Bills Digest no. 174 2008–09
Family Assistance Legislation Amendment (Child Care)
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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introduced: 14 May
House: House of Representatives
Portfolio: Education, Employment and Workplace
Sections 1 to 3, Schedules
1, 2 and 3, and Parts 1 3 of Schedule 5 on the day of Royal Assent;
Part 1 of Schedule 4 on the day after Royal Assent; Part 4 of
Schedule 5 on the 28th day after Royal Assent; and Part
2 of Schedule 4 on a day to be fixed by Proclamation or, if any
provision does not commence within six months from the day of Royal
Assent, it commences on the day after that.
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 purpose of the Family
Assistance Legislation Amendment (Child Care) Bill 2009 (the Bill)
is to make a number of technical and administrative amendments
involves technical and administrative changes following on from
provisions introduced by the Family Assistance Legislation
Amendment (Child Care Budget and Other Measures) Act
The child care tax rebate (CCTR) was introduced in 2004 by the
Howard Government to provide additional assistance to cover the
cost of child care for families who were already in receipt of the
main child care subsidy known as the child care benefit
could claim 30 per cent of their out of-pocket costs of child care
as a rebate if they:
- were in receipt of the CCB
- used approved child care, and
- met the CCB work/study/training test (or were otherwise
eligible for up to 50 hours of CCB per week).
In its original form, the CCTR could only be claimed at the end
of the financial year after the year the costs were incurred (as
CCB entitlements were not finalised until October of each year).
The CCTR was also considered a non-refundable tax offset and thus
could only reduce a person s tax liability to zero. Once zero
liability was reached, any excess rebate had to be transferred to a
spouse or be lost. Low income earners with no tax liability did not
benefit from the CCTR.
These problems were addressed in the 2007 08 Budget. The CCTR
became a direct payment administered by Centrelink, paid at the end
of the year in which costs were incurred once CCB entitlement was
finalised. This meant that the CCTR was no longer a tax rebate at
all and claimants could receive the full payment regardless of
their tax liability.
The Rudd Government, through the Family Assistance
Legislation Amendment (Child Care Budget and Other Measures) Act
2008, made further changes to the CCTR. The amount of the
rebate was increased to 50 per cent of out-of-pocket child care
expenses for eligible claimants and the payment of the rebate was
to be made quarterly. The maximum amount that could be claimed for
the rebate was also increased from $4354 to $7500 per annum for
each child in care.
The name change provisions in this Bill reflect that the CCTR
has not technically been a tax rebate since 2007. The rebate is not
a tax offset under taxation law but is a benefit paid under family
assistance law. The CCTR will be renamed the child care rebate
The proposals in this Bill in regard to eligibility to receive
CCR of those taking over the guardianship of a deceased person s
child, are consistent with the provisions for payment of CCB in
similar situations. The proposals extend CCR payment eligibility to
those providing care in substitution for the deceased, by allowing
for those substitute carers to be considered eligible for the
period in which they have been given guardianship of the deceased s
child if they meet the other conditions for payment of the
The Bill also proposes a number of amendments in regard to how
entitlement for CCR can be calculated. Currently, the entitlement
for the fourth quarter of an income year and the entitlement for
the entire year are calculated separately. This can result in a
payment for the fourth quarter being considered part of an
overpayment or underpayment following the calculation of the income
year s entitlement, even though these separate calculations can be
made at around the same time. Proposed amendments in the Bill allow
for the calculation of the fourth quarter entitlement to be
withheld until the annual entitlement has been calculated, thus
allowing for any overpayment or underpayment to be partly or fully
addressed through the fourth quarter payment.
The introduction of quarterly payments for the CCTR in 2008
affected a number of sections of the FAAA related to debt creation
and recovery and the periods for which an entitlement or no
entitlement is assessed. The Bill proposes amendments to allow for
the correct identification of any CCR debt amount by clarifying the
periods for CCR entitlement determinations. Proposed amendments aim
to effectively cover any problems in identifying periods of CCR
entitlement (particularly when tied to CCB entitlement) as a result
of the 2008 changes to when determinations and payment of the
rebate are made.
