSP), which is administered by the Health and Family
Services Portfolio. To receive an operational subsidy, an 'eligible
child care centre' (ie. one operated or proposed to be operated by
a not-for-profit body corporate, or a local Government authority,
or by a Commonwealth, State, or Territory body, or a religious or
charitable organisation) is required to put in a submission for
funding. Once the centre has been approved for funding, the
operational subsidy becomes part of the Commonwealth's recurrent
expenditure.
It has been argued that the number of centres approved for
receipt of the operational subsidy appears to be more contingent
upon the funding that the Government has appropriated in respect of
child care, rather than demonstrated need for centres.(2) In
addition, it has been suggested that the submission model of
funding results in funds going to those groups who have the skills
and resources to put together a funding submission.(3) It was for
this reason that Kim Beazley (sen.), the Opposition spokesman on
child care, argued against the submission-based model. However, his
proposed amendment to the Child Care Bill was defeated in the
Senate.
Community-based long day care centres
Long day care centres are centres that open for at least 8 hours
a day during normal working days (ie. Monday to Friday) and operate
for at least 48 weeks of the year. As mentioned above,
community-based LDCs are not-for profit centres, generally operated
by a local government authority, a community organisation, or a
religious or charitable organisation. The centres themselves are
normally administered by a management committee consisting of
parents and other members of the community.(4)
The establishment and subsidisation of community-based child
care centres represented an attempt to give parents and local
communities control over the child care services in their area.
Proponents of community-based child care services argue that this
form of management results in benefits to the children, the
parents, and the service itself. Supporters argue that parental
involvement on committees ensures that the centre is more
responsive to the needs of parents and children. This is reinforced
by the fact that the parents on the management committee will also
experience the effects of any decisions that they make.
Furthermore, as parents are given a greater opportunity to
influence the type of care their child receives, they are much more
likely to be satisfied with the quality of the care.(5)
Location of community-based LDCs
Although community-based child care centres are located in urban
and rural Australia, in rural and remote Australia, they make up a
greater proportion of the child care services available than they
do in urban areas.(6) This is explained in part by the fact that
commercial operators do not perceive that long day centres in these
areas (particularly small rural centres and remote areas) as being
viable. On the other hand, the operating subsidy received by
community-based long day care centres can be used to offset the
greater expense of operating a long day care centre in rural and
remote areas.(7)
In its report into the operation of federal child care
legislation, the Australian Law Reform Commission (ALRC)
examined the situation of families living in rural and remote
areas. A consistent theme of the submissions from child care
providers in rural areas in remote areas was that these services
are disadvantaged because services costs more to operate, and it is
more difficult for these services to remain viable. The ALRC noted
that the increased expense arose as a result of a number of
factors, including: the need to offer financial incentives to
attract staff from urban areas; the increased cost of food,
building materials, etc as a result of additional transport costs;
greater training, transport and 'phone costs.
The nature of the operational subsidy
From 1972 - 1985, the operational subsidy provided to
community-based LDCs equalled 75 per cent of the salaries of
approved qualified staff, based on attendance of children on a
particular representative day. The funding formula was based on one
nurse for each 20 children over the age of three, one teacher for
every 15 children over the age of three, and 1 nurse for every ten
children under three years of age.
In November 1985, the funding formula was changed; an amount of
subsidy is paid per child, based on approved places and utilisation
rates, reducing the amount of operational subsidy, on average, by
approximately 50 per cent.(8) The subsidies are currently indexed,
and the present levels of subsidy are as follows:
- $21.40 for children under three years of age; and
- $14.35 for children aged three years of age and over.
