House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, the Hon Mal Brough MP)

NOTES ON CLAUSES

Clause 1 sets out how the Act is to be cited, that is, the Families, Community Services and Indigenous Affairs Legislation Amendment (Child Care and Other 2007 Budget Measures) Act 2007 .

Clause 2 provides a table that sets out the commencement dates of the various sections in, and Schedules to, the Act.

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.

This Explanatory Memorandum uses the following abbreviations:

•

'Family Assistance Act' means the A New Tax System (Family Assistance) Act 1999 ;

•

'Family Assistance Administration Act' means the A New Tax System (Family Assistance ) ( Administration) Act 1999 ;

•

'CCB' means child care benefit;

•

'CCTR' means child care tax rebate; and

•

'HCC' means health care card.

Schedule 1 - Amendments relating to child care benefit rate and child care tax rebate

Summary

This Schedule gives effect to two measures related to child care payments announced in the 2007-08 Budget.

From 1 July 2007, the CCB standard and minimum hourly rates will increase by 10 per cent, over and above the normal CPI increase applicable from this date.

Another measure converts the child care tax offset for out-of-pocket child care expenses, currently available under the taxation legislation, into a direct payment under the family assistance law. This payment, which will be known as the child care tax rebate (CCTR), will be an annual lump sum payment. Eligibility requirements for the payment will remain unchanged but the amount of entitlement will no longer be limited by the amount of the tax liability of the eligible individual. It remains as 30 per cent of out-of-pocket child care costs.

(a) Child care benefit rates

Background

The CCB standard hourly rate and minimum hourly rate are specified in the Family Assistance Act. The rates are indexed in line with the movement in the CPI, as provided for in this Act. As a result of the 2007-08 Budget the CCB rates will, from 1 July 2007, increase by 10 per cent plus CPI. The increased rates will thereafter be subject to annual indexation.

Explanation of the changes

Part 1 - Amendments

Amendments to the Family Assistance Act

The CCB standard hourly rate is specified in clause 4 of Schedule 2 to the Family Assistance Act. Item 7 repeals the standard hourly rate amount specified in table item 1 and substitutes a new amount of $3.37, which is to apply from 1 July 2007.

The CCB minimum hourly rate is specified in the numerator in the formula in clause 12 of Schedule 2 to the Family Assistance Act. Item 8 repeals the formula and substitutes a new formula, which includes a new numerator of $0.564, providing for the increase of the minimum hourly rate of CCB.

Item 11 amends clause 3 of Schedule 4, which provides for indexation of, among other things, the CCB standard hourly rate and minimum hourly rate, as specified in the CPI indexation table. Item 11 inserts new subsection (5), which specifies that these rates are not to be indexed on 1 July 2007 (as the indexation due on this date has been included in the increased rates specified in the indexation table).

Part 2 - Application

Item 24 provides for the application of the amendments made by items 7 and 8 , dealing with the increase in CCB rates, to sessions of care provided on or after 1 July 2007.

(b) Child care tax rebate

Background

The child care tax offset is currently being delivered through the tax system, reducing the tax liability of eligible persons.

The current arrangement under the tax system allows individuals to offset an amount equal to 30 per cent of out-of-pocket child care expenses against their tax liability. The out-of-pocket child care expenses represent the difference between the amount of child care fees incurred by the taxpayer for care and the amount of CCB entitlement for an income year for children in an approved child care service. The maximum amount that can be offset is limited to $4,000 (indexed) on out-of-pocket expenses for each child per year. This child care tax offset limit is indexed on an annual basis in line with movements in the CPI.

Eligibility for the child care tax offset is currently linked to the entitlement to CCB. The out-of-pocket child care expenses to which the rebate applies relate to weeks of care during which the individual and the partner meet a work/training/study test.

Currently, the child care tax offset for child care expenses in a particular income year may be obtained after a delay of one income year to ensure families receive an accurate amount. For example, the offset for out-of-pocket costs in 2005-06 could be obtained from July 2007.

