Bills Digest no. 179 2006–07
Families, Community Services and Indigenous Affairs
Legislation Amendment (Child Care and Other
2007 Budget Measures) Bill
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
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Families, Community Services and
Indigenous Affairs Legislation Amendment (Child Care and
Other 2007 Budget
Measures) Bill 2007
Date introduced: 31 May 2007
House: House of Representatives
Portfolio: Families, Community Services and
Sections 1 to 3 of the Act commence on Royal Assent. The amendments
relating to the child care benefit and the child care tax rebate
(Schedule 1) commence on 1 July 2007 whilst those relating to
health care cards commence on 1 October 2007.
To amend laws
relating to family assistance and social security to implement
child care measures announced in the 2007 Budget. In essence, these
changes provide for an increase of more than 13% in the rate of
child care benefit (CCB) commencing on 1 July 2007 and more rapid
access by families to the Child Care Tax Rebate (CCTR) by
delivering rebates via the Family Assistance Office and not the
taxation system as is currently the case.
The Bill will also extend the benefits of the
health care card to a number of young students with disabilities or
severe medical conditions.
The CCB was introduced in July 2000 and replaced
Childcare Assistance and the Childcare Cash Rebate. Under the
current rules, families can claim up to 50 hours per week of CCB
for approved childcare if they satisfy the work/study test - that
is, they are either working, are looking for work, are involved
with volunteer work, are studying or training - or are otherwise
exempt, such as if they have a disability or if they are caring for
a child that has a disability. Families are able to claim up to 24
hours per week of CCB without having to pass the work/study test.
Details available here:
There are currently about 730,000 Australian families eligible
to receive the CCB.
Families who earn less than $34,310 a year (or families on
income support) are eligible for the maximum rate of CCB which is
$148 per week for one child. This amount rises for families that
have additional children in care. Part rates of CCB are paid for
families with incomes higher than $34,310 per year and there is a
minimum rate of CCB ($24.85 per child per week) for families who
have incomes in excess of $98,348 (with one child). Higher income
rates apply for families with more than one child. CCB rates are
indexed each July in line with rises in the Consumer Price Index
(CPI). The Bill proposes a one-off 10% increase in the CCB from 1
July 2007 this combined with the normal yearly indexation will mean
a net increase of a little over 13% from the current rate. For
families on the maximum rate of CCB, and claiming for 50 hours
care, this equates to an extra $20.50 per week per child. For more
details on CCB rates see the Centrelink information page at
In recent years the increase in child care fees has far exceeded
increases in the CPI and as a consequence some families have found
it increasingly difficult to afford child care. One study reported
in February 2007 found that child care costs had risen by 64% over
the last five years, while inflation had only risen by 14% over the
same period.(1) No doubt the one-off 10% increase in the
rate of CCB will help improve affordability, but if child care fees
continue to increase at the rate they have in recent years, then
much of the increase may be eaten up by increased costs of
The CCTR allows families with children in approved care to
claim, through the tax system, 30% of out-of-pocket child care
expenses. This refers to the amount that families themselves have
to pay after their CCB entitlement is taken into account. Families
currently receive the 30% rebate when they finalise their taxation
returns, that is, from July onwards each year. Claims can be made
back to July 2004.
Families began to receive the 30% rebate for their 2004-05 child
care expenses when they finalised their 2005-06 tax returns, that
is, from July 2006 onwards. This delayed payment is caused by the
need to reconcile CCB entitlement for the financial year before an
accurate assessment of out-of-pocket expenses can be made. That
happens too late for a claim to be possible in the tax return at
the end of the year in which the child care was used. So CCTR can
only be claimed at the end of the following financial year. That
means that the payment might be made up to two years after the
out-of-pocket expense was incurred. The changes in this Bill mean
that, from 1 July this year, the rebate will be paid directly to
families at the end of the financial year in which they incurred
their child care expenses and it will be paid to all families
regardless of their tax liabilities.
The original decision to deliver
assistance through the tax system imposed rigidities that have
prevented timely delivery of the benefit of the CCTR. For this
reason the CCTR has been criticised for delivering assistance much
too long after child care costs are incurred, therefore providing
little immediate assistance to working families coping with high
child care costs. Delivering it as a payment via the Family
Assistance Office and bringing it forward by twelve months is
therefore a logical improvement to the program, since it goes some
way to address the problem of timeliness.
Another criticism that has been made about CCTR is that it is
not income tested and that it provides greater benefits to higher
income families. This is on account of their higher out-of-pocket
expenses because they have lower entitlements to CCB which is
income tested. However, it is misleading to look at CCTR in
isolation. Viewed with CCB, the whole package of child care
assistance has directed most assistance to lower income
This situation will continue with the Budget s changes. However,
the change to providing CCTR as a direct payment will also allow
low-income families to access their full rebate. The amount of the
CCTR entitlement will no longer be limited by the extent of the tax
liability of the eligible individual. That change together with the
increase in the rate of CCB is in fact likely to improve the
progressiveness of the child care assistance system by tipping the
balance somewhat more in favour of lower and middle income
For further details on the history of the CCTR and it how
operates, see the Parliamentary Library Research Note, The new
Child Care Tax Rebate .(2) The Research Note includes a
table showing how the CCB and the CCTR interact.
