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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FAMILY ASSISTANCE LEGISLATION AMENDMENT
(CHILD CARE SUBSIDY) BILL 2023
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Education, the Hon Jason Clare MP)
GLOSSARY
|
Abbreviation |
Definition |
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ACCS |
Additional Child Care Subsidy |
|
CCS |
Child Care Subsidy |
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Department |
Department of Education |
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Family Assistance Act |
A New Tax System (Family Assistance) Act 1999 |
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Family Assistance Administration Act |
A New Tax System (Family Assistance) (Administration) Act 1999 |
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Minister’s Rules |
Child Care Subsidy Minister’s Rules 2017 |
FAMILY ASSISTANCE LEGISLATION AMENDMENT (CHILD CARE SUBSIDY) BILL 2023
OUTLINE
The purpose of the Family Assistance Legislation Amendment (Child Care Subsidy) Bill 2023 (the Bill) is to amend family assistance legislation to confirm responsibility for certain Child Care Subsidy (CCS) debts. These include debts for absences before a child’s first attendance or after a child’s last attendance and debts that involve a portion of a CCS amount that is initially withheld from being paid, then subsequently paid to an individual.
CCS is an entitlement of individuals who are liable for child care fees. Since July 2018, the Commonwealth has made CCS payments via the CCS system to providers. Providers charge individuals fees and are required to pass on the CCS to the individual by way of fee reduction. Providers report enrolment and attendance information in the CCS system, which then makes CCS payments to providers based on the reported information.
When a CCS payment greater than the individual’s entitlement has been made, which may arise when a provider reports enrolment or attendance information that is later found to be incorrect, the CCS system raises a debt and recovers the amount from providers. Providers would then adjust billing arrangements for that family to reflect the debt.
Families are entitled to receive CCS when their child is absent from a session of care they would normally attend, for up to 42 absence days per year. These are known as ‘allowable absences’. For an absence to count as an ‘allowable absence’, the absence day must be after the child’s first physical attendance or before the child’s last physical attendance before they cease being enrolled. Except in limited circumstances, CCS is not payable for absences before the child’s first attendance or after the child’s last attendance. The amendments confirm provider responsibility for debts where CCS has been paid for absences before a child first physically attends a service or after a child last physically attends a service. This ensures that a family’s allocation of allowable absences will not be inappropriately exhausted by sessions of care that children are not likely to attend. For example, CCS cannot be paid where a family is being charged fees to ‘hold’ a child care place before commencing at a service, or where a child has stopped attending a service but the family is still being charged fees during a notice period.
The amendments ensure that an individual does not incur a debt for absences before a child’s first attendance or after a child’s last attendance. Rather, providers incur the debt because the debt arises due to the provider submitting attendance reports to claim CCS for absences where no CCS should have been paid. Families will still be responsible for any debts in respect of the ‘withholding component’ applied to the session of care that was paid to them, as providers do not have the power to access or adjust this component that is withheld from payment. The ‘withholding component’ comprises a small percentage of the individual’s CCS entitlement, generally 5%, that is withheld from the individual in the CCS system to assist the individual reduce the likelihood of the individual receiving an overpayment and incurring a debt.
The amendments also confirm that for a debt raised against a provider in respect of CCS paid due to provider fault, the portion of the debt that comprises the ‘withholding component’, is a debt of the individual. This amendment would only apply in limited circumstances where:
· an individual met CCS reconciliation conditions (generally by lodging their tax return); and
· provider fault is identified after the individual met CCS reconciliation conditions, resulting in a determination that the individual was not entitled to be paid CCS for a session of care, or was overpaid for that session of care.
These amendments confirm current policy and administrative practice. The amendments align with the general delineation of CCS debts between providers and families: families are responsible for debts related to their obligations, such as timely and accurate reporting of income and activity details, while providers are responsible for debts relating to their obligations, such as attendance reporting and maintaining enrolments.
FINANCIAL IMPACT STATEMENT
There are no financial impacts associated with the amendments.
CONSULTATION
The amendments confirm existing policy and administrative practice in relation to CCS debts for absences before a child’s first attendance and after a child’s last attendance at a service. The Department has received feedback on the operation of CCS in relation to these absences from both providers and families since this time.
Providers are very supportive of receiving CCS payments directly from the Commonwealth. However, some have provided feedback on difficulties experienced with having a CCS debt raised and having torecover that amount from a family. Should the Commonwealth directly recover these debts from families, it is likely many families would appeal these debts on the basis of the provider being at fault. An examination to establish which party was at fault would add regulatory burden to both families and providers. Should provider fault be established, the debt would ultimately become a provider responsibility under existing provisions.
