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Thursday, 9 February 2017
Page: 500


Senator FIFIELD (VictoriaManager of Government Business in the Senate, Minister for Communications and Minister for the Arts) (15:36): I present two government responses to the Education and Employment Legislation Committee reports on the provisions of the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015 and the provisions of the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 and a related bill. In accordance with the usual practice, I seek leave to have the documents incorporated in Hansard.

Leave granted.

The documents read as follows—

Australian Government response to the Senate Education and Employment Legislation Committee report:

Inquiry into the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 [Provisions] and Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016 [Provisions]

February 2017

Introduction

The Australian Government welcomes the report by the Senate Education and Employment Legislation Committee in relation to the inquiry into the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 (the Child Care Bill) and Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016 (the Social Services Bill).

The Jobs for Families Child Care Package (the Package) will provide genuine and necessary reform for a simpler, more affordable, accessible and flexible child care system. The Government's child care assistance package strikes the right balance between targeted child care support for hard working families who depend upon it, a generous safety net to protect those most vulnerable in our community and ongoing support for high quality early learning. This is why the passage of the Child Care Bill, as well as the savings required to fund it, is amongst the Government's top priorities for 2017.

The Government thanks those individuals and organisations who contributed to this inquiry, and previous inquiries into these Bills, by preparing written submissions or appearing at the public hearings.

Majority report

The Government welcomes and accepts the recommendation from the Majority Report that these Bills be passed. The Government notes the Committee's view that reforms to the child care system contained within the Child Care Bill will achieve quality early childhood education and care as well as provide increased opportunities for workforce participation.

The Government also notes the Committee's view that the measures contained within the Social Services Bill will provide greater assistance on a fortnightly basis to lower income families who need it, and will create a more accessible and flexible child care system for Australian families.

Dissenting reports and additional comments

The Government's response to each recommendation made in the Senate Committee's report, including those contained in the dissenting reports of Labor and the Australian Greens Senators respectively, and the additional comments by Senator Skye Kakoschke-Moore from the Nick Xenophon Team, is provided below. There will be further opportunity to address concerns raised in dissenting reports and comments throughout the Parliamentary debate.

The Government does not accept the recommendations from Labor and the Australian Greens Senators that the Social Services Bill not be passed. The Government considers that redirecting funding from Family Tax Benefits into greater investment into childcare is a better way to spend public money. This redirection of funding will strengthen the incentives and support required to further increase workforce participation and, based on evidence and research, assist in increasing the living standards of low and middle income families. The Government notes that no other viable proposals to fully fund the Package were put forward during the inquiry and remains of the view that funding offsets are necessary in order to ensure a sustainable child care system into the future. The reforms in the Social Services Bill, in conjunction with those in the Child Care Bill, represent a fair and fiscally responsible way to deliver a simpler and more accessible, flexible and affordable child care system.

The Government acknowledges the range of feedback that has been received in relation to the development of the Child Care Bill over the period of its development, including through the Productivity Commission Inquiry, Regulation Impact Statement consultation process, two Senate Inquiry processes and ongoing consultation with the sector by the Department of Education and Training, as detailed in Attachment A.

The Government has considered the views of the sector in developing the Child Care Bill and will continue to consult with the sector and with the Senate cross-bench on the Package to ensure these reforms achieve the objectives of increasing affordability, flexibility and accessibility of the child care system for families.

Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016

Recommendations contained in the Committee ' s Report

The committee recommends that both bills be passed.

The Government accepts the Committee's recommendation and urges Members of the House of Representatives and Senators to vote in favour of legislation to give effect to the policy in both bills. Only then will the Government be able to reform Australia's early childhood education and care system to support families most in need.

Recommendations contained in the Labor Senators ' Dissenting Report and the Australian Greens Dissenting Report

Labor Senators recommend that the Senate reject the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016.

The Australian Greens recommend that the Bill not be passed.

The Government does not accept recommendations from Labor and the Australian Greens Senators that the Social Services Bill not be passed.

The Government considers that redirecting funding from Family Tax Benefits into greater investment into childcare is a better way to spend public money. This redirection of funding will strengthen the incentives and support required to further increase workforce participation and, based on evidence and research, assist in increasing the living standards of low and middle income families.

Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016

Recommendation contained in the Committee ' s Report

1. The committee recommends that both bills be passed.

The Government accepts the Committee's recommendation and urges Members of the House of Representatives and Senators to support legislation to ensure the Government can support families most in need through a sustainable system that will deliver quality learning experiences for Australian children.

Recommendations contained in Labor Senators ' Dissenting Report

1. Key ministerial determinations and rules—which will set many of the parameters affecting the day to day use of the system by families—should be published before the Parliament considers the Bill. This includes those relating to children at risk, financial hardship and the activity test.

In line with legislative process, the Minister's and Secretary's Rules that sit under the Jobs for Families legislation will be tabled following its passage.