The third measure in the Bill, which is due to commence on 1
October 2007, allows eligible full time students (aged 16 to 25)
who are ex-carer allowance (child) care receivers ongoing access to
the health care card.
Carer allowance (child) is paid to people who care for a child
(under 16 years) with a disability or severe medical condition in
their own home. The benefit can be either a fortnightly payment
plus the health care card or just the health care card. The benefit
received depends upon the severity of the child s disability.
At present, once the child reaches 16 years of age, continuing
access to a concession card only occurs if the child is eligible
for a low income health care card (which is not available to
students aged 16 to 18 years) or another payment such as the
disability support pension that includes a pension concession
The measure in this Bill will allow all full time students who
were formerly eligible for the carer allowance (child) to continue
to have access to a health care card until they are 26. The health
care card allows the holders to get PBS prescriptions and certain
Medicare items at cheaper rates. The Second Reading Speech
indicates that approximately 26,000 students aged between 16 and 25
may benefit from this measure.
The Explanatory Memorandum provides estimates
for the costs of the various measures over four years from
2006-2007 (the current financial year) to 2009-2010 inclusive.
CCB - $412.6 million over four years. In
2006-07 the estimated cost is minimal, at $0.6 million.
CCTR - $1,234.2 million over four years. In
2006-07 the estimated cost is $451 million.
Health care card - $19.3 million over four
years. This includes a figure of $4.5 million for 2006-07. However,
as the measures will only commence on 1 October 2007, it is not
clear why there should be significant costs for the 2006-2007 year.
Certainly the Explanatory Memorandum does not shed light on whether
the relevant transitional provisions of the Bill (item 2 of
Schedule 2) are responsible for the estimated costs for
Item 5 inserts a
proposed Division 5 into existing Part 3, entitled
Eligibility for child care tax rebate . The
Explanatory Memorandum states that the eligibility criteria for the
CCTR are substantially the same as the current child care tax
offset criteria .(3) However, it is not clear what the
change (or changes) is, as the criteria cross-reference other
sections of the A New Tax System (Family Assistance) Act
1999 and other Acts. It would useful if the Government
clarified that no persons are likely to be significantly
disadvantaged by the new criteria.
inserts a proposed Division 4A
into existing Part 4 entitled Child care tax rebate
. This sets out the rules about how the amount of CCTR is
calculated for eligible persons.
The amount cannot exceed the upper limit set
out in proposed section 84F. For the current
financial year (ending 30 June 2007), the limit is $4211 per child
and for the 2008 financial year it is $4354. Due to items 9
and 11, the limit will be indexed for subsequent years.
For reference, the current limit is $4000.
Essentially, the amount claimable - subject to
the upper limit mentioned above - remains at 30% of the claimant s
out of pocket expenses. Such expenses are calculated after
deducting any payments through the CCB and the Jobs, Education and
Training (JET) Child Care Fee Assistance.
These amendments deal with the administrative
mechanics of the CCTR. Notably, item 13 covers
situations where the CCTR was paid to a person who was not entitled
to it or where there was an overpayment. In such cases, a debt is
owned to the Commonwealth and thus recoverable in the same way
other family assistance debts are recoverable under existing
subsection 82(1) of the A New Tax System (Family Assistance)
(Administration) Act 1999.
Again these are administrative amendments
reflecting the change from the current child care tax offset system
to the proposed CCTR from the 2007 financial year.
The standard amount that can be claimed per
hour of approved care when this Act was first passed was set at
$2.40 and that amount still appears in the relevant part of the
table in clause 4 of Schedule 2. However, as the amount has been
indexed yearly through the operation of Schedule 4, the actual
amount payable is currently a little under $3 per hour (for
historical rates see
Item 7 inserts a new standard hourly amount of
$3.37, which will apply from 1 July 2007. As mentioned earlier in
this Digest, this figure is an increase of 10 per cent plus the
usual CPI indexation. The system of yearly indexation will
2 amends the Social Security Act 1991 to insert
eligibility requirements for a health care card for certain
Australian residents living in Australia, who are studying
full-time and are aged 16 to 25 years inclusive. The detail of the
measure is discussed in the background to this Digest. Note that
any dependants of the student cannot be listed on the card and thus
are not eligible for benefits under it: item
The measures contained in this Bill are likely
to be non controversial and supported by the wider community. Some
groups and individuals may argue that more needs to be done to help
families get and pay for childcare and that more needs to be done
to help students with disabilities. However, as stand-alone
measures, the three main changes introduced in this Bill are likely
to receive general support.
- J. Hildebrand, Child HQs for Suburbs ,
Daily Telegraph, 5 February 2007 p. 1.
- Greg McIntosh, The new Child Care Tax Rebate
Research Note no. 3 2005 06, http://www.aph.gov.au/library/pubs/rn/2005-06/06rn03.htm
- Explanatory Memorandum, p. 4.
Social Policy Section
Law and Bills Digest Section
12 June 2007
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