Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011



Download PDFDownload PDF

ISSN 1328-8091

Parliament of Australia Departmentof Parliamentary Services

Contents

Purpose .................................................................................................................................................... 2

Background .............................................................................................................................................. 2

Child Care Tax Rebate (CCTR) ............................................................................................................. 2

The original model ......................................................................................................................... 2

2007 Election Commitments and reform since then ..................................................................... 3

Financial implications ............................................................................................................................... 4

Key provisions .......................................................................................................................................... 4

Schedule 1 ...................................................................................................................................... 4

Amendment of the A New Tax System (Family Assistance) Act 1999 ...................................... 4

Amendment of the A New Tax System (Family Assistance) (Administration) Act 1999 .......... 4

Schedules 2 and 3 .......................................................................................................................... 5

BILLS DIGEST NO. 74, 2010-11 22 March 2011

Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011

Dale Daniels Social Policy Section

2 Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest.

Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011

Date introduced: 23 February 2011

House: House of Representatives

Portfolio: Employment Participation and Childcare

Commencement: See the detailed table in clause 2 of the Bill. Weekly payments of the Child Care Rebate are to commence on 1 July 2011.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bills home page, or through http://www.aph.gov.au/bills/. When Bills have been passed they can be found at the ComLaw website, which is at http://www.comlaw.gov.au/.

Purpose

• To provide for weekly or fortnightly payments of the Child Care Rebate (CCR) in addition to the

quarterly and annual options presently available. • To provide for payments to be made either directly to families or to child care services.

Background

Child Care Tax Rebate (CCTR)

The original model

During the 2004 election campaign, the then Howard Government announced that it would introduce a 30 per cent Child Care Tax Rebate (CCTR) for out-of-pocket child care costs. The CCTR was designed to complement the already existing Child Care Benefit (CCB), which was the main form of child care fee assistance. The CCTR was available to those in receipt of the CCB who used approved child care and who met the CCB work/study/training test.

Families were able to claim 30 per cent of their out-of-pocket costs (that is, costs in excess of CCB payments received) for approved child care up to a maximum of $4000 per child per annum. This amount was increased annually in line with movements in the Consumer Price Index. Originally, out-of-pocket child care costs could be claimed at the end of the financial year after the costs were incurred. Consequently, costs during the first year of operation from 1 July 2004 for the 2004-05 year could not be claimed until the 2005-06 tax year. This delay was due to the need to establish out of pocket costs, after entitlement to CCB for each financial year had been finalised. This happens in the October after the end of each financial year.

The other problem with the CCTR was that it was a non-refundable tax offset. It could only reduce a person’s tax liability to zero. Once a person’s basic income tax liability had been reduced to nil, the

Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011 3

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest.

taxpayer could not receive the excess as a refund. However, the remaining rebate could be transferred to the taxpayer’s spouse. Likewise, where the child care user did not have enough income to have a tax liability, they did not benefit from a tax rebate.

The 2007 improvements

The 18-month to two-year delay between incurring costs and receiving the rebate was an obvious problem and was addressed in the 2007-08 Budget. The Howard Government changed the CCTR into a direct payment administered by Centrelink. It became a tax rebate in name only and was paid at the end of the year in which the costs were incurred after the correct entitlement to CCB had been established. In 2007 claimants received two years worth of CCTR in one payment shortly before the 2007 election.

This change also meant that the CCTR could now be paid in full, regardless of the tax liability of the claimant.

2007 Election Commitments and reform since then

The ALP included an increased rebate level and maximum payments in their 2007 election policy.

Recognising the delivery problems of the CCTR as originally implemented, both sides of politics offered enhancements to the delivery of CCTR in the 2007 election campaign. The ALP promised to implement quarterly payments, with this added promise:

New information systems enable out of pocket costs to be calculated faster and in office, a Rudd Labor Government will fast track the introduction of the new Child Care Management System with the goal of paying the 50 per cent rebate every fortnight. 1

The Coalition policy promised that:

From April 2008, a re-elected Coalition Government will pay the 30 per cent Child Care Tax Rebate directly to child care services so that they can pass on this benefit to parents immediately, when they need it most. This will have the effect of cutting by 30 per cent the amount parents have to pay upfront to their child care service each week.