Removal of the operational subsidy
The Federal Government announced the removal of the operational
subsidy for community-based LDCs as part of Budget '96. It is
anticipated that the removal of the operational subsidy in respect
of community-based LDCs will save the Government $118.4 million
over three years. To assist community-based LDCs to adjust to the
removal of the operational subsidy, the Government has allocated
$8.3 million over the next four years. With this funding,
community-based LDCs are supposed to hire consultants to help them
to restructure their service and improve efficiency without raising
fees. (9)
In addition, the Government has undertaken, over the next four
years, to provide $12.5 million to ensure that families in severely
disadvantaged areas do not lose access to child care , plus $10.9
million to provide capital funding to ensure that '...families in
rural and remote areas and places of special need have access to
flexible child care...'(10)
However, despite the allocation of funding to help them adjust
to the loss of the operating subsidy, community-based LDCs have
argued that this will not be sufficient, and they will be forced to
pass on the costs to parents.(11) It has been suggested that a
low-income family with one child under the age of three receiving
maximum Childcare Assistance ($2.30 per hour, or $115.00 for 50
hours) would, after the Childcare Cash Rebate was factored in,
experience a rise in the cost of care for that child per week from
$29.50 to $50.90.(12) The question must also be asked as to whether
community-based organisations would consider it worthwhile or
feasible to continue operating a long day care centre in the
absence of an operational subsidy.
The removal of operational subsidies (in respect of all child
care services) has been advocated by a number of commentators and
groups for almost two decades. The removal of subsidies was first
proposed during the Fraser Government. During its period in office,
the Labor Government conducted a number of reviews relating to the
provision of child care services. Supporters of its removal (eg the
then Senator Walsh) argued that the subsidy should be replaced by a
voucher system. (13)
In addition, providers of commercial child care services (eg.
commercial long day care centres, which do not receive operational
subsidy) have called for the Government to cease providing
operational subsidies to child care providers, including
community-based long day care centres. In so doing, they argue that
they already provide the services (eg provide places for
under-twos) provided by community-based long day care centres, and
do so more efficiently.(14)
On the other hand, supporters of the retention of the
operational subsidy for community-based LDCs argue that commercial
long day care centres are able to reinvest their profits to improve
their services. Community-based LDCs, being operated on a
non-profit basis, rely on the operational subsidy in order to
provide quality, affordable child care. In addition, as the
original formula for the provision of the operational subsidy was
premised on the need to employ highly trained nursing and teaching
staff, the establishment of community-based LDCs has led to an
increase in the quality of child care overall, as it has encouraged
commercial operators to improve the quality of their child care
services in order to compete.(15)
The National Commission of Audit Report, and the EPAC
Report into Future Child Care provision in Australia
The Government's decision to remove the operating subsidy for
community-based child care centres is broadly consistent with
recommendations made in both the National Commission of Audit
Report, and the EPAC Report into Future Child Care Provision in
Australia. (16)
Both reports recommended the abolition of the operational
subsidy in respect of all child care services. However, there was a
divergence of views as to whether and how the funds saved should be
redirected. The National Commission of Audit recommended that, as
part of reducing the complexity of Commonwealth-State financial
arrangements and service delivery, that sole responsibility for the
provision of child care services should be devolved to the States,
with Commonwealth funding support being provided by means of untied
general purpose grants.(17) More specifically, it recommended the
withdrawal of operational subsidies from '...publicly funded child
care centres to ensure competitive neutrality and improved equity
in payments amongst parents using public and private sector
providers.'(18)
The EPAC Report, on the other hand, recommended that operational
and capital subsidies paid in relation to all types of child care
services should be abolished and folded into a single Child Care
Benefit. Exceptions were proposed in relation to children with
special needs (ie. children with disabilities, Aboriginal and
Torres Strait Islander children, and children living in rural and
remote areas). This was regarded as being the most equitable means
of delivering child care services.(19)
Rather than adopt either of the recommended approaches, the
Government appears to have adopted a course which falls somewhere
between them, (ie. remove the operational subsidy, but not replace
it, as suggested in the EPAC Report).
The Family Tax Initiative, Child care assistance and
child care cash rebate
The Child Care Cash Rebate Scheme is administered by the Health
Insurance Commission, through its Medicare offices. At present, it
is not means tested. 'Eligible families' are required to register
and establish with Medicare that the child care expenses for which
they are seeking the Child Care Cash Rebate (the Rebate) are 'work
related'. Rebate payments are based on the presentation of receipts
from registered carers. At present, the Rebate is not
means-tested.
To a certain extent, the Rebate complements the Childcare
Assistance Scheme; as it is payable on the amount paid by a family
for child care after Childcare Assistance has been deducted.
