Bills Digest no. 174 2008–09
Family Assistance Legislation Amendment (Child Care) Bill 2009
WARNING:
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 Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced: 14 May 2009
House: House of Representatives
Portfolio: Education, Employment and Workplace Relations
Commencement: 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.
Links: 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 at http://www.comlaw.gov.au/.
The purpose of the Family Assistance
Legislation Amendment (Child Care) Bill 2009 (the Bill) is to make a number of
technical and administrative amendments which will:
The Bill
involves technical and administrative changes following on from provisions
introduced by the Family Assistance Legislation Amendment (Child Care Budget
and Other Measures) Act 2008.[1]
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 (CCB).[2] Families 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[3]
- 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).[4]
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’ (CCR).
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
rebate.
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’.[5]
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.[6] The penalties introduced in 2008 related to situations that had previously only
being covered by criminal offences.[7] Courts 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.[8]
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.[9]
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.[10] 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’.[11]
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.[12]
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.[13] In response, on 7 November 2008 the Government announced that interim funding
would be made available to maintain operations at around 400 centres.[14]
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 ceased.[15]
However, this requirement is somewhat at odds with the prohibitions against
insolvent trading which are contained in the Corporations Act 2001.[16]
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 assessed.
According to the Explanatory
Memorandum, there are no financial implications arising from the Bill.[17]
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 occur.
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 substitution.[18]
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 individual.
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
debts.
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 year.
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).[19]
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, or
- if the person is a body corporate—400 penalty units.[20]
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.[21]
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.[22]
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.[23]
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.[24]
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 units.[25]
For 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.[26]
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,[27] and
- in any other case—50 penalty units.[28]
Items 10–14 are consequential amendments to the FAAA.
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).
Michael Klapdor
Paula Pyburne
18 June 2009
Bills Digest Service
Parliamentary Library
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