In developing the underlying policy for the Minister's and Secretary's Rules, the Department of Education and Training has consulted extensively with, and taken advice from, the sector, as detailed in Attachment A. This has included targeted consultation on the policy parameters of the Additional Child Care Subsidy (Child Wellbeing) payment and the activity test.

A number of changes have already been incorporated in proposed Rules as a result of feedback from the sector. As the Department of Education and Training is still refining draft Rules, and will continue to seek feedback, it is not possible to publish a final set of Rules at this time, noting that Rules can only be made by the Minister or Secretary once the primary legislation has been passed by the Parliament.

The Department of Education and Training will continue to engage with the sector as these Rules are developed and will ensure that there is adequate opportunity for review and further feedback.

2. The transition process for Budget Based Funded Indigenous and Mobile services should be stopped and direct ongoing support should be guaranteed.

The Government is committed to ensuring these valuable community services continue to operate beyond the introduction of the Package. Senator the Hon Simon Birmingham, Minister for Education and Training, wrote to all BBF services in December 2016, expressing this commitment and clarifying the transition process (Attachment B).

The current funding model for Budget Based Funded (BBF) services is not working in a fair or transparent way, with some services receiving less than $100 per child per year and other services receiving thousands of dollars per child per year. A major program review, an ANAO audit and several smaller projects highlighted a range of problems with the BBF Program, including:

the program objective is unclear

most BBF services operate outside the regulatory system and are excluded from the National Quality Framework so BBF services are not held to the same quality standards as approved services

the program is capped and fully committed meaning no new services can be funded in areas of need

there is no incentive for services to increase utilisation

in some cases families pay high fees but are not eligible for any fee subsidy

in some locations approved child care services have been established close to the BBF service so there may no longer be a real need for that service

funding for BBF services has remained stagnant while funding for mainstream child care has increased steadily for many years.

The Government notes that some stakeholders have called for a separate grant fund for services providing care for Aboriginal and Torres Strait Islander children. To do this would create these same issues, whereby artificial limits would be set, and services would not be paid according to the numbers of children that attend.

The new funding arrangements through the Child Care Subsidy will be demand driven, encouraging new services to open or expand their service delivery where there is need. This will mean former BBF services can be funded equitably based on the number of children they support and the services they deliver.

The new system has been designed to support a diverse range of services that have the flexibility to adapt to the needs of local families. The current arrangements do not allow this flexibility and have effectively limited services that would have benefited from a fairer funding model, such as the one proposed as part of this legislation.

Additional funding will be provided to eligible services through the Community Child Care Fund which will provide grants to child care services to reduce barriers to accessing child care, provide sustainability support for child care services experiencing viability issues and provide capital support to increase the supply of child care places in areas of high unmet demand, particularly in disadvantaged, regional or remote communities.

Further, the Additional Child Care Subsidy will provide extra subsidies to families who are eligible under the child-wellbeing component, those experiencing temporary financial hardship, and people moving from income support into work.

The Department of Education and Training has engaged consultants to provide face-to-face support to BBF funding recipients in their transition to the new child care system or, where appropriate, to move to alternative funding arrangements. This support commenced in May 2016.

Support will be provided in two phases. Phase 1, which will largely be completed by February 2017, is the development of a comprehensive report and transition plan for each BBF funding recipient including mobile BBF services. The analysis undertaken in Phase 1 will inform the ongoing tailored support provided to BBF funding recipients through Phase 2. This face-to-face support is expected to begin in February 2017 and will continue as long as necessary, beyond July 2018 if required.

3. The Government should consider amendments to their child care changes to:

Ensure vulnerable and disadvantaged children are provided with adequate access to early education and care;

Ensure the activity test—and associated determinations and rules—don't introduce unnecessary barriers for parents trying to get back into the workforce;

Continue providing children with access to two days early education a week, and trial any changes to the activity test before their introduction; and

Provide an immediate increase in assistance for families; in recognition of the cost pressures families will face because of the Government's decision to delay additional assistance until mid-2018.

The new Child Care Safety Net will assist disadvantaged communities and vulnerable and at-risk children and their families by addressing barriers in accessing child care, while encouraging parents to enter or re-enter the workforce. In particular, the Additional Child Care Subsidy component of the Child Care Safety Net will provide targeted additional fee assistance to families and children facing barriers in accessing affordable child care, including:

children at risk of serious abuse or neglect

grandparents on income support who are the primary caregivers of their grandchildren

families experiencing temporary financial hardship

low income families transitioning to work from income support

families with an income below around $65,000 (in 2017 terms) where the family does not meet the activity test.

The activity test will ensure Government support is better targeted to those who depend on child care to work, train, study, or participate in other recognised activities. It is estimated that the Package will encourage more than 230,000 families to increase their involvement in paid employment.