As a result of the 2007-08 Budget, the child care tax offset will be converted into the child care tax rebate (CCTR). CCTR will be delivered as a family assistance payment (not a tax offset) after the end of the income year in which the expenses were incurred. This is around a year more quickly than in the current system. For example, CCTR for care provided in 2007-08 will be paid from July 2008, rather than July 2009, as is the case for the child care tax offset.

CCTR is 30 per cent of out-of-pocket costs up to a maximum of $4,000 (indexed). The out-of-pocket costs for the new payment arrangement will be the full fees for which the individual is liable for care provided, less the CCB and any Jobs Education and Training Child Care fee assistance entitlement.

The maximum annual amount of the rebate for a child will be indexed annually in line with CPI increases. This maximum amount is $4,211 per child in the 2006-07 income year and $4,354 per child in the 2007-08 income year. Other characteristics of the CCTR payment are substantially the same as for the child care tax offset.

These amendments commence from 1 July 2007 in respect of child care expenses for the 2006-07 income year.

Explanation of the changes

Part 1 - Amendments

Amendments to the Family Assistance Act

Item 1 amends subsection 3(1), which contains definitions of terms, to include the definition of 'child care tax rebate' to mean the rebate for which a person is eligible under new Division 5 of Part 3 inserted by item 5 .

Item 2 amends the definition of 'family assistance' in subsection 3(1) to include reference to 'child care tax rebate' in new paragraph 3(1)(da).

Item 3 amends the definition of 'week' in subsection 3(1) to include reference to 'child care tax rebate'.

Item 4 amends subsection 3(6), which defines a week for the purposes of CCB as starting on Monday. The amendment makes the definition also applicable to CCTR.

Item 5 adds a new Division 5 at the end of Part 3, entitled 'Eligibility for child care tax rebate', which includes a new section 57F.

New Division 5 - Eligibility for child care tax rebate

New section 57F - Eligibility for child care tax rebate

New section 57F sets out criteria to be met for an individual to be eligible for CCTR for an income year in respect of a child. These criteria are substantially the same as the current child care tax offset criteria.

The criteria are as follows:

(a)

care must be provided to the child by one or more 'approved child care services' during at least one 'week' in the income year (whether or not that week finished in that year); and

(b)

the individual and the child must have a determination of entitlement in force for care provided in that income year in respect of the individual and the child under either:

(i)

section 51B of the Family Assistance Administration Act, which relates to CCB by fee reduction; or

(ii)

section 52E, which relates to CCB for a past period of care; and

(c)

the individual must either meet the work/training/study test or other requirements such as grandparent CCB or special CCB; the section gives effect to this by assessing whether the weekly limit of hours applicable in the week to the individual and the child is 50 hours (under section 54) or more than 50 hours (under section 55) or a 24 hour care limit (under section 56), and notes that the individual does not need to meet requirements (under section 17A(1)(b)) relating to the work/training/study test for CCB purposes; this CCTR work/study/training requirement is the same as that applying to the child care tax offset.

In relation to criterion (a) above, 'approved child care service' is defined in section 3 of the Family Assistance Administration Act as a centre-based long day care service, family day care service, in-home care service, outside school hours service or occasional care service approved under Division 1 of Part 8 of that Act.

'Week', for the purposes of CCTR is defined in subsections 3(1) and 3(6), as amended by items 3 and 4 .

In relation to criterion (b) above, under new subsection 57F(1), an individual may only become eligible for CCTR for an income year after a CCB entitlement determination relevant to that income year has been made.

In relation to individuals receiving CCB by fee reduction, the determination of entitlement to CCB by fee reduction is made after the end of the income year. This is usually as soon as the individual's income tax assessment has occurred for the income year. At that point, the eligibility for CCTR for the income year will arise in respect of particular weeks for which the individual was entitled to be paid CCB by fee reduction, provided they met the work/training/study test for the week or other requirements for more than the 24 hours weekly limit.

Individuals claiming CCB for a past period may make the claim within the two years following the income year in which the past period has occurred. Once a determination of entitlement for CCB for the past period has been made, eligibility for CCTR for that income year will arise in respect of particular weeks for which the individual was entitled to be paid CCB for a past period, provided they met the work/training/study test for the week or the other requirements.