(However, it should be noted that, unlike Childcare Assistance, the
Rebate is available in respect of child care provided by informal
registered carers.)
The Commonwealth Childcare Assistance Scheme (CCAS) provides
funds to approved child care services, to enable them to charge
families who are eligible for assistance a lower fee than they
would otherwise pay. As for the amount of assistance, this is
calculated upon a sliding scale according to family income and the
number of dependent children.(20) The Childcare Assistance
threshold for maximum Childcare Assistance benefit is currently
$476.00 per week. The maximum fee ceiling on which
Child care Assistance will be paid is $2.30 per hour, or $115.00
for 50 hours per week.(21)
The other amendments to the Bill propose to impose a partial
means test upon the Child Care Cash Rebate. Families with dependent
children will be able to claim the full 30% rebate if their
combined income per annum is below the threshold for Part A of the
Family Tax Initiative (ie $70,000 per annum), or they receive a
certificate from the Department of Social Security (DSS) stating
that they are eligible for Family Payment. Despite the partial
means-testing of the Rebate, this is unlikely to silence the
criticisms of commentators who believe that the Rebate does not
target those families who are in need, and the greatest benefit is
derived by families on middle to high incomes.
Schedule 1 - amendments to the Child Care Act
1972
Item 2 proposes the repeal of section 11 of the
Child Care Act 1972 (the Act). At present,
section 11 provides for the Minister to approve payment of
operational subsidy to operators of community-based long day care
centres. Subsection 11(7) of the Act allows the Minister to
determine levels of subsidy and notify them in the
Gazette.
Schedule 2 - Amendments to the Childcare Rebate Act
1993
Items 2 to 5 propose a number of amendments to
section 4 of the Childcare Rebate Act (CCR Act) for the
purpose of clarifying the distinction between de facto
partners and business partners for the purposes
of the legislation.
Item 7 adds subsection 10(2), which provides
for the HIC to determine that a person is taken to be a parent of a
child, where that person '...has day-to-day care of the child on a
long-term basis'. In other words, a person need not have
guardianship of a child to be entitled to apply for a determination
that they be taken to be a parent.
Item 12 amends the definition of 'child care'
set out in section 27 of the Act. The salient difference is the
amendment of paragraph 27(1)(d). Currently, this paragraph defines
'child care' by reference to the premises at which a child care
service (ie a service whose operation is partially subsidised
by the Commonwealth and/or a State or Territory, or a child care
service as determined by the Minister). Paragraph 27(1)(d) is to be
replaced by paragraph 27(1)(b), which, rather than define 'child
care' by reference to premises, provides for the HIC to determine
other forms of child care as 'child care', for the purposes of the
Act. New subsection 27(3) provides for a person to make an
application to the HIC for a determination pursuant to 27(2).
Item 13 of the Bill repeals existing paragraph
36(c) and replaces it with a new provision. The application of the
paragraph will be extended, to ensure that Child Care Cash Rebate
is not paid to a 'registered carer' in respect of care provided to
dependent children of a de facto partner, or a business
partner.
Item 14 of the Bill attempts to address the
situation where a claim is made in respect of two sets of fees for
one period of care. At present, section 36(1)(d) provides that
Child Care Cash Rebate is not payable where the claimant, or a
member of the claimant's family, has already made a claim in
relation to child care provided to the child or children specified
in the claim, for the same period. Item 14 applies to the
calculation of the rebate from the week beginning on 7 April
1997.
Subsection 36(2) provides for the Minister to determine
circumstances in which the rebate will be payable in respect of
both sets of fees. A determination under subsection (2) is a
disallowable instrument.
Processing of claims for Child Care Cash Rebate and
review of decisions
Item 15 of the Bill proposes the insertion of
proposed section 36AA, which deals with the processing of claims.
The HIC is to make a decision on a claim within 14 days after the
claim is made. Where the HIC considers that the rebate may not be
payable, it is obliged to give notice to the claimant as soon as is
practicable. Once notice is given, the HIC may defer the making of
a decision on the claim until the end of 28 days after the notice
was given, or the Commission is satisfied that the claim as to
whether or not the rebate is payable in respect of the claim,
whichever occurs first.