Under the Package, the more hours a parent works, studies, or trains (including in combination with other activities such as volunteering and looking for work) the more hours of subsidised child care they can access. In addition, the new Child Care Subsidy will be paid directly to child care service providers to make the system simpler for families.

A broad range of activities will meet the activity test requirements, including paid work, looking for work, volunteering or study. People on paid and unpaid parental leave who are returning to work would also meet the activity test. To ensure families with casual or irregular work are not disadvantaged by the activity test and to ensure their children receive continuity of care, parents in this circumstance will be able to estimate their hours of activity over a three month period.

The entry point to the activity test is set at a very low base - at least 8 hours of activity a fortnight results in access to up to 36 hours of subsidised child care a fortnight; more than 16 hours of activity a fortnight results in access to up to 72 hours of subsidised care a fortnight; and that more than 48 hours of activity a fortnight results in access to up to 100 hours of subsidised care a fortnight.

We know children from disadvantaged backgrounds benefit most from quality early childhood education and care, and that's why we're providing additional support to those who need it most. Families with incomes below around $65,000 (in 2017 terms) who do not meet the activity test will be able to access 24 hours per fortnight of subsidised care —equivalent to two weekly six-hour sessions—at the highest 85 per cent rate of subsidy (this is an increase on the current 72 per cent). The removal of minimum hours per day and days per week opening requirements will allow service providers' to deliver these hours over two sessions per week.

The Government is also considering the sector's proposal to increase the number of subsidised hours for families with low incomes (below around $65,000 in 2017 terms) who do not meet the activity test from 24 to 30 hours per fortnight as part of its negotiations and deliberations in preparation for Parliamentary debate. Noting that this and any other changes requiring additional expenditure would need to be offset.

As the Child Care Subsidy and Additional Child Care Subsidy will be legislated payments, it would be difficult to trial the new activity test prior to the legislated start date. This is why the Department of Education and Training is consulting on key policy concepts in the Bill that will be set out in Minister's Rules, such as Activity Test definitions and implementation details. This will ensure that key elements of the package are well tested amongst the sector before their final implementation.

To improve affordability for families in the short term, on 1 July 2017 the existing Child Care Rebate will be indexed by the Consumer Price Index for the first time since Labor froze the cap in 2011.

The Government will continue to consult with the sector on the detail of the Package over the coming months to ensure these reforms achieve the objectives of increasing affordability, flexibility and accessibility of the child care system for families.

4. Funding for early education should not be conditional on Family Tax Benefit cuts which will hurt low and middle income families.

As a result of the increased Australian Government investment into child care, the Package is to be implemented using savings contained in the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016.

The Government notes that no other viable proposals to fully fund the Package were put forward during the inquiry and remains of the view that funding offsets are necessary in order to ensure a sustainable child care system into the future. The reforms in the Social Services Bill, in conjunction with those in the Child Care Bill, represent a fair and fiscally responsible way to deliver a simpler and more accessible, flexible and affordable child care system.

Recommendations contained in the Dissenting Report by the Australian Greens

1. The Australian Greens recommend that the activity test be amended to include an additional amount of base level subsidised childcare for all families that fall within the 0-8 hours of activity to a minimum of two full days care.

The entry point to the activity test is set at a very low base - at least 8 hours of activity a fortnight results in access to up to 36 hours of subsidised child care a fortnight; more than 16 hours of activity a fortnight results in access to up to 72 hours of subsidised care a fortnight; and that more than 48 hours of activity a fortnight results in the maximum amount of subsidised care of 100 hours a fortnight.

A broad range of activities will meet the activity test requirements, including paid work, looking for work, volunteering or study. People on paid and unpaid parental leave who are returning to work would also meet the activity test. To ensure families with casual or irregular work are not disadvantaged by the activity test and to ensure their children receive continuity of care, parents in this circumstance will be able to estimate their hours of activity over a three month period.

Families with incomes below around $65,000 (in 2017 terms) who do not meet the activity test will be able to access 24 hours per fortnight of subsidised care —equivalent to two weekly six-hour sessions—at the highest 85 per cent rate of subsidy (this is an increase on the current 72 per cent). The removal of minimum hours per day and days per week opening requirements will allow service providers' to deliver these hours over two sessions per week.

The Government is also considering the sector's proposal to increase the number of hours in the safety net from 24 to 30 hours per fortnight as part of its negotiations and deliberations in preparation for Parliamentary debate. Noting that this and any other changes requiring additional expenditure would need to be offset.

2. The Australian Greens recommend that an adequately flexible reporting grace period be adopted that allows all casual workers, part-time workers with irregular hours or people who lose their jobs to estimate their expected activity and childcare needs, so as not to be disadvantaged by the activity test.

Workers with casual or irregular hours:

To ensure families with casual or irregular work are not disadvantaged by the activity test and to ensure their children receive continuity of care, parents in these circumstances will be able to estimate their hours of activity over a three month period. This will be captured in a Minister's rule, the content of which has been the subject of consultation with the sector.