In relation to criterion (c) above, for the purposes of eligibility for CCTR, it is not relevant for the weekly limit how many hours of care were provided to the child in that week. For example, if the weekly limit of hours is 50 and the individual actually uses 40 or 60 hours in the week, the individual still meets the condition. A note at the end of new subsection 57F(1) makes this clear.

Where an individual is not using child care for work/training/study purposes, and the other requirements are not met, the individual is eligible for a default limit of 24 hours in a week (subsection 53(3) refers). New subsection 57F(2) makes it clear that, where a limit of only 24 hours applies in a week, the condition for CCTR for that week is not satisfied.

New subsection 57F(3) ensures that the work/study/training requirements are the same as for the child care tax offset. In particular, it maintains the current child care tax offset exemption, which ensures that eligibility for CCTR is not dependent on whether the individual and the partner meet the 15 hours (or 30 hours over two weeks) activity requirement specified in paragraph 17A(1)(b). This arrangement is consistent with the work/training/study requirements prior to the changes to the test introduced from 1 July 2005 as part of the Welfare to Work amendments by the Family and Community Services Legislation Amendment (Welfare to Work) Act 2005 .

Item 6 inserts a new Division 4A after Division 4 of Part 4, providing for the calculation of CCTR.

New Division 4A - Child care tax rebate

New section 84A - Amount of the child care tax rebate

New section 84A deals with the amount of CCTR to which an individual is entitled in respect of care provided to a child in an income year.

New section 84A provides that, if a determination of entitlement for CCTR under new section 65EA or 65EB of the Family Assistance Administration Act is in force in respect of the individual, the child and the income year (the rebate year), the amount of rebate is worked out as provided by the method statement contained in this new section.

The method statement sets out the steps to be followed to calculate the rebate amount.

For step 1, the total amount of 'approved child care fees' that the service charges the individual for the child in each 'base week' in the income year are to be worked out.

'Approved child care fees' are defined in new section 84B, and 'base week' is defined in new section 84C.

Under step 2, the total 'amount of the individual's entitlement' to CCB is worked out for the child for the same base weeks in the income year.

'Amount of CCB entitlement' is defined in new section 84D.

If an individual is eligible to receive the 'Jobs Education and Training (JET) Child Care fee assistance' for care provided to the child in any base week, step 3 is used to work out the total amount of JET Child Care fee assistance for the child for those base weeks.

'Jobs Education and Training (JET) Child Care fee assistance' is defined in new section 84E.

Under step 4, a formula is provided for the calculation of the amount of the rebate, which, once followed, will result in the total amount of the rebate (step 5). Under the formula, the amount of CCB entitlement worked out in step 2 (and the JET Child Care fee assistance amount worked out in step 3, if applicable) is deducted from the amount of full fees worked out in step 1. This produces an amount representing the individual's total out-of-pocket child care expenses in the base weeks in the income year. This amount is multiplied by 30 per cent to calculate an amount to be compared with the CCTR limit for the year for the child. The individual's rebate for the child for the year is the lesser of the amount resulting from the application of the formula and the CCTR limit.

'Child care tax rebate limit', for the purposes of this comparison, is defined in new section 84F.

For example, if the total full child care fees for the income year are $6,000 and the CCB entitlement amount is $2,000 and there is no eligibility to JET Child Care fee assistance, then $2,000 is deducted from $6,000, resulting in out-of-pocket expenses of $4,000. This amount is then multiplied by 30 per cent, resulting in an amount of $1,200. This is then compared with the child care tax rebate limit of $4,000, and the lesser amount is the rebate (in this case, $1,200). If, however, the individual had been eligible for a JET Child Care fee assistance amount of $3,800 for that income year, then that amount would also be deducted from the original full fee amount of $6,000, resulting in out-of pocket expenses of $200. $200 would then be multiplied by 30 per cent, resulting in a rebate amount of $60.