Concern over the regulation of the child care industry has grown
considerably in the last few years, particularly in regards to
issues arising from the market dominance of the ABC Learning child
care company (ABC Learning) and the collapse of that company in
2008. The Family Assistance Legislation Amendment (Child Care
Budget and Other Measures) Act 2008 introduced a range of new
civil penalties for failure to comply with different child care
service obligations. These penalties were introduced to regulate
approved child care services and former approved child care
services, to ensure they comply with a range of obligations under
the family assistance law .
Prior to that amending Act, civil penalties in regard to the
child care compliance program only applied to an approved child
care service provider s obligation to report information to the
Child Care Access Hotline. The penalties introduced in 2008 related to situations
that had previously only being covered by criminal
need only be satisfied on the balance of probabilities that a civil
penalty provision has been contravened in order to issue a penalty,
rather than the more rigorous beyond reasonable doubt standard of
proof under criminal law.
In the second reading speech for this Bill, the Parliamentary
Secretary for Early Childhood Education and Childcare, Maxine
McKew, explained the Government s rationale for further amendments
to the civil penalties provisions:
Given the events of last year with the collapse
of ABC Learning, we are especially mindful that Australian families
need to have the greatest possible certainty around continuity of
care We acknowledge of course that the majority of child care
providers are doing the right thing when it comes to compliance.
But we want to ensure that those who are negligent are pressed to
do the right thing.
The downfall of ABC Learning can be traced back to February 2008
with the release of revised earnings figures leading to margin
calls on the shares of the directors. ABC Learning s share price
spiralled down in the ensuing months and trading in its shares was
halted in August 2008. DEEWR had established a Child Care Industry Taskforce
on 24 September 2008 to manage the Department s inquiries into what
was occurring at ABC Learning and to undertake contingency planning
for child care centres closing and/or the company s insolvency
Although there was ongoing speculation as to the financial
viability of ABC Learning throughout 2008, the company did not
officially advise the Department of Education, Employment and
Workplace Relations (DEEWR) that it would enter voluntary
administration until 2 November 2008. Following ABC Learning s advice to
DEEWR as to its insolvency and prior to the appointment of the
voluntary receivers on 6 November 2008, it became clear that a
large number of the centres may have to cease operation. In response, on 7
November 2008 the Government announced that interim funding would
be made available to maintain operations at around 400
At the time of ABC Learning s insolvency, there was a
legislative requirement that a child care service operator who
intended to cease operating that service was to notify of that
intention 30 days or more before the date that the service
However, this requirement is somewhat at odds with the prohibitions
against insolvent trading which are contained in the
Corporations Act 2001. Whilst the Child Care Industry Taskforce had
notice of ABC Learning s financial difficulties more than 30 days
before the company s eventual insolvency, it could not be said that
this equated to a formal notice of an intention to cease operating
a child care service. In the case of ABC Learning, it appears that
the intention to cease operating was not formed before the time
that the insolvency became known.
The proposed amendments in this Bill will allow for an expansion
in civil penalties under family assistance law by enabling the
imposition of civil penalties in regulations made under the FAAA.
At the time of writing this Bills Digest, the content of the
proposed regulations is unknown.
The Family Assistance Legislation Amendment (Child Care
Budget and Other Measures) Act 2008 removed the minimum rate
of CCB. This has meant that, since July 2008, some individuals have
been determined to have no entitlement to CCB for a particular
period. The Bill proposes to amend currently inoperative sections
of the FAAA so, where certain information was not provided to the
Family Assistance Office before the zero entitlement was
determined, this determination can be appealed. A claimant must
appeal within two years and provide the missing information in
order for any possible change in their entitlement to be
According to the Explanatory Memorandum, there are no financial
implications arising from the Bill.