Proposed subsection 36(4) provides that where the HIC has not
informed the claimant in writing before the end of 28 days after
the provision of notice, the HIC is taken to have made a decision
that the rebate is not payable in respect of the claim. Where the
HIC decides that the rebate is not payable, section 55 of the Act
provides for the claimant to apply to the HIC for a reconsideration
of the decision. Subsections 55(2) and (3) provide that the
application must be in writing, and must be made within 28 days of
the applicant being informed of the decision (or such period as
extended by the HIC).
However, there is no express provision in the Childcare
Rebate Act stating that the HIC to notify a claimant that
their claim for rebate has been refused. Rather, the legislation
imports the obligations on decision-makers that are set out in
section 27A of the Administrative Appeals Tribunal Act
1975 (the AAT Act).
Section 27A of the AAT Act requires a person who makes a
reviewable decision to take such steps as are reasonable
in the circumstances to notify a person who is affected by a
decision of the making of the decision and their right to have the
decision reviewed. In so doing, the decision maker must have regard
to the Code of Practice for Notification of Reviewable
Decisions and Rights of Review (the Code) determined by the
Attorney-General under section 27B. The provisions of the Code are
legally binding upon decision-makers. However, it must also be
noted that section 27A(3) provides that a failure to notify an
affected person of a decision will not affect its validity.
- As the decision of the HIC on reconsideration is reviewable by
the Administrative Appeals Tribunal, a decision that a claimant is
not entitled to the rebate is a reviewable decision for
the purposes of the AAT Act (section 27A(4)(i)).
The Code sets minimum standards of practice for notification of
reviewable decisions and rights of review, and agencies are
encouraged to supplement them in their area of operation.(22)
In relation to a person's right to seek a review of a
first-instance decision made by the HIC, a note in similar terms to
the note below section 57 should be inserted beneath subsection
36(4) of the CCR Act.
Item 15 also inserts section 36AB, which provides for the
suspension of payments pending inquiries into the registration of a
family or carer. This suspension continues until either the end of
28 days after the notice of suspension was given, or until the HIC
notifies the registered family or carer that the suspension is
revoked, or the registration is cancelled. Where a suspension has
ended, a registered family or carer's right to receive the rebate
is taken not to have been affected.
Calculation of Child Care Cash Rebate and Compliance
issues
Item 18 repeals the current sections 45 and 46,
which deal with the calculation of the rebate. A registered carer
or family will only be entitled to the rebate if the cost of care
in a particular week exceeds the minimum weekly threshold. The
formulae for the calculation of the rebate are contained in the
proposed subsections 45(2) and (3). These are as follows:
- Where the claim is less than the maximum claimable amount, the
rebate is the difference between the child care expenditure for
that week and the minimum weekly threshold, multiplied by the
rebate percentage (either 30 percent or 20 percent, depending on
which applies);
- Where the claim exceeds the maximum claimable amount, the
rebate is the difference between the maximum claimable amount and
the minimum weekly threshold, multiplied by the rebate
percentage.
'minimum weekly threshold' - is the difference between the
fee relief ceiling and the maximum amount of relief that would be
payable under the guidelines in force under section 12A of the
Child Care Act in respect of a child care centre for providing a
child with 50 hours of child care.
'fee relief ceiling' - is the maximum fee on which Childcare
Assistance will be paid. At present, this is $2.30 per hour; the
total for 50 hours a week at this rate is $115.00, and applies in
approved long day care centres, family day care schemes and some
occasional care centres.
For those families that are eligible, the Rebate is payable in
respect of the 'gap fee', which is the fee that is payable by a
family where a child care service charges more than the fee
ceiling. Where another claim has already been made in respect of
child care, the amount of rebate payable will be deducted by the
amount of rebate paid or payable in respect of those claims.
Section 46 deals with the issue and cancellation of family
payment notices and family income notices. (The criteria governing
eligibility for, and the issue of, these notices are those
contained in the Social Security Act 1991 (SSA Act). Where
a notice is cancelled, that person must notify the HIC within 14
days of receipt of the notice; failure to do so attracts a penalty
of 20 penalty units ($2,000).