Some
providers and families take issue in general with the restrictions
on payment of CCS for absences before and after attendance. These
CCS payment restrictions do not align with provider fee charging
practices, which are intended to safeguard provider financial
viability, rather than ensuring a family’s annual allocation
of absence days for which they are entitled to receive CCS are not
inappropriately exhausted. The feedback from providers and families
informed the development and passage of amendments in Schedule 7 of
the Family Assistance
Legislation Amendment (Cheaper Child Care) Act
2022 . These amendments
extended payment of CCS for absences before a child’s first
attendance or after the child’s last attendance for families
experiencing exceptional circumstances.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Family Assistance Legislation Amendment (Child Care Subsidy) Bill 2023
The Family Assistance Legislation Amendment (Child Care Subsidy) Bill 2023 (the Bill) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .
Overview of the Bill
The Bill amends the family assistance legislation to confirm responsibility for certain Child Care Subsidy debts for absences before a child’s first attendance or after a child’s last attendance lies with approved providers. The amendments ensure that families do not incur a debt for absences before a child’s first attendance or after a child’s last attendance. Instead, providers incur the debt because the debt arises due to the provider submitting attendance reports to claim CCS for absences where no CCS should have been paid. The amendments confirm policy and administrative practice in relation to CCS debts for absences before a child’s first attendance and after a child’s last attendance at a service and are otherwise beneficial to individuals and families in that they do not incur the debts directly.
CCS is an entitlement of individuals who are liable for child care fees. Since July 2018, the Commonwealth has made CCS payments via the CCS system to providers. Providers charge individuals fees and are required to pass on the CCS to the individual by way of fee reduction. Providers report enrolment and attendance information in the CCS system, which then makes CCS payments to providers based on the reported information.
When a CCS payment greater than the individual’s entitlement has been made, which may arise when a provider reports enrolment or attendance information that is later found to be incorrect, the CCS system raises a debt and recovers the amount from providers. Providers would then adjust billing arrangements for that family to reflect the debt.
Families are entitled to receive CCS when their child is absent from a session of care they would normally attend, for up to 42 absence days per year. These are known as ‘allowable absences’. For an absence to count as an ‘allowable absence’, the absence day must be after the child’s first physical attendance or before the child’s last physical attendance before they cease being enrolled. Except in limited circumstances, CCS is not payable for absences before the child’s first attendance or after the child’s last attendance. The amendments confirm provider responsibility for debts where CCS has been paid for absences before a child first physically attends a service or after a child last physically attends a service. This ensures that a family’s allocation of allowable absences will not be inappropriately exhausted by sessions of care that children are not likely to attend. For example, CCS cannot be paid where a family is being charged fees to ‘hold’ a child care place before commencing at a service, or where a child has stopped attending a service but the family is still being charged fees during a notice period.
The amendments ensure that an individual does not incur a debt for absences before a child’s first attendance or after a child’s last attendance. Rather, providers incur the debt because the debt arises due to the provider submitting attendance reports to claim CCS for absences where no CCS should have been paid. Families will still be responsible for any debts in respect of the ‘withholding component’ applied to the session of care that was paid to them, as providers do not have the power to access or adjust this component that is withheld from payment. The ‘withholding component’ comprises a small percentage of the individual’s CCS entitlement, generally 5%, that is withheld from the individual in the CCS system to assist the individual reduce the likelihood of the individual receiving an overpayment and incurring a debt.
The amendments also confirm that for a debt raised against a provider in respect of CCS paid due to provider fault, the portion of the debt that comprises the ‘withholding component’, is a debt of the individual. This amendment would only apply in limited circumstances where:
· an individual met CCS reconciliation conditions (generally by lodging their tax return); and
· provider fault is identified after the individual met CCS reconciliation conditions, resulting in a determination that the individual was not entitled to be paid CCS for a session of care, or was overpaid for that session of care.
These amendments confirm current policy and administrative practice. The amendments align with the general delineation of CCS debts between providers and families: families are responsible for debts related to their obligations, such as timely and accurate reporting of income and activity details, while providers are responsible for debts relating to their obligations, such as attendance reporting and maintaining enrolments.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms.
Conclusion
The Bill is compatible with human rights because it does not raise any human rights issues.