There are five schedules to the Bill.
Item 1 of Part 1 of Schedule 1 of the Bill
inserts a new definition of child care
rebate into the A New Tax System (Family
Assistance) Act 1999 (NTS (FA) Act). Items 2
10 make amendments to important headings in the NTS (FA)
Act to reflect the change of name from child care tax rebate to
child care rebate . Similarly, items 11 14 make
amendments to important headings in the FAAA to reflect the change
of name from child care tax rebate to child care rebate .
Items 15 41 in Part 2 of Schedule 1 of the Bill
makes bulk changes to the NTS (FA) Act, the FAAA, the Family
Assistance Legislation Amendment (Child Care Budget and Other
Measures) Act 2008 and the Income Tax Assessment Act
1997 (ITAA 1997), so that the words child care tax
rebate are substituted with the words
child care rebate wherever they
In a situation where the parent or carer entitled to the CCR
dies, the amendments in Schedule 2 would allow the person taking
over the child s guardianship to become entitled to the CCR in
substitution of the deceased person.
Items 1-5 of Schedule 2 amend various parts of
section 57F of the NTS (FA) Act so that a substituted person can be
eligible for CCR in respect of a child.
Item 6 repeals existing subsection 84B(2) of
the NTS (FA) Act and substitutes proposed subsection
84B(2), which provides a special rule for calculating
approved child care fees in a base week where an individual and
their partner might be eligible for the rebate in his or her own
right. According to the Explanatory Memorandum, the proposed
subsection has been inserted to cater for the circumstance where a
member of a couple has died and the surviving member has an
entitlement in their own right, as well as an entitlement in
Item 7 inserts proposed sections 84DA
84DD into the NTS (FA) Act, setting out the formula to be
applied in calculating the amount of CCR payable by a substitute
Items 11 19 amend the FAAA. In particular,
item 11 inserts proposed section
65ECA which applies where the Secretary has determined
that a person is entitled, or not entitled, to be paid child care
benefit in substitution because of the death of another person.
Items 13 inserts proposed subsections
65EF(2D) and 65EF(2E). Proposed
subsection 65EF(2D) provides that where a determination
has been made that an individual will be paid CCR in substitution,
the amount must be paid to a bank account nominated and maintained
by the person.
Item 18 repeals existing section 152A and
substitutes proposed sections 152A and
152B. These proposed provisions relate to reviews
of CCR decisions in situations where there has been an application
for review of the CCR decision.
The amendments in Schedule 3 relate to the recovery of
Item 1 substitutes proposed sections
65EA 65EC into the FAAA. The amended sections require the
Secretary to make determinations about whether an individual is
entitled to be paid child care benefit, either by fee reduction or
lump sum payment; and whether there is an entitlement or no
entitlement to CCR during a particular period in an income
Item 3 repeals existing sections 71CAA and
71CAB of the FAAA and substitutes proposed sections 71CAA
71CAC. Proposed section 71CAA generally
provides that where a CCR is paid to a person who is subsequently
determined to have no entitlement to the payment the amount paid is
a debt due to the Commonwealth. Similarly, proposed section
71CAB generally provides that where an amount of CCR paid
to a person is greater that the correct amount that should have
been paid, the difference between the amount paid and the correct
amount is a debt due to the Commonwealth. In particular,
proposed subsections 71CAA(5) and
71CAB(4) relate to incorrect payments in
situations involving payments in substitution.
Proposed section 71CAC relates to debts arising
where a CCR payment has been made to an incorrect account. In that
case, the person, or jointly and severally the persons in whose
name or names the incorrect account is kept, owes a debt due to the
Commonwealth for the amount incorrectly paid.
Amendments to the FAAA proposed in Schedule 4 relate to civil
penalties in regulations.
Item 1 amends existing subsection 3(1) of the
FAAA to expand the definition of civil penalty
provision to include a provision of the regulations
that is declared to be a civil penalty provision in accordance with
proposed paragraph 235(1A)(b).