Section 46 also allow DSS to impose obligations upon recipients
of a family income or family payment notice to provide information
to DSS in relation to changes in circumstances which might affect
eligibility for the entitlement. Refusal or failure to comply with
such obligations attracts a penalty ($2,000).
In addition, section 46 imports the internal review provisions
of the SSA [section 1240(1)] in respect of decisions not to issue,
or to cancel, notices.
Item 20 proposes amendments to section 49(4),
which deals with matters that are to be included in a notice
provided to a registered carer. This item imposes an obligation
upon registered carers to notify the HIC of matters affecting
eligibility for registration, under (new) section 50A (inserted by
Item 22). The HIC is to determine the matters in relation to which
registered carers are required to notify the Commission.
Items 23 -25 clarify that decisions made at
first instance by the HIC are reviewable decisions for the purpose
of the Act, and add classes of decisions that are reviewable.
Item 27 inserts section 62AA, which provides
for the Minister to make guidelines about matters in respect of
which the Commission, in making determinations, must comply.
Item 28 is a savings provision, to ensure that
guidelines that were in force under section 17 of the CCR Act
immediately before the commencement of Item 11 (ie the repeal of
section 17) will continue in force as if they had been made under
section 62AA of the CCR Act 1993.
- Gifford, Jean, Child Care Funding Re-assessed: operational
subsidies, fee relief and taxation issues, Australian Early
Childhood Association; Canberra, 1992, p.31.
- Gifford, p.5.
- Brennan, Deborah, The Politics of Australian Child Care:
From Philanthropy to Feminism, Cambridge University Press,
1994, pp.92-93.
- Australian Law Reform Commission, Report No.70 (Interim),
Child Care for Kids: A review of legislation administered by
the Department of Human Services and Health, 1994, p.84.
- Australian Law Reform Commission, Report No.70 (Interim),
Child Care for Kids: A review of legislation administered by
the Department of Human Services and Health, 1994, p.86.
- This conclusion is derived from a comparison of randomly
selected urban and rural Federal electorates; Australian Electoral
Commission, Portfolio Strategies Group, Electorate
Profiles; Calare, Canberra, Perth, Franklin, Northern
Territory, Kalgoorlie.
- It should be noted that, until recently, there were no
community-based LDCs in South Australia (five centres have recently
opened in Adelaide). Queensland has the highest percentage of
community-based LDCs.
- Gifford, p.11.
- Budget 1996/97, Child Care Budget Initiatives, 20
August 1996.
- Budget 1996/97, Child Care Budget Initiatives, 20
August 1996.
- Gunn, Michelle, 'First steps in childcare industry overhaul',
The Australian, 24 August 1996.
- Bagwell, Sheryle, 'Fair-to-meddling deal on kids',
Financial Review, 28 August 1996.
- Walsh, Peter, 'Care for the rich kids', Australian
Financial Review, 27 August 1996.
- EPAC, Child Care Task Force Interim Report: Future Child
Care Provision in Australia, June 1996, p.100.
- Gifford, p.19
- Economic Planning Advisory Commission, Future Child Care
Provision in Australia (Interim Report), Canberra, June 1996;
National Commission of Audit, Report to the Commonwealth
Government, AGPS, June 1996.
- National Commission of Audit, p. xiii
- National Commission of Audit, p.68.
- EPAC Report, p.106.
- Lindsay, Mary, 'Some recent developments in child care: 1
January 1994 - 30 September 1995, Current Issues Briefs (Social
Policy Group), No.6, 1995/96, 4 October 1995; p.3.
- Childcare Assistance (Fee Relief) Guidelines,
Commonwealth of Australia Gazette, No. S 368, 29 September
1995. (A variation to the current Guidelines has been laid before
both Houses of Parliament. Subject to disallowance, it is due to
take effect on 1 April 1997.)
- Code of Practice for Notification of Reviewable Decisions
and Rights of Review, Michael Lavarch, Attorney-General, 30
November 1994.
Elen Perdikogiannis Ph. 06 277 2699
25 October 1996
Bills Digest Service
Parliamentary Research Service
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ISSN 1323-9031
© Commonwealth of Australia 1996
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1996.
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