Minister for Education, the Hon Jason Clare MP
FAMILY ASSISTANCE LEGISLATION AMENDMENT (CHILD CARE SUBSIDY) BILL 2023
NOTES ON CLAUSES
Clause 1: Short title
1. This is a formal provision specifying the short title of the Act.
Clause 2: Commencement
2. The table in this clause sets out the date for when the Bill’s provisions commence.
3. The whole of the Act commences the day after the Act receives the Royal Assent.
Clause 3: Schedules
4. This clause gives effect to the provisions in the Schedules to the Bill.
Schedule 1— Amendments
A New Tax System (Family Assistance) (Administration) Act 1999
Item 1: After section 71D
5. Item 1 of Schedule 1 to the Bill inserts new section 71DA into the Family Assistance Administration Act. The new section provides that debts in respect of CCS or ACCS for absences before a child’s first attendance or after a child’s last attendance are debts of the provider, not of the individual. The amount of the debt does not include a withholding component of the CCS or ACCS amount that is paid to the individual - this remains an individual debt under section 71B.
6. CCS is generally paid when a child is enrolled with an approved child care service and physically attends a session of care provided by the service. However, there are certain circumstances where a child may be absent from care, and the absence is taken to be a session of care that attracts CCS (known as an ‘allowable absence’). The allowable absence must, among other things, occur on a day that is after the day the child first attended a session of care and before the day the child last attended a session of care (see subparagraphs 10(2)(b)(ii) and (iii) and subparagraphs 10(3)(b)(ii) and (iii) of the Family Assistance Act).
7. Where a child is absent before their first day of attendance, or after their last day of attendance, no CCS will be payable for those absences. If CCS was paid for a session of care on these absence days, a debt arises. For example, a debt would arise if the provider submitted an attendance report required under section 204B of the Family Assistance Administration Act that reported an ‘allowable absence’ for the child on that day, but that absence day was after the child’s last day of attendance.
8. New section 71DA ensures that providers are responsible for debts in respect of CCS or ACCS paid for absences before a child’s first attendance or after a child’s last attendance. The amount of the debt does not include a withholding component of the CCS or ACCS amount that is paid to the individual - this remains an individual debt under section 71B.
9. As providers are responsible for submitting attendance reports and CCS is generally paid to providers to pass on to individuals as a fee reduction, providers should also be responsible for these debts. However, individuals remain responsible for debts in relation to any withholding component of the CCS amount that was paid to them, as individuals retain control of how much the withholding component is. Individuals also remain responsible for debts related to their obligations, such as timely and accurate reporting of income and activity details.
10. Paragraphs 71DA(1)(a) to (e) set out the requirements that must be met for a debt in respect of CCS or ACCS for an absence before a child’s first attendance or after a child’s last attendance to be a debt due to the Commonwealth by the provider, and not a debt of the individual.
11. Paragraph 71DA(1)(a) requires that an amount must be paid to an individual by way of CCS or ACCS for a session of care provided by a child care service of a provider to a child on a day. In most cases, providers are paid a fee reduction amount under section 67EB of the Family Assistance Administration Act, which the provider will be required to pass on to the individual under section 201A of that Act. An amount of CCS or ACCS is taken to have been paid to an individual if the provider passes on the fee reduction amount to the individual (see subsection 201A(5) of the Family Assistance Administration Act). Individuals may also be paid directly by the Secretary (see subsection 67EC of the Family Assistance Administration Act).
12. Paragraphs 71DA(1)(b) and (c) require that the child did not attend any part of the session of care specified in paragraph (a) and that day was before the child first attended a session of care provided by the service or after the child last attended a session of care provided by the service before the child ceased to be enrolled for care by the service.
13. Subsections 10(2), (3) and (5) of the Family Assistance Act identify certain limited circumstances where an absence before a child’s first attendance or after a child’s last attendance would be considered an ‘allowable absence’. Paragraph 71DA(1)(d) requires that the service is not taken to have provided the session of care under subsection 10(2), (3) or (5) of the Family Assistance Act. In other words, there was no ‘allowable absence’.
14. Paragraph 71DA(1)(e) requires that the individual incurs a debt under subsection 71B(1) that wholly or partly consists of the amount paid to the individual in paragraph (a). Where an amount is paid to an individual by way of CCS or ACCS for one or more sessions of care but the individual is not entitled to be paid that CCS or ACCS amount, the individual incurs the debt under subsection 71B(1).
15. Subsection 71DA(2) explains the effect of subsection 71DA(1) being met, where the individual incurs the debt before the individual met the CCS reconciliation conditions for the income year.