New section 84B - Component of formula - approved child care fees

New section 84B defines 'approved child care fees', required to be worked out in step 1 of the method statement in new section 84A.

New subsection 84B(1) provides that the amount of approved child care fees for the base week is those fees that the individual or the individual's partner is liable to pay for care provided to the child by an approved child care service during the base week, whether or not the individual is entitled to receive CCB for all of that care. This subsection is subject to new subsection 84B(2).

New subsection 84B(2) provides a special rule where the base week for the individual and the child is the same base week as for the individual's partner and the child. This may occur in cases where each member of a couple is entitled to CCB in respect of care provided to the same child in a week, but for different sessions of care. The special rule is that the individual's fees for the week do not include any fees that the individual's partner is liable to pay for care provided to the child. Therefore, the individual's out-of-pocket child care expenses relate only to the full fees the individual is liable to pay for the child for that week, not to the total fees for the week.

New subsection 84B(3) ensures that the amount of fees to be worked out under step 1 of the method statement in new section 84A takes into account the full fees for which the individual is liable in respect of the base week and the child (before the CCB reduction is applied), and not the reduced amount. If fees for child care have been reduced under Division 1 of Part 8A of the Family Assistance Administration Act, then a reference to those fees for which the individual or the individual's partner is liable is taken to be a reference to the fees for which the individual or the individual's partner would have been liable for the care if the fees had not been so reduced.

New section 84C - Component of formula - base week

New section 84C provides the definition of the formula component 'base week', relevant to the method statement in new section 84A. A base week has the following features: it either partly or fully falls within the income year (the rebate year); the care to the child is provided by one or more approved child care services during the week; a determination of CCB entitlement has been made under either section 51B or 52E of the Family Assistance Administration Act for the child and the income year in which the base week falls; and new paragraph 57F(1)(c), which relates to the weekly limit of hours applicable to the individual and the child, is satisfied for the week.

New section 84D - Component of formula - amount of the individual's entitlement to child care benefit

New section 84D provides the definition of the formula component 'amount' of the individual's entitlement to CCB, relevant to the method statement in new section 84A. The amount of the individual's CCB entitlement is determined under section 51B (entitlement to be paid CCB by fee reduction for sessions of care occurring in an income year while the individual was conditionally eligible for CCB by fee reduction) or section 52E (entitlement to be paid CCB for a past period) of the Family Assistance Administration Act. The amount is expressed as a total amount for the period encompassed by the determination. As step 2 of the method statement for the calculation of CCTR requires the calculation of the CCB entitlement amount for the base week, new section 84D provides that the relevant amount of entitlement for a base week is, in the case of a determination of entitlement under section 51B, so much of the amount of entitlement to CCB by fee reduction as is attributable to the base week, and, in the case of a determination under section 52E, so much of the amount of entitlement to CCB for a past period as is attributable to the base week.

New section 84E - Component of formula - Jobs Education and Training (JET) Child Care fee assistance

New section 84E provides the definition of the formula component 'Jobs Education and Training JET Child Care fee assistance'. It defines Jobs Education and Training (JET) Child Care fee assistance as the payment of that name that is paid by the Commonwealth to the individual in respect of the child care provided by one or more approved child care services to the child in the base week.

New section 84F - Component of formula - child care tax rebate limit

New section 84F provides the definition of the formula component relating to the 'child care tax rebate limit' for a child for an income year. It sets the limit at $4,211 for the income year ending on 30 June 2007 and $4,354 for the income year ending on 30 June 2008. Indexation is to occur annually under Schedule 4, starting on 1 July 2008.

Item 9 amends the table in clause 2 of Schedule 4, dealing with indexed and adjusted amounts, to ensure that the amount of the CCTR limit specified in new section 84F is indexed.

Item 10 amends the table in subclause 3 of Schedule 4 to specify that the CCTR limit amount is indexed on 1 July each year, taking into account the March quarter before the indexation day as the reference quarter and applying the rounding base of $1.00.

