Bills Digest no. 139 2007–08
Family Assistance Legislation Amendment (Child Care
Budget and Other Measures) Bill 2008
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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Family Assistance Legislation Amendment
(Child Care Budget and Other Measures) Bill
introduced: 29 May 2008
House: House of Representatives
Portfolio: Education, Employment and Workplace
Schedule 1 items 1 to 63 commence on 7
July 2008. Schedule 2 and item 5 of Schedule 5 commence on 1 July
2008. Item 23 of Schedule 5 commences on 1 January 2009. The
remainder of the Bill commences on the day the Act receives the
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The Bill includes amendments to implement the following 2008-09
- The percentage of out of pocket child care expenses claimable
under the Child Care Tax Rebate (CCTR) is to increase from 30 to 50
- The maximum amount that can be claimed for each child in care
under the CCTR is to increase from $4 354 to $7 500 per annum.
- The CCTR is to be paid quarterly rather than annually.
- The minimum rate of Child Care Benefit (CCB) is to be removed
so that a person s rate of CCB may reduce to zero.
- CCTR is to be available to those who claim CCB and receive a
zero rate of CCB.
The Bill also includes amendments that provide for:
- Changes to debt recovery provisions for CCB and CCTR.
- The expansion of a civil penalties scheme for child care
- The expansion of entry powers for authorised officers
undertaking on-site inspections of approved child care
- Other minor amendments relating to child care assistance
The changes to the CCTR that form the heart of this package of
amendments have their origins in the child care policy announced by
the ALP during the 2007 election campaign. The abolition of the minimum rate of
CCB was added in the 2008-09 Budget.
During the 2004 election campaign the Howard
Government announced, that it would introduce a 30 per cent CCTR
for out-of-pocket child care costs. The CCTR was designed to complement the already
existing CCB, which was the main form of child care
The CCTR was available to families who
- in receipt of the CCB,
- used approved child care, and
- who met the CCB work/study/training test (or were otherwise
eligible for up to 50 hours of CCB per week).
Families were able to claim 30 per cent of
their out-of-pocket costs (that is, costs in excess of CCB payments
received) for approved child care up to a maximum of $4 000 per
child per annum. This amount was indexed on an annual basis in line
with movements in the Consumer Price Index. It is currently $4
Originally, out-of-pocket child care costs
could be claimed at the end of the financial year after the costs
were incurred. So costs during the first year of operation from 1
July 2004 for the 2004-05 year could not be claimed until the 2005
06 tax year. This delay was due to the need to establish out of
pocket costs, after CCB entitlements had been finalised in October
of each year by the Family Assistance Office.
The other problem with the CCTR was that it
was a non-refundable tax offset. It could only reduce a person s
tax liability to zero. Once a person s basic income tax liability
had been reduced to nil, the tax payer could not receive the excess
as a refund. However the remaining rebate could be transferred to
the taxpayer s spouse. Likewise, where the child care user didn t
have enough income to have a tax liability, they didn t benefit
from a tax rebate.
The 18 month to two year delay between incurring costs and
receiving the rebate was an obvious problem and was addressed in
the 2007-08 Budget. The Government changed the CCTR into a direct
payment administered by Centrelink. It became a tax rebate in name
only and was paid at the end of the year in which the costs were
incurred after the correct entitlement to CCB had been established.
In 2007 claimants received two years worth of CCTR in one payment
shortly before the 2007 election.
This change also meant that the CCTR could now be paid in full,
regardless of the tax liability of the claimant.
The ALP included the increased rebate level and maximum payments
in their 2007 election policy.
Recognising the delivery problems of the CCTR as originally
implemented, both sides of politics offered enhancements to the
delivery of CCTR in the 2007 election campaign. The ALP promised to
implement the change in this bill to quarterly payments, with this
New information systems enable out of pocket
costs to be calculated faster and in office, a Rudd Labor
Government will fast track the introduction of the new Child Care
Management System with the goal of paying the 50 per cent rebate
The Coalition policy promised that:
From April 2008, a re-elected Coalition
Government will pay the 30 per cent Child Care Tax Rebate directly
to child care services so that they can pass on this benefit to
parents immediately, when they need it most. This will have the
effect of cutting by 30 per cent the amount parents have to pay
upfront to their child care service each week.
The Government rationale for the changes to the CCTR is provided
in the Ministers Budget press release:
The Government recognises that the early years
are critical. As part of an ambitious reform agenda that will
provide affordable and accessible quality child care and universal
access to preschool, the increased CCTR is a substantial
contribution to the Education Revolution.
The increase will reduce the burden of child
care costs for parents, helping them get back into the workforce or
further training. Greater workforce participation builds extra
capacity in Australia s economy, helping to ease inflationary
Moving to more frequent, quarterly payments
will help families meet their regular child care expenses,
providing more assistance closer to the time that costs are
These changes to the rate and frequency of the
CCTR are a key part of the Rudd Government s commitment to
improving the affordability of child care.
The main issue arising in media coverage of the CCTR changes
concerns the impact on fees charged by child care services. There
are fears that child care fees will increase at a greater rate than
usual now that families have greater capacity to pay due to the
increased government subsidy provided by the CCTR.
Unlike other programs to subsidise child care costs such as the
Child Care Cash Rebate (superseded in 2000) and the CCB, the CCTR
pays 50 per cent of out of pocket child care costs. Those costs can
expand as fees increase. Other programs effectively capped the
subsidy they provided by having a maximum hourly or weekly benefit.
CCTR has quite high annual maximum rebate levels that will probably
only benefit higher income families using full-time care. So there
is potentially more scope for fee increases to drive up CCTR rebate
levels due to the proposed more generous structure of the rebate;
50 per cent rather than 30 per cent, and the amount that can be
claimed; up from $4 354 to $7 500.