Individuals who experience sudden change of circumstances:

Current provisions in the Bill already ensure continuity of care when parents experience a sudden change in circumstance that affects their entitlement.

These provisions include:

The Additional Child Care Subsidy (Temporary Financial Hardship) that will provide short-term increased child care fee assistance to families who are experiencing significant financial stress due to exceptional circumstances. Families experiencing temporary financial hardship will be eligible to receive a subsidy equal to the actual fee charged, up to 120 per cent of the Child Care Subsidy hourly fee cap, for up to 100 hours per fortnight, for a maximum of 13 weeks per event). Families will not be required to meet the activity test during this period.

Individuals' eligibility for this payment can be backdated up to 28 days (from the date of application), in recognition that family circumstances may change with little or no notice.

The capacity for the Secretary of the Department of Education and Training to make a case-by-case determination of an individual's activity test result based on exceptional circumstances, which could be more than 100 hours of subsidy per fortnight. Exceptional circumstances could include, but would not be limited to, families impacted by significant trauma, the short-term incapacity of the individual or a member of their family, or where the individual, their partner or their child is affected by domestic violence.

An activity test which recognises the combined total of a broad range of activities (including actively looking for work and volunteering) to help them maintain access to subsidised care where their usual activity ceases unexpectedly.

3. The Australian Greens recommend that unless additional funding for services which meets the needs of vulnerable children in remote and regional Australia and Aboriginal and Torres Strait Islander children is provided, that the current Budget Based Funding levels remain in place.

Refer to the response provided to Labor Senator's Dissenting Report, Recommendation 2, above.

4. The Australian Greens recommend an amendment to include mechanisms for increasing childcare places where vacancy rates are critically low, creating barriers to parents being able to find affordable care.

The Government does not intervene directly in the child care market. Elements of the Package are aimed at encouraging services to be more flexible in how they provide care and child care places to both encourage more providers and to free up potential places in current services. For example, the Government is removing the requirement on the number of hours per day and days per week that an approved service must be open, in order to free services up to respond to the particular needs of their community.

5. The Australian Greens recommend that providers of In Home Care be explicitly referenced in the Bill as being eligible for Child Care Subsidy payments.

In Home Care (IHC) is an important part of the child care and early education landscape and will continue beyond the introduction of the Package in July 2018.

The future policy design for approved child care delivered in the family's home will be informed by the current evaluation of the Nanny Pilot Programme, and the review of IHC. The Institute of Social Science Research at the University of Queensland is currently undertaking the evaluation to inform future policy, which will be designed to cater to a range of different needs, including parents who cannot work for reasons such as disability or illness, parents who live in rural or remote areas away from suitable child care options and parents who are looking to either meet or increase their workforce commitments and cannot access other child care because they work non-standard hours.

It has been over 10 years since there has been a review of IHC and the current review, which will be completed this year, seeks to collect more up-to-date information about the IHC program to inform development of the new policy.

The Child Care Bill contains a rule making provision to prescribe a new service type and a relevant Child Care Subsidy hourly rate cap. Provision will be made for continued Australian Government support for care in the family's home under the Package, based on the findings of the University of Queensland evaluation and the IHC review.

Recommendations contained in the Additional Comments by the Nick Xenophon Team

1. The Department of Education clarify as a matter of urgency whether funding for in-home care will continue to be made available under the Jobs for Families package.

Refer to the response provided to the Dissenting Report by the Australian Greens, Recommendation 5, above.

2. The Department of Education review their consultation procedures to ensure that all appropriate stakeholder groups are comprehensively consulted when reform packages are being developed.

The development and refinement of the Package has been the subject of significant and comprehensive consultation over several years, as outlined in Attachment A.

The Department of Education and Training is committed to ongoing consultation and will continue to engage with the sector on policy settings for the Minister's and Secretary's Rules to be made under the Child Care Bill.

3. The Department of Education and Training make public information in relation to the tenders.

All details relating to contracts executed with the department are publicly available on AusTender which is the Australian Government's procurement information system. The three contract numbers relating to the tender to support Budget Based Funded services to transition to the new child care system are:

1. PricewaterhouseCoopers (PwC) - CN3341068-A2

2. PricewaterhouseCoopers Indigenous Consulting (PIC) - CN3341067

3. Community Child Care Co-operative NSW (CCCC) - CN3341077

Contract number 3341077 with the CCCC was mutually terminated on 31 August 2016 and has been incorporated into contract CN3341068-A2.

The contract was mutually terminated as the CCCC did not have a detailed understanding of key elements of the Package which resulted in contractual obligations not being met, specifically in regards to the support for BBF services to transition to the new child care system or alternative funding arrangements.

4. The Department further consults with stakeholders regarding the suitability of the 15 hours proposal and the impact on business models of ECEC providers.

