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Thursday, 23 March 2017
Page: 2018

Senator BIRMINGHAM (South AustraliaMinister for Education and Training) (12:52): I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 introduces major reforms under the government's Jobs for Families Child Care Package.

This package will deliver genuine, much-needed reform for a simpler, more affordable, more accessible and more flexible early education and childcare system.

Almost one million Australian families will benefit as a result of this childcare assistance package. Low- and middle-income families will be the greatest beneficiaries.

The measures contained in this bill represent an important investment in Australia's future, and they will deliver genuine reform.

The child care package contained in this bill has been before three Senate Inquiries. I thank the Senate Education and Employment Legislation Committee, the Senate Community Affairs Legislation Committee, as well as all those individuals and organisations who contributed to these inquiries. The government welcomes and accepts the recommendation from each of the committee's majority reports that the childcare bills be passed.

The government's Jobs for Families Child Care Package strikes the right balance between targeted childcare support for hardworking 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 further boosted through our $840 million in federal support in 2016 and 2017 for 600 hours of universal preschool access for each child in the year before school.

The key elements of the Child Care Reform Package are:

A new, simpler Child Care Subsidy, which will improve affordability

The Child Care Safety Net, which will improve accessibility and comprises three elements:

o the Additional Child Care Subsidy

o the Community Child Care Fund

o the Inclusion Support Program

Reducing red tape for services by removing the minimum hours per day and days per week opening requirements for child care services so they can operate more flexibly to meet family needs.

This bill makes significant amendments to the current A New Tax System (Family Assistance) Act 1999 and A New Tax System (Family Assistance) (Administration) Act 1999 in order to introduce the Child Care Subsidy, Additional Child Care Subsidy, and new approved provider and service requirements from July 2018. The bill provides for a number of transitional provisions that will commence in July 2017 and for the fast-tracked introduction of some enhanced compliance measures from royal assent.

Together these will give effect to the majority of the government's response to the recommendations from the Productivity Commission Inquiry into Childcare and Early Childhood Learning

Our objective is to help parents who want to work, or who want to work more, while still focusing on early childhood education.

Having two parents in paid employment has become the preferred choice for most families because of the changes in our society and economy over many years. Access to more affordable, quality child care puts the opportunity of work within far better reach of more families.

The Jobs for Families Child Care Package is designed to support more families, including jobless families, to increase their participation in work, training, study or volunteering. The Government's significant investment is targeted to those who need it most—low- and middle-income families who are juggling work and parenting responsibilities.

We want families to choose their child care around their work, rather than limit their work hours to suit their child care. It is estimated that the package will encourage more than 230,000 families to increase their involvement in paid employment.

Child Care Subsidy

The centrepiece of the Jobs for Families Child Care Package is the new Child Care Subsidy. From July 2018, the Child Care Subsidy will replace the current Child Care Benefit and Child Care Rebate with a single, means-tested subsidy.

The Child Care Subsidy will be better targeted than current childcare payments, providing more assistance for low- and middle-income families.

This reform is fundamentally fair. Low-income families will receive a Child Care Subsidy rate of 85 per cent of the actual fee charged (up from 72 per cent). That decreases to a 20 per cent subsidy for very high income families who are currently receiving a 50 per cent rebate on their out of pocket costs. The Child Care Subsidy rate tapers from 85 per cent to 20 per cent to ensure the package is most generous to those who earn the least. A family on $60,000 a year [whose child care centre charges $100 per day] would pay around $15 a day per child for care.

To make child care fairer, the coalition's reforms include abolishing the $7,500 Child Care Rebate annual cap that currently applies to all families. This will ensure that low- and middle- income families are not limited by a cap on the amount of child care they can access. Families earning more than around $185,000 will also benefit from an increased annual cap of $10,000 per child.

The new Child Care Subsidy will be paid directly to childcare service providers to make the system simpler for families.

An activity test will ensure that taxpayers' support for child care is targeted to those who depend on child care to work or work additional hours. The three-step activity test will align the hours of subsidised care more closely with the combined hours of work, training, study or other recognised activity undertaken, and provide for up to 100 hours of subsidy per fortnight. The bill provides that at least eight hours of activity a fortnight results in access to 36 hours of subsidised child care a fortnight; more than 16 hours of activity a fortnight results in access to 72 hours of subsidised care a fortnight; and more than 48 hours of activity a fortnight results in the maximum amount of subsidised care of 100 hours a fortnight.

These reforms are fundamentally fair—they provide the greatest hours of support in child care to the families who work the most hours, and the greatest subsidy and financial support to the families who earn the least.

The Package is also designed to place downward pressure on childcare costs for families and to ensure the government's significant investment in child care is more sustainable into the future.

New data released earlier this week showed that there are nearly 18,000 approved child care services nation-wide, caring for roughly 1.25 million children.

But the data also illustrates a broken early education and care system that is not working for Australian families. The data for the June 2016 quarter shows families faced a fee spike of almost eight per cent since the June 2015 quarter. While the Turnbull Government has done everything it can to reduce fee increases in the current system, this latest 7.6 per cent increase in child care fees - including a 6.3 per cent increase in Long Day Care fees - demonstrates that Australia's child care system needs to be reformed.

We need to fix this broken system with a complete overhaul.

The reforms will place downward pressure on what have been incessant child care fee increases through an hourly rate cap.