16. Subsection 71DA(2) provides that the individual is taken not to have incurred any debt that may have arisen under subsection 71B(1) with respect to the CCS or ACCS amount paid for the absences before the child’s first attendance or after the child’s last attendance, and instead is a debt of the provider. This provision ensures a debt is not raised against both individual and provider for the same period.
17. Subsections 71DA(3) to (5) explain the effect of subsection 71DA(1) being met, where the individual incurs the debt after the individual met the CCS reconciliation conditions for the income year.
18. Paragraph 71DA(3)(a) provides that the amount of the debt an individual incurs under subsection 71B(1) with respect to the CCS or ACCS amount paid for the absences before the child’s first attendance or after the child’s last attendance, is taken to be the ‘withholding component’ of the CCS or ACCS amount. The ‘withholding component’ is defined in subsection 71DA(4) to be the amount that would be the withholding amount under subsections 67EB(3) of the Family Assistance Administration Act, if it were assumed that subsections 67EB(3) and (4) applied for the purposes of section 71DA and references to a payment in subsection 67EB(3) were instead references to the CCS/ACCS amount.
19. Generally, a ‘withholding amount’ is applied as a percentage of a CCS or ACCS amount that is withheld and not paid to the provider (see subsection 67EB(3)). The amount paid to the provider is known as the ‘fee reduction amount’ under subsection 67EB(2), i.e. the CCS amount the individual is entitled to less the withholding amount. The ‘withholding amount’ is generally 5% (see section 40A of the Minister’s Rules) but a different percentage may be determined by the Secretary under subsection 67EB(4) if that percentage was more appropriate to avoid the individual receiving an overpayment and incurring a debt.
20. These amendments ensure that a withheld amount for an individual’s CCS entitlement, which is then paid to the individual, can be attributed to the individual as a debt arising under subparagraph 71DA(3)(a).
21. Paragraph 71DA(3)(b) provides that the amount of the ‘fee reduction component’ of the CCS or ACCS amount is a debt due to the Commonwealth by the provider. The ‘fee reduction component’ is defined in subsection 71DA(5) to be the CCS or ACCS amount reduced by the ‘withholding component’ of the CCS or ACCS amount referred to in subparagraph (4), since the ‘withholding component’ would be a debt of the individual. As providers are responsible for submitting attendance reports and CCS is generally paid to providers to pass on to individuals as a fee reduction, providers should also be responsible for the fee reduction component. However, individuals remain responsible for debts in relation to any withholding component of the CCS amount that was paid to them, as individuals retain control of how much the withholding component is.
22. Debts arising under 71DA(3) are not expected to arise often. The withholding amount would only be paid to the individual after they meet CCS reconciliation conditions at the end of the financial year (generally by lodging their tax return). For example, a debt could arise if the provider subsequently varied a session report or a child’s enrolment ended after CCS reconciliation conditions were met. As a condition of their approval and to ensure proper administration of CCS, providers are required to submit accurate session reports in a timely manner. Providers cannot vary session reports from the previous financial year. It is only in limited circumstances with the approval of the Secretary that providers can vary a session report from a previous financial year. For example, where there is evidence the provider became aware it failed to report accurate information, which resulted in a family not being paid CCS they were entitled to. It is expected that this debt, comprising of the withholding amount paid directly to individuals, would not often arise.
23. Subsections 71DA(6) and (7) ensure that a provider will not incur a debt for the same session of care under both new section 71DA and section 71F, which this Bill also amends. New section 71F broadly provides that, if the provider was at fault for the payment or overpayment of CCS or ACCS because the provider made a false or misleading statement or failed to comply with the family assistance law, the provider would incur a debt that would have otherwise been incurred by the individual under subsection 71B(1) or 71C(1). The amount of the debt under new section 71F does not include a withholding component of the CCS or ACCS amount that is paid to the individual - this remains an individual debt under subsection 71B(1) or 71C(1).
Item 2: Section 71F
24. Item 2 repeals section 71F of the Family Assistance Administration Act and substitutes it with a new section that confirms that providers will be responsible for debts due to provider fault, minus any withholding component paid to an individual in respect of the session of care.