Item 11 amends clause 3 of Schedule 4, which provides for indexation of the rates specified in the CPI indexation table. As item 10 amends subclause 3(1) to add to the table the new CCTR maximum amount, item 11 inserts new subsection (6), which specifies that the first indexation of this amount is to take place on 1 July 2008 (as the indexation due on 1 July 2007 has been included in the increased rates specified in the indexation table).

Amendments to the Family Assistance Administration Act

Item 12 inserts a new Division 4AA into Part 3, containing Subdivisions A and B, which provide for the making of determinations of entitlement to CCTR, notices of these determinations and the manner of payment of CCTR.

New Division 4AA - Child care tax rebate

New Subdivision A - Determination of entitlement to child care tax rebate

New section 65EA - Determination of entitlement to child care tax rebate - individual eligible for child care benefit by fee reduction

Section 65EA deals with a determination of entitlement to CCTR, where the individual is entitled to be paid CCB by fee reduction. A determination of entitlement to CCTR under this section can only be made when a determination of entitlement to CCB by fee reduction was made under section 51B.

New subsection 65EA(1) imposes an obligation on the Secretary to make a determination of entitlement to CCTR in respect of an individual and a child for an income year where the Secretary has made a determination under section 51B that the individual is entitled to be paid CCB by fee reduction for one or more sessions of care provided to the child by an approved child care service during the income year. Under this section, there can be no determination to CCTR where no section 51B determination is in force in respect of the individual, the child and the income year.

Furthermore, a determination of entitlement to CCTR cannot be made under this section if a determination of entitlement to CCTR for the individual, the child and the income year has already been made under new section 65EB (new paragraph 65EA(1)(b) refers).

New subsection 65EA(2) provides that, if the Secretary is satisfied that the individual is eligible under section 57F of the Family Assistance Act for CCTR in respect of the child for the income year, then the Secretary must determine the amount of the rebate that the individual is entitled to be paid.

New subsection 65EA(3) provides that, if the Secretary is not satisfied that the individual is eligible under section 57(1) of the Family Assistance Act for CCTR in respect of the child for the income year, then the Secretary must make a determination of no entitlement to the rebate.

The determinations of entitlement, or no entitlement, to CCTR are reviewable by the Social Security Appeals Tribunal and the Administrative Appeals Tribunal under Part 5 of the Family Assistance Administration Act.

New section 65EB - Determination of entitlement to child care tax rebate - individual eligible for child care benefit for a past period

New section 65EB deals with a determination of entitlement to CCTR where the individual is entitled to CCB for a past period. A determination of entitlement to CCTR under this section can only be made where a determination of entitlement to CCB for a past period has been made under section 52E of the Family Assistance Administration Act.

New subsection 65EB(1) imposes an obligation on the Secretary to make a determination of entitlement to CCTR in respect of an individual and a child for an income year where the Secretary has made a determination under section 52E that the individual is entitled to be paid CCB for a past period for one or more sessions of care provided to the child by an approved child care service during the income year. Under this section, there can be no determination of entitlement to CCTR where no section 52E determination is in force.

Furthermore, a determination of entitlement to CCTR cannot be made under this section if a determination of entitlement to CCTR for the individual, the child and the income year has already been made under new section 65EA (new paragraph 65EB(1)(b) refers).

New subsection 65EB(2) provides that, if the Secretary is satisfied that the individual is eligible under subsection 57F(1) of the Family Assistance Act for CCTR in respect of the child for the income year in which the period falls, then the Secretary must determine the amount of the rebate to be paid.

New subsection 65EB(3) provides that, if the Secretary is not satisfied that the individual is eligible under section 57(1) of the Family Assistance Act for CCTR for the income year, then the Secretary must make a determination of no entitlement to the rebate.

New section 65EC - Determination of entitlement to child care tax rebate

New section 65EC allows additional CCTR determinations to be made where the original determination did not include all periods of CCTR entitlement in the same income year. It allows a CCTR entitlement determination to be made in respect of an income year where a determination of entitlement to CCTR for the individual, the child and the income year was previously made under either new section 65EA or 65EB, or where an earlier determination under new section 65EC was made in respect of the individual, the child and the income year (the earlier rebate determination).