Additional Child Care Subsidy

We know children from disadvantaged backgrounds benefit most from quality early childhood education and care, and that is why we are providing additional support to those who need it most. The Child Care Subsidy I have just spoken of will be supplemented by an Additional Child Care Subsidy to provide extra childcare support for disadvantaged and vulnerable children, whether they be children at risk of serious abuse or neglect, families experiencing temporary financial hardship, grandparents on income support with primary carer responsibilities for their grandchildren, or parents on income support seeking to return to work, study or training.

The Child Care Safety Net aims to work alongside other state, territory and federal government payments and programs that are designed to give our most vulnerable children the additional support they need. Amongst other measures, it will provide low-income families who do not meet the activity test up to 24 hours per fortnight of subsidised care—this is equivalent to two weekly six-hour sessions. These 24 hours will be provided at the highest 85 per cent rate of subsidy, which is an increase on the current rate of about 72 per cent.

Getting children into quality child care maximises the early learning opportunities for children who may not be getting all the support they need at home. It also improves a family's ability to break a cycle of poverty and intergenerational welfare dependence by minimising barriers to workforce participation and providing access to early learning.

The Productivity Commission's report identified that existing programs that support disadvantaged and vulnerable families are complex, inefficient, poorly targeted and open to abuse. This is particularly the case in relation to the Community Support Program, special childcare benefit and the jobs, education and training childcare fee assistance payment.

These payments and programs, along with the current Budget Based Funded Program and grandparent childcare benefit, will be replaced by the Additional Child Care Subsidy and other elements of the Child Care Safety Net. Together, these will comprise a more integrated and targeted set of funding programs that leverage the increased Commonwealth investment in child care to provide the best early learning outcomes, particularly for those who need it most.

The new payments will remain linked to immunisation requirements that were strengthened under the very successful No Jab, No Pay policy from 1 January 2016.

Elements of the Jobs for Families Child Care Package outside the legislation

The Jobs for Families Child Care Package also includes a number of other important measures that are not formally part of the legislation. This includes the Community Child Care Fund which will help new and existing services, particularly in rural, regional or vulnerable communities, increase the supply of places in areas of high, unmet demand.

Much has been said, in both the House of Representatives debate and in the Senate Inquiry, about the transition of Budget Based Funded services under this package, otherwise known as BBFs, and the support they will receive from the Community Child Care Fund.

There are 300 BBF services nationwide, caring for around 22,000 children, amongst those are around 5,000 children in 45 mobile services.

In order to address concerns with the current block-funded program, which is capped and closed, this Package brings BBFs that are delivering child care into the broader funding model. For the first time, families using these services will receive direct support from the Government through the Child Care Subsidy and, for those requiring extra support, through the Additional Child Care Subsidy.

Recognising that many of these services go to great - and costly - lengths to travel to small communities with limited numbers of children, our third funding source for BBFs, including mobiles, is the Community Child Care Fund, which is an ongoing program with funding of $110 million a year. A significant portion of that fund will be provided as a supplementary funding stream to BBFs that need extra support in order to remain viable. As is the case for the BBF program, Community Child Care fund guidelines will not be legislated - this has the benefit of flexibility and the ability to tailor the program to meet emerging needs into the future.

However, having listened to the need for certainty going forward, I can assure the Senate that these BBFs will benefit from longer term grants of between 3 and 5 years. Great care has been taken to support BBFs in the Jobs for Families Child Care Package, including service based reports developed by Pricewaterhouse Coopers for each and every BBF. This careful work will continue after the bill has been passed, particularly with regard to further consultation on the Guidelines governing the Community Child Care Fund, which will be published by July 2017. We will also examine this program, along with every other provision of the bill, as part of the Post Implementation Review scheduled to commence within one year of implementation.

Strengthened compliance arrangements

Unfortunately, there are those who seek to use Government support to the childcare system for personal gain. This Government is determined to ensure that taxpayer support for early childhood education and care is used for fee relief for families, as intended.

We know that compliance measures are effective. Last year, we introduced new rules to eliminate the costly abuse of payments through a process known as 'child swapping' in the family day care sector. The Australian Government's focus on noncompliance (mainly but not solely focussed on family day care) is showing very clear results. The Government's action has resulted in a significant reduction of fraud in the child care system. While still growing the number of child care places available to hard working families, we have also managed to spare taxpayers nearly $1 billion in waste and driven dozens of rorters out business.

By contrast, under the previous Labor Government in the two years to June 2013, there were no cancelations, no suspensions and only two fines issued. In 2012-13 the Labor Government carried out only 523 compliance checks, while in the past financial year the Coalition Government carried out 3,100.

This Government will continue its tough stance on compliance and it is fast-tracking some of the strengthened compliance arrangements in this legislation to ensure they take effect from Royal Assent.

Currently, once a child care provider is approved by a state or territory regulator, the Commonwealth has limited grounds for not approving fee assistance for parents using that service. Compliance measures being brought forward in this legislation will include the power for the minister to make legislative instruments to place a pause on child care service applications for fee assistance. Such a pause may be made in relation to a particular service type for a defined period.

This measure will help us to address excessive growth within a particular child care service type, specifically where there are concerns about proven or alleged noncompliance with family assistance law.

Closure and transitional arrangements for child care payments

The bill includes consequential amendments and will provide transitional provisions to support the replacement of existing child care payments with the Child Care Subsidy and Additional Child Care Subsidy.


By way of conclusion, this bill, and the Jobs for Families Child Care Package more generally, will deliver significant and greatly needed reform through a simpler, more affordable, more flexible and more accessible childcare system. I commend the bill to the Senate.