The Department of Education and Training notes that a number of stakeholders in the early childhood education and care sector have worked together to propose increasing the low income provision (for families with annual income under the low income threshold and who not meet the activity test) from the 24 hours of subsidised care per fortnight (12 hours per week) contained in the Child Care Bill, to 30 hours per fortnight (15 hours per week).

The Government is also considering this proposal as part of its negotiations and deliberations in preparation for Parliamentary debate of the Bills.

The Bill removes regulatory requirements that currently apply to child care services, including the hours per day and days per week a service must open. This will allow providers and services to be able to consider flexible options that may better suit their children and families, as well as their business.

5. The Department conduct modelling on the impact 15 hours of subsidised ECEC would have on childcare workers' workforce participation.

The Government is considering the sector's proposal to increase the number of subsidised hours of care to low income families who do not meet the activity test from 12 to 15 hours per week and notes evidence given by Mr John Cherry, Advocacy Manager, Goodstart Early Learning to the Committee on this matter, as follows:

"I can speak on behalf of the country's largest provider. We certainly believe that the key to actually going from 12 to 15 is that it forces you to offer two sessions, two days, because 12 hours in the long day care environment is closest to one day but certainly when you move to 15 then you have to offer that over two days. As the largest childcare provider we would say that we would be certainly looking at offering sessions over two days that would meet that 15-hour entitlement."1

The removal of minimum hours per day and days per week operating requirements will enable services to consider flexible options that may better suit children and families, as well as their business.

The Department of Education and Training is unable to model the workforce participation of child care workers, including in relation to this proposal, because child care service providers are responsible for making their own business decisions in relation to operational matters including staffing.

1 Mr John Cherry, Advocacy Manager, Goodstart Early Learning, Senate Education and Employment Committee Hansard, Inquiry into the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016, Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016, Hearing, 3 October 2016, p. 13.

Australian Government response to the Senate Education and Employment Legislation Committee report:

Inquiry into the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015 [Provisions]

February 2017

Introduction

The Australian Government welcomes the report by the Senate Education and Employment Legislation Committee in relation to the inquiry into the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015 (the 2015 Child Care Bill) and thanks those individuals and organisations who contributed to this inquiry by preparing written submissions or appearing at the public hearings.

The Jobs for Families Child Care Package (the Package) will provide genuine and necessary reform for a simpler, more affordable, accessible and flexible child care system. The Government's child care assistance package strikes the right balance between targeted child care support for hard working families who depend upon it, a generous safety net to protect those most vulnerable in our community and ongoing support for high quality early learning. This is why the passage of the Child Care Bill, as well as the savings required to fund it, is amongst the Government's top priorities for 2017.

Since the Committee tabled its report, the Bill lapsed due to the prorogation of Parliament on 15 April 2016. The Bill was re-introduced to Parliament, with minor technical and corrective amendments, as the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 (the 2016 Child Care Bill) on 1 September 2016.

This Government response relates to the 2015 Child Care Bill, noting that some similar issues were raised, and responded to, through the Committee's Inquiry into the 2016 Child Care Bill and the Social Services Legislation Amendment (Family Payments Structural Reform and Participation Measures) Bill 2016.

Majority report

The Government welcomes and accepts the recommendation from the Majority Report that the Bill be passed, noting that this Bill has since been replaced by other legislation to give effect to the Package. The Government notes the Committee's view that the Package will target support to those who depend upon it in order to work or work more, as well as recognise the importance of access to high quality early childhood education and care for children.

Dissenting reports

The Government's response to each recommendation made in the Senate Committee's report is provided below, including those contained in the dissenting reports of Labor and the Australian Greens Senators respectively.

The Government has considered the views of the sector in developing this Bill, as well as the 2016 Bill, and will continue to consult with the sector and with the Senate cross-bench on the Package to ensure these reforms achieve the objectives of increasing affordability, flexibility and accessibility of the child care system for families.

Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015

Recommendation contained in the Committee ' s Report

1. The committee recommends that the Senate pass the Bill.

The Government accepts the Committee's recommendation and urges Members of the House of Representatives and Senators to vote in favour of the Package in the Parliament to ensure the Government can deliver on its long term reform plan which delivers support to children and families, and a sustainable system for taxpayers and the sector.

Recommendations contained in Labor Senators ' Dissenting Report

Considering the evidence presented to the Committee, Labor Senators recommend the following amendments to the Bill:

1. Ensure that vulnerable children, or children at risk of abuse, not be worse off under the reforms;

The new Child Care Safety Net will assist disadvantaged communities and vulnerable and at-risk children and their families by addressing barriers in accessing child care, while encouraging parents to enter or re-enter the workforce. In particular, the Additional Child Care Subsidy component of the Child Care Safety Net will provide targeted additional fee assistance to families and children facing barriers in accessing affordable child care, including:

children at risk of serious abuse or neglect

grandparents on income support who are the primary caregivers of their grandchildren

families experiencing temporary financial hardship

low income families transitioning to work from income support

families with an income below around $65,000 (in 2017 terms) where the family does not meet the activity test.