However CCTR has been in place for child care cost incurred
since July 2004. Child care costs as measured by the Child Care
Component of the Consumer Price Index (CPI) have grown well above
inflation since 2003 before the CCTR was announced. Over the last
four years increases have been between 12 and 13 per cent per
annum. This measure gives no clear guidance as to the impact of the
CCTR s arrival on child care costs as opposed to other drivers of
costs such as wages and demand for limited places.
CCB was introduced in July 2000 by merging two pre existing
child care fee relief programs: Child Care Assistance and the Child
Care Cash Rebate. The merger of the two programs produced a payment
structure that tried to preserve certain of the features of the
previous programs so that no one would be disadvantaged.
The minimum rate of CCB was put in place so that families who
had formerly claimed the Child Care Cash Rebate would continue to
get some assistance regardless of their family income. The Cash
Rebate had provided families with a payment equal to 20 or 30 per
cent of their child care costs after they had paid a basic fee
component and deducted any Child Care Assistance. The minimum rate
of CCB preserved this non-means tested basic component in a similar
form to that paid by the cash rebate before 2000.
With the introduction of CCTR in July 2004, the rationale for
the minimum rate of CCB began to be eroded, because there was now
another means test free method of providing assistance with child
care fees. However it did not provide immediate assistance because
of the long wait between paying child care costs and receiving
CCTR. It also didn t provide assistance to those who didn t have a
tax liability. Now that the payment of CCTR is to be made quarterly
and also to those who do not have a tax liability, the function of
the minimum CCB rate as a mechanism to provide a basic rate of fee
relief to all families has been taken over by CCTR.
Enhancements to the CCTR are estimated to cost $1.571 billion
over four years. However, the abolition of the minimum rate of CCB is
estimated to save $224.1 million over four years.
Item 1 of Schedule 1 substitutes a new
paragraph 57F(1)(b) in the Family Assistance Act
1999 (FAA) to ensure that CCTR can be paid to families where a
determination has been made that their rate of CCB is zero.
Items 7 to 10 of Schedule 1 provide for
amendments to the FAA for the minimum rate of CCB to be removed.
This means that the existing income test will reduce a families
entitlement to CCB to zero rather than reducing it to the minimum
payment that is currently $0.564 per hour of care.
The table below compares the thresholds at which the minimum
rate is paid at present with the estimated thresholds at which no
CCB will be paid after 1 July 2008.
Number of children
Minimum rate cuts in 2007-08
minimum rate would have cut in 2008-09
zero rate will cut in 2008-09
Note: incomes shown are family incomes that include the income
of both parents.
An estimated 571 900 families were eligible for CCB in 2007.
About 94 per cent of them (about 538 000) claimed CCB and about 24
per cent of that group (about 129 000) received the minimum rate.
So this group will lose some or all of their CCB entitlement but
benefit rather more from the increase in the CCTR to a 50 per cent
Items 14 to 62 of Schedule 1 amend various
provisions of the Family Assistance (Administration) Act
1999 (FAAA) to ensure that the removal of the minimum rate of
CCB does not cause any unintended consequences for the payment of
CCB by fee reduction or by lump sum for past periods.
Item 1 of Schedule 2 changes the amount of
rebate available from 30 per cent to 50 per cent in Section
84A of the FAA.
Item 2 of Schedule 2 sets a maximum rate of
CCTR for the 2008-09 year at $7 500 in Subsection
84F(1) of the FAA.
Government estimates in the table below indicate that families
with a child in full-time child care will benefit by between $1 195
and $2 486 per annum from these changes. Families using part-time
and out of school hours care will receive lesser benefits in line
with the number of hours used.
One child family having full time child care (LDC 50
hrs) - per week
How much you
Items 3 and 4 of Schedule 2
provide for the indexation of the new maximum rate of CCTR.
Part 2 of Schedule 2 makes amendments to the
FAA and the FAAA to provide for the quarterly payment of CCTR.
Quarterly payments will be available to claimants who claim CCB by
fee reduction. Those who make CCB claims for past periods will not
be able to claim quarterly payments of CCTR.
The quarterly payments will be paid directly to the claimant.
They will be calculated where Centrelink receives one or more
fortnightly reports from an approved child care service that
include child care usage by the claimant s child.
Schedule 3 contains amendment to the FAAA to
clarify certain debt recovery provisions and to allow the recovery
of CCTR debts from CCB entitlements.
Schedule 4 contains amendments to expand the
civil penalties regime to regulate approved child care services.
Currently, mainly criminal offence provisions and an infringement
notice scheme are used to enforce compliance with obligations under
the family assistance law by Australia s approximately 11,200
approved child care service providers. According to the Explanatory
Memorandum the civil penalties regime will provide the Government
with a wider range of options to encourage compliance.
Civil penalties are imposed by courts in circumstances where the
relevant court is satisfied that a person, company or other entity
has contravened the particular civil penalty provision. The court
need only be satisfied of the contravention on the balance of
probabilities , rather than the more rigorous beyond reasonable
doubt standard of proof applying to criminal offences.
In most cases, the situations for which Schedule 4 civil penalty
provisions are proposed are currently only covered by criminal
offences. The new provisions will create over 20 new civil penalty
provisions, making it easier to apply a sanction for contraventions
in these situations. Item 79 of Schedule 4 will
also increase the maximum penalty for most (but not all) civil
penalty provisions to 200 penalty units ($22 000) for persons and
400 penalty units ($44 000) for companies.
Schedule 5 contains clarifications to the
legislation and other minor amendments.
. Family Assistance Legislation
Amendment (Child Care Budget and Other Measures) Bill 2008,
Explanatory Memorandum, p. 3.
17 June 2008
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