25. Subsection 71F(1) sets out the requirements that must be met for a debt in respect of CCS or ACCS to be a debt due to the Commonwealth by the provider, and not a debt of the individual. These provisions reflect current paragraphs 71F(1)(a) to (c). Subsection 71F(1) provides that for a debt under section 71F to arise:
a. an amount of CCS or ACCS (‘CCS/ACCS amount’) is paid to an individual for a session of care provided by a child care services of a provider. In most cases, providers are paid a fee reduction amount under section 67EB of the Family Assistance Administration Act, which the provider will be required to pass on to the individual under section 201A of that Act. An amount of CCS or ACCS is taken to have been paid to an individual if the provider passes on the fee amount to the individual (see subsection 201A(5) of the Family Assistance Administration Act). Individuals may also be paid directly by the Secretary (see subsection 67EC of the Family Assistance Administration Act).
b. all or part of the CCS or ACCS amount (‘attributable component’) is paid to the individual because of a misleading or false statement of the provider, or the provider’s failure to comply with the family assistance law. For example, a provider reporting a session of care for which a child was not booked.
c. the individual incurs a debt under subsection 71B(1) or 71C(1) for the CCS or ACCS amount. Where an amount is paid to an individual by way of CCS or ACCS for one or more sessions of care but the individual is not entitled to be paid that CCS or ACCS amount, the individual incurs the debt under subsection 71B(1). Where an amount is paid to an individual by way of CCS or ACCS for one or more sessions of care and the received amount is greater than the amount of CCS or ACCS the individual is entitled to receive, the individual incurs the debt under subsection 71C(1).
26. Subsections 71F(2) explains the effect of subsection 71F(1) being met, where the individual incurs the debt before the individual met the CCS reconciliation conditions for the income year. In this case, the individual’s debt under subsection 71B(1) or 71C(1) is reduced by the amount of the attributable component, and amount of the attributable component is instead a debt of the provider. This provision reflects current paragraphs 71F(d) and (e).
27. Subsections 71F(3) to (5) explain the effect of subsection 71F(1) being met, where the CCS or ACCS amount was paid after the individual met the CCS reconciliation conditions for the income year.
28. Subsection 71F(3) provides that the amount of the debt an individual incurs under subsection 71B(1) or 71C(1) with respect to a CCS or ACCS amount, is taken to be the ‘withholding component’ of the CCS or ACCS amount. The ‘withholding component’ is defined in subsection 71F(4) to be the amount that would be the withholding amount under subsection 67EB(3) of the Family Assistance Administration Act, if it were assumed that subsection 67EB(3) applied for the purposes of section 71F and references to a payment in subsection 67EB(3) were instead references to the CCS/ACCS amount.
29. Generally, a ‘withholding amount’ is applied as a percentage of a CCS or ACCS amount that is withheld and not paid to the provider (see subsection 67EB(3)). The amount paid to the provider is known as the ‘fee reduction amount’ under subsection 67EB(2), i.e. the CCS amount the individual is entitled to less the withholding amount. The ‘withholding amount’ is generally 5% (see section 40A of the Minister’s Rules) but a different percentage may be determined by the Secretary under subsection 67EB(4) if that percentage was more appropriate to avoid the individual receiving an overpayment and incurring a debt.
30. These amendments ensure that a withheld amount for an individual’s CCS entitlement, which is then paid to the individual, can be attributed to the individual as a debt arising under subparagraph 71F(3)(a).
31. Paragraph 71F(3)(b) provides that the amount of the ‘fee reduction component’ of the CCS or ACCS amount is a debt due to the Commonwealth by the provider. The ‘fee reduction component’ is defined in subsection 71F(5) to be the CCS or ACCS amount reduced by the ‘withholding component’ of the CCS or ACCS amount referred to in subsection (4), since the ‘withholding component’ would be a debt of the individual. As providers are responsible for submitting attendance reports and CCS is generally paid to providers to pass on to individuals as a fee reduction, providers should also be responsible for the fee reduction component. However, individuals remain responsible for debts in relation to any withholding component of the CCS amount that was paid to them, as individuals retain control of how much the withholding component is.
32. Debts arising under subsection 71F(3) are not expected to arise often. The withholding amount would only be paid to the individual after they meet CCS reconciliation conditions at the end of the financial year (generally by lodging their tax return). For example, a debt could arise if the provider subsequently varied a session report from the previous financial year or an investigation reveals provider non-compliance. As a condition of their approval and to ensure proper administration of CCS, providers are required to submit accurate session reports in a timely manner. Providers cannot vary session reports from the previous financial year. It is only in limited circumstances with the approval of the Secretary that providers can vary a session report from a previous financial year. For example, where there is evidence the provider became aware it failed to report accurate information, which resulted in a family not being paid CCS they were entitled to. It is expected that this debt, comprising of the withholding amount paid directly to individuals, would not often arise.
Item 3: Application of amendment
33. Item 3 of Schedule 1 to the Bill is an application provision that provides that this amendment will apply to sessions of care provided on a day occurring on or after the commencement of this Schedule.