Prior to the introduction of the 2015 Child Care Bill, the Government announced at the Mid-Year Economic and Fiscal Outlook 2015-16 the inclusion of Additional Child Care Subsidy (Grandparent). This was in response to sector feedback, to ensure grandparent primary carers on income support will have access to subsidised child care.

Since the time of the Committee's report, the Government has made further refinements to the Additional Child Care Subsidy to better support vulnerable children. For example, the name of the payment to support children at risk of serious abuse or neglect was changed from Additional Child Care Subsidy (At Risk) to Additional Child Care Subsidy (Child Wellbeing) in the 2016 Child Care Bill. This change was prompted by feedback from the sector that the original name could deter families from accessing this additional support. While the name has changed, the intent, design and application of the subsidy remains the same.

2. Ensure that families in Aboriginal and Torres Strait Islander communities not be worse off under the reforms by establishing an Aboriginal and Torres Strait Islander community based program within the new Child Care Safety Net;

The current funding model for Budget Based Funded (BBF) services is not working in a fair or transparent way, with some services receiving less than $100 per child per year and other services receiving thousands of dollars per child per year. A major program review, an ANAO audit and several smaller projects highlighted a range of problems with the BBF Program, including:

the program objective is unclear

most BBF services operate outside the regulatory system and are excluded from the National Quality Framework so BBF services are not held to the same quality standards as approved services

the program is capped and fully committed meaning no new services can be funded in areas of need

there is no incentive for services to increase utilisation

in some cases families pay high fees but are not eligible for any fee subsidy

in some locations approved child care services have been established close to the BBF service so there may no longer be a real need for that service

funding for BBF services has remained stagnant while funding for mainstream child care has increased steadily for many years.

The Government notes that some stakeholders have called for a separate grant fund for services providing care for Aboriginal and Torres Strait Islander children. To do this would create these same issues, whereby artificial limits would be set, and services would not be paid according to the numbers of children that attend.

The new funding arrangements through the Child Care Subsidy will be demand driven, encouraging new services to open or expand their service delivery where there is need. This will mean former BBF services can be funded equitably based on the number of children they support and the services they deliver.

The new system has been designed to support a diverse range of services that have the flexibility to adapt to the needs of local families. The current arrangements do not allow this flexibility and have effectively limited services that would have benefited from a fairer funding model, such as the one proposed as part of this legislation.

Additional funding will be provided to eligible services through the Community Child Care Fund which will provide grants to child care services to reduce barriers to accessing child care, provide sustainability support for child care services experiencing viability issues and provide capital support to increase the supply of child care places in areas of high unmet demand, particularly in disadvantaged, regional or remote communities.

Further, the Additional Child Care Subsidy will provide extra subsidies to families who are eligible under the child-wellbeing component, those experiencing temporary financial hardship, and people moving from income support into work.

The Department of Education and Training has engaged consultants to provide face-to-face support to BBF funding recipients in their transition to the new child care system or, where appropriate, to move to alternative funding arrangements. This support commenced in May 2016.

Support will be provided in two phases. Phase 1, which will largely be completed by February 2017, is the development of a comprehensive report and transition plan for each BBF funding recipient including mobile BBF services. The analysis undertaken in Phase 1 will inform the ongoing tailored support provided to BBF funding recipients through Phase 2. This face-to-face support is expected to begin in February 2017 and will continue as long as necessary, beyond July 2018 if required.

3. Ensure volunteering is treated similarly to paid work or study under the activity test;

A broad range of activities will meet activity test requirements, including paid work, being self-employed, unpaid work in a family business, looking for work, undertaking unpaid voluntary work or studying. There will also be exemptions to the activity test for parents who legitimately cannot meet the requirements.

Through the Regulation Impact Statement for the Package, the Department of Education and Training's submission to the Senate Inquiry and sector consultation on Minister's and Secretary's Rules, the Government has consistently made it clear that a broad definition of voluntary work will be adopted for the purposes of the activity test.

The proposed definition which was provided to the Senate Committee during the hearing and which was the subject of sector consultation is: an individual undertakes unpaid voluntary work to improve work skills or employment prospects, or for community engagement. To be recognised, voluntary work can be undertaken at a registered or recognised voluntary organisation or other charitable or community organisation, and this may include churches, sporting clubs or schools. Since that time, and in response to further consultation from the sector, the proposed definition of unpaid voluntary work has been expanded to include volunteering in a centre-based service undertaking activities that directly support children's learning and development. The proposed inclusion of this activity will assist in encouraging parental engagement and supports children's learning and development.

It is also proposed that individuals undertaking unpaid voluntary work would be entitled to 36 hours per fortnight (step 1 of the activity test) of subsidised child care. Voluntary work can be combined with other recognised activities to increase hours of subsidised child care.