Subsection 219TSD(1) currently provides that the pecuniary
penalty payable by a person, in respect of the person s
contravention of a civil penalty provision, must not exceed:
- if the person is not a body corporate 200 penalty units,
- if the person is a body corporate 400 penalty units.
Item 2 substitutes proposed subsection
219TSD(2) for the existing subsection so that there are
three exceptions to the general pecuniary penalty provision in
subsection 219TSD(1), being subsections 219EA(2) and 219L(3) and a
provision of the regulations declared to be a civil penalty
provision are exceptions.
Items 3 and 4 amend the
existing table items in subsection 219TSK(1) of the FAAA which
lists the pecuniary penalties to be specified in an infringement
notice given to a body corporate for alleged contravention/s of a
civil penalty provision. The effect of the proposed amendment in item
4 is that for a single contravention of a declared civil
penalty provision in the regulations, the pecuniary penalty to be
specified is 24 penalty units. For multiple contraventions of a declared civil
penalty provision in the regulation, the pecuniary penalty is
worked out by multiplying the number of contraventions by 24. If
the number of contraventions is eight or more, the pecuniary
penalty is worked out by multiplying 24 by eight.
Items 5 and 6 amend the
existing table at subsection 219TSK(2) of the FAAA, which lists the
pecuniary penalties to be specified in an infringement notice given
to a person other than a body corporate for
alleged contravention/s of a civil penalty provision. The effect of
the proposed amendment in item 6 is that for a
single contravention of a declared civil penalty provision in the
regulations, the pecuniary penalty to be specified is 12 penalty
multiple contraventions of a declared civil penalty provision in
the regulation, where the number of alleged contraventions is less
than eight, the pecuniary penalty is worked out by multiplying the
number of contraventions by 12. If the number of contraventions is
eight or more, the pecuniary penalty is worked out by multiplying
12 by eight.
Item 9 inserts proposed subsection
235(1A), which provides that the regulations:
- may prescribe penalties for offences against the regulations
that do not exceed a fine of 10 penalty units, and
- declare that specified provisions of the regulations are civil
penalty provisions in that case the penalties must not exceed:
- for a body corporate 250 penalty units, and
- in any other case 50 penalty units.
Items 10 14 are consequential amendments to the
Item 2 inserts proposed subsection
65EAA(1A) into the FAAA so that the Secretary may decide
not to calculate an amount of CCR for the last quarter of the
income year from 2008 onwards.
Item 6 substitutes sections 60 and 60A of the
FAAA so that the Secretary must vary a determination made that a
person had no entitlement to CCB if certain conditions are
satisfied. These conditions include if the person who is the
subject of the determination provides information to the Secretary,
which was not previously provided, such as an estimate of income or
the number of children the person had in their care at a specific
time. The time limit for providing the required information is
within two years after the end of the income year during which the
determination was made.
Item 9 inserts proposed section
195A into the FAAA so that, for the purposes of family
assistance law, an obligation imposed on or permission granted to,
an approved child care service, it is taken to be imposed on or
granted to the person operating the service.
Items 13 16 relate to the obligation in
existing section 219M of the FAAA that a child care service
operator who intends to cease operating that service is to notify
of that intention 30 days or more before the date that the service
ceases. Item 14 substitutes proposed
subsection 219M(2) which requires that the notice of
intention to cease operating the child care service must be given
in a specific manner and form.
Item 16 inserts proposed subsections
219M(4) (6). Proposed subsection 219(M)(4) provides that
an operator of an approved child care service contravenes the
subsection if, once the operator has notified of an intention to
cease operating a child care service, the operator is requested to
give specific information about the intended cessation and the
operator fails to do so within seven days.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2554
(Michael Klapdor) or (02) 6277 2434 (Paula Pyburne).
18 June 2009
Bills Digest Service
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