2

The Rudd Government increased the rebate to 50 per cent, increased the maximum payment to $7500 and introduced quarterly payments in 2008. They also changed the name of CCTR to Child Care Rebate (CCR). The Child Care Management System which allows transmission of child care

1. The Australian Labor Party, Labor’s affordable child care plan, Policy Document, Election 2007, Canberra, 22 October 2007, pp. 6-7, viewed 1 March 2011, http://parlinfo/parlInfo/download/library/partypol/1SPO6/upload_binary/1spo64.pdf;fileType=application/pdf#search =%22child%20care%22

2. The Liberal Party, Better child care for families, Policy Document, Election 2007, November 2007, viewed 1 March 2011,

http://parlinfo/parlInfo/download/library/partypol/6LWO6/upload_binary/6lwo62.pdf;fileType=application/pdf#searc h=%22child%20care%22

4 Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest.

usage information between child care services and Centrelink was in use by all child care services by the end of June 2009.

On 9 July 2010, the Gillard Government announced that fortnightly payment of the CCR would be introduced from July 20113.The Coalition called for a move to weekly payments of CCR in their 2010 election policy.4

The move to weekly or fortnightly payment of CCR has been made possible by the introduction of the Child Care Management System over the period July 2007 to June 2009. Payments close to the time that child care service providers charge fees is clearly an improvement for families over the present and past arrangements which have required families to pay fees and then wait months for the rebate.

The Bill will also allow payment of the rebate directly to services so that families can just receive a bill for the part of their fees that are not covered by CCB or CCR.

Financial implications

According the Explanatory Memorandum, the cost over the five years 2010-11 to 2014-15 is estimated to be $42.5 million.5

Key provisions

Schedule 1

Amendment of the A New Tax System (Family Assistance) Act 1999

Items 1 to 8 of Schedule 1 amend the A New Tax System (Family Assistance) Act 1999 to include eligibility for weekly payments of CCR and provide a method to calculate the CCR amount for a week. Item 3 includes provision for 15 per cent of the CCR entitlement to be withheld until after the end of the income year in order to minimise any debt due to changes of income during the income year.

Amendment of the A New Tax System (Family Assistance) (Administration) Act 1999

Item 13 inserts new Subdivisions AAA and AAB into Division 4AA of Part 3 of the A New Tax System (Family Assistance) (Administration) Act 1999. They provide for claimants for CCR to elect to have their CCR paid in a particular way and also provide for weekly payments of CCR. At present families claiming the CCR can choose between annual and quarterly payments that are paid directly to them. These payments are partial refunds of fees paid to a child care service. This bill expands that choice

3. Explanatory Memorandum, Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011, p. 4. 4. The Liberal Party, The Coalition’s plan for real action on child care, 1 January 2010, viewed 1 March 2011, http://parlinfo/parlInfo/download/library/partypol/DRFX6/upload_binary/drfx60.pdf;fileType=application/pdf#search= %22child%20care%22

5. Explanatory Memorandum, Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011, p. 3.

Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011 5

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest.

in two ways. The choice of timing of payments is increased to include weekly and fortnightly payments. A new choice of payment method is provided as well. The option to have payments delivered as fee reductions where the payments are made to the child care service rather than to the family is made available in addition to the present method of direct payment to families who have already paid fees.

Item 62 inserts a new section 219EB imposing on an approved child care service, an obligation to provide additional information in section 219E statements. These statements set out the amounts of CCB and CCR that a service is passing on to child care users as fee reductions. Penalties are imposed for a failure to meet these obligations.

Item 71 inserts new sections 219QC, 219QD and 219QE which provide for weekly payments of CCR to approved child care services.

Schedules 2 and 3

Schedules 2 and 3 contain amendments of a technical nature. The reader is referred to the Explanatory Memorandum for an explanation.

6 Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest.

© Commonwealth of Australia 2011

This work is copyright. Except to the extent of uses permitted by the Copyright Act 1968, no person may reproduce or transmit any part of this work by any process without the prior written consent of the Parliamentary Librarian. This requirement does not apply to members of the Parliament of Australia acting in the course of their official duties.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Feedback is welcome and may be provided to: web.library@aph.gov.au. Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library’s Central Enquiry Point for referral.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2410.