4. Ensure provisions are made to ensure casual and seasonal workers are not disadvantaged by the activity test by including appropriate averaging and transitionary arrangements, and including a six week 'exceptional circumstances' exemption; and

To ensure families with casual or irregular work are not disadvantaged by the activity test and to ensure their children receive continuity of care, parents in this circumstance will be able to estimate their hours of activity over a three month period.

Current provisions in the Bill ensure continuity of care when parents experience a sudden change in circumstance that affects their entitlement without the need for a six week exemption period.

These provisions include:

The Additional Child Care Subsidy (Temporary Financial Hardship) that will provide short-term increased child care fee assistance to families who are experiencing significant financial stress due to exceptional circumstances. Families experiencing temporary financial hardship will be eligible to receive a subsidy equal to the actual fee charged, up to 120 per cent of the Child Care Subsidy hourly fee cap, for up to 100 hours per fortnight, for a maximum of 13 weeks per event. Families will not be required to meet the activity test during this period.

Individuals' eligibility for this payment can be backdated up to 28 days (from the date of application), in recognition that family circumstances may change with little or no notice.

The capacity for the Secretary of the Department of Education and Training to make a case-by-case determination of an individual's activity test result based on exceptional circumstances, which could be more than 100 hours of subsidy per fortnight. Exceptional circumstances could include, but would not be limited to, families impacted by significant trauma, the short-term incapacity of the individual or a member of their family, or where the individual, their partner or their child is affected by domestic violence.

An activity test which recognises a broad range of activities (including actively looking for work and volunteering) to help families maintain access to subsidised care where their usual activity ceases unexpectedly.

5. The Government should provide modelling showing the longer term impact of the proposed benchmark price on the proportion of ECEC costs borne by parents and its impact on out of pocket costs. The Government should structure the child care subsidy more effectively to limit out of pocket costs for parents.

The new Child Care Subsidy has been designed to place downwards pressure on child care fees to improve affordability for families, through an hourly fee cap.

Fee assistance payments under the Child Care Subsidy are based on a percentage of the actual fees charged, up to the relevant percentage of an hourly fee cap, with the level of the cap varying based on the service type used. The hourly fee caps effectively set a 'benchmark price' from which Australian families have a reference point to hold providers accountable and from which they can expect prices should not dramatically exceed. This measure is necessary to ensure that the increased level of fee assistance offered by the Package does not accelerate fee increases, as we saw when the previous government increased the Child Care Rebate from 30 per cent of fees charged to 50 per cent of fees charged, with no constraints on the fees charged by centres. In addition, as part of simplifying the child care system and ensuring services can operate in a manner that best suits the families who use them, the Bill will reduce regulatory requirements currently applying to child care services, including the hours per day and days per week a service must open. This will mean that services and providers will be able to consider flexible options that better suit their children and families, as well as their business models, which will contribute to affordable and flexible child care options.

Further, Labor Senators recommend that the government:

6. Expand the Explanatory Memorandum to address key definitions (particularly with regard to abuse and neglect) pertaining to subsidies and payments;

The ability to define key terms (such as those related to "abuse and neglect" and "risk" for Additional Child Care Subsidy (at risk / child wellbeing)) in subordinate legislation was to allow for further consultation with the sector and other key stakeholders. Rather than pre-empt the outcome of ongoing consultation, the Government will table the Rules following the passage of legislation, in line with legislative process.

During 2016, the Department of Education and Training consulted the sector on all Minister's and Secretary's Rules which are proposed to be made at this time. The Government will continue to take sector feedback into consideration as the Rules are finalised. This is further elaborated in the Government's response to the more recent Senate Inquiry.

7. Extend the Ministerial Advisory Council on Child Care and Early Learning to include key stakeholders and peak bodies in the industry;

The Ministerial Advisory Council (MAC) on Child Care and Early Learning already consists of representatives of national peak bodies as well as experts in early childhood development and pedagogy, and the child care and early learning sector. MAC members' appointments were recently extended to the middle of 2017.

Given the diverse membership on MAC, as well as the range of other consultations with the sector (see Attachment A), the Government is confident it has received comprehensive feedback on all elements of the Package.

8. Review internationally recognised research on the returns on investment that public expenditure on early learning brings, ensure ECEC in Australia is in line with OECD best practice, and make sure levels of investment in early childhood are consistent with the best outcomes for children and the community; and

Australia performs well in its funding and delivery of early childhood education and care compared to other OECD countries, noting that the extent of public funding for early childhood education and care in Australia is not well represented in OECD data. This is because funding delivered to parents through fee subsidies is often reported as a 'private expense' in OECD data when in fact the Government provides generous subsidies that are targeted to families who need it most.

The Package reflects extensive consultation and expert analysis over several years and has been developed taking into account the significant evidence base developed by the Productivity Commission through its Inquiry into Childcare and Early Childhood Learning, including consideration of workforce participation, early childhood educational outcomes and relevant international models. This is why the objective of the Government's significant investment in the Package is to provide parents with more choice and opportunity to work, and children with high quality early education.

In addition, to understand the impact of the Package over time, there will be ongoing monitoring and evaluation of the changes to the child care system. The Government's framework for evaluation of the Child Care Package includes a post-implementation review to commence in 2018-19 and a subsequent impact evaluation. The evaluation will build on the previously undertaken activities of monitoring, data collection, baseline data and the post implementation review to assess the effect of the changes on the community.

9. Immediately release to the public all data, research and evidence used in developing the legislation—including complete details of the impact the changes will have on families - so that the Senate can make a more informed assessment of its impact on all Australian families.

The Government has provided significant detail on the modelling and assumptions used to develop the Package and details of the impact the changes will have on families. This includes an impact analysis of the Package at Chapter 5 of the Regulatory Impact Statement. Section 5.3, in particular, analyses the impact on families, child care service providers, communities and governments, and an assessment of the Package's effectiveness at achieving the objectives of the reform. A summary of that information, as it relates to families, is provided in the submission to the inquiry made by the Department of Education and Training at paragraphs 137 to 142.

Recommendations contained in the Dissenting Report by the Australian Greens

1. The Australian Greens recommend that the activity test be amended to include an additional amount of base level subsidised childcare for all families that fall within the 0-8 hours of activity, so that all children have access to a minimum of 24 hours of subsidised child care per week.

The entry point to the activity test is set at a very low base - at least 8 hours of activity a fortnight results in access to up to 36 hours of subsidised child care a fortnight; more than 16 hours of activity a fortnight results in access to up to 72 hours of subsidised care a fortnight; and that more than 48 hours of activity a fortnight results in access to up to 100 hours of subsidised care a fortnight.

A broad range of activities will meet the activity test requirements, including paid work, looking for work, volunteering or study. People on paid and unpaid parental leave who are returning to work would also meet the activity test. To ensure families with casual or irregular work are not disadvantaged by the activity test and to ensure their children receive continuity of care, parents in this circumstance will be able to estimate their hours of activity over a three month period.

We know children from disadvantaged backgrounds benefit most from quality early childhood education and care, and that's why we're providing additional support to those who need it most. Families with incomes below around $65,000 (in 2017 terms) who do not meet the activity test will be able to access up to 24 hours per fortnight of subsidised care —equivalent to two weekly six-hour sessions—at the highest 85 per cent rate of subsidy (this is an increase on the current 72 per cent). The removal of minimum hours per day and days per week opening requirements will allow service providers' to deliver these hours over two sessions per week.

The Government is also considering the sector's proposal to increase the number of subsidised hours for families with low incomes (below around $65,000 in 2017 terms) who do not meet the activity test from 24 to 30 hours per fortnight as part of its negotiations and deliberations in preparation for Parliamentary debate.

2. The Australian Greens recommend that an adequately flexible reporting grace period be adopted that allows all casual workers, part-time workers with irregular hours or people who lose their jobs to estimate their expected activity and childcare needs, so as not to be disadvantaged by the activity test.

Refer to the response provided to Labor Senator's Dissenting Report, Recommendation 4, above.

3. The Australian Greens recommend that further detailed clarification be provided as to how the Additional Child Care Subsidy will meet the needs of vulnerable children, in particular children in remote and regional Australia, and Aboriginal and Torres Strait Islander children.

The new Child Care Safety Net will assist disadvantaged communities and vulnerable and at-risk children, including children in remote and regional Australia and Aboriginal and Torres Strait Islander children, and their families to address barriers in accessing child care, while encouraging parents to enter or re-enter the workforce. In particular, the Additional Child Care Subsidy component of the Child Care Safety Net will provide targeted additional fee assistance to families and children facing barriers in accessing affordable child care, including:

children at risk of serious abuse or neglect

grandparents on income support who are the primary caregivers of their grandchildren

families experiencing temporary financial hardship

low income families transitioning to work from income support

families with an income below around $65,000 (in 2017 terms) where the family does not meet the activity test.

Since the time of the Committee's report, the Department of Education and Training has undertaken consultation with the sector on the proposed detail of all Additional Child Care Subsidy payments, and will continue to engage with the sector as policy settings for these payments are finalised.

For further detail on specific support available to services currently funded through the Budget Based Funded program, please refer to the response provided to Labor Senator's Dissenting Report, Recommendation 2, above.

4. The Australian Greens recommend an amendment to include mechanisms for increasing childcare places where vacancy rates are critically low, creating barriers to parents being able to find affordable care.

The Government does not intervene directly in the child care market. Elements of the Package are aimed at encouraging services to be more flexible in how they provide care and child care places to both encourage more providers and to free up potential places in current services.