This section applies when, after a CCTR entitlement determination was made under new section 65EA or 65EB, an additional CCB entitlement determination is made in respect of the individual, the child and the income year, as a result of which the amount of the entitlement to CCTR for that income year would increase. In that situation, the Secretary will be required to make a new determination of entitlement to CCTR for the individual, the child and the income year under new section 65EC to replace the previous determination.

For example, a new determination may be made where additional CCB entitlement relevant to the same income year is made. Once the first determination of entitlement for CCB has been made for the individual, the child and the income year (for example, a determination under section 51B), a determination of entitlement to CCTR will be made under either new section 65EA or 65EC, as appropriate. If another (additional) determination of entitlement to CCB is subsequently made for the individual, the child and the income year (for example, under section 52E), that makes the individual entitled to CCB for additional periods of care not included in the scope of the previous CCB determination. Therefore, a new determination of entitlement to CCTR for the individual, the child and the income year will be made under new section 65EC for CCTR for the additional base weeks. This new CCTR entitlement determination will replace the earlier CCTR entitlement determination made for the same income year.

If a CCTR entitlement determination were to be made as a result of a CCB entitlement determination, and the CCB entitlement determination were changed as a result of a review process, the CCTR entitlement determination may need to be reviewed. The replacement mechanism in new section 65EC does not operate to change a CCTR entitlement determination following a change in the CCB entitlement resulting from review (new paragraph 65EC(1)(d) refers).

New subsection 65EC(2) provides that, where there has been a determination made under this section, an earlier determination ceases to have force.

New section 65ED - When determination is in force

New subsection 65ED provides that a determination comes into force under this Subdivision when it is made and remains in force at all times after it is made. The exemption applies when an earlier CCTR entitlement determination ceases to be in force as a result of a subsequent determination under new section 65EC.

New section 65EE - Notice of determination

New subsection 65EE(1) imposes an obligation on the Secretary to give notice of a CCTR determination to the individual, stating the income year for which the determination is made, whether the individual is entitled to be paid CCTR where determinations have been made under new sections 65EA or 65EB, the amount of the CCTR entitlement and that the individual may apply for review under the provisions in Part 5.

New subsection 65EE(2) provides that the determination will still be effective even if any or all the requirements of subsection (1) are not complied with.

New Subdivision B - Payment

New section 65EF - Payment of child care tax rebate

New subsection 65EF(1) relates to the payment of CCTR. It provides that, where the individual is entitled to be paid CCTR for an income year, the Secretary must pay that amount to the credit of a bank account nominated and maintained by the individual at such time as the Secretary considers appropriate.

New subsection 65EF(2) provides that, in circumstances where there has been a substituted determination made under section 65EC, which has resulted in an increase in the CCTR entitlement, the Secretary must pay the amount of that increase at such time that the Secretary considers appropriate into a bank account held by the individual.

New subsection 65EF(3) provides that the Secretary may direct that the payment be made in a different way than that provided for in subsection 65EF(1).

New subsection 65EF(4) provides that the section is subject to the provisions in Part 4, which deal with overpayments and debt recovery, and Division 3 of Part 8B, which deals with payments to payment nominees.

Item 13 inserts new sections 71CAA and 71CAB after section 71C. New section 71CAA deals with debts in respect of CCTR where there is no entitlement or the rebate is paid to the wrong person and new section 71CAB deals with debts arising in respect of CCTR where there has been an overpayment.

New section 71CAA - Debts arising in respect of child care tax rebate where no entitlement or rebate paid to wrong account

New subsection 71CAA(1) relates to full recovery of payments. It provides that, if an amount of CCTR has been paid to a person and that person is not entitled to receive that payment, then it becomes a debt due to the Commonwealth by that person. This section may be used to recover debts where there has been a payment of CCTR for an income year but it was found at a later date that there was no entitlement to CCTR.

New subsection 71CAA(2) provides that, if a payment of CCTR is made into an incorrect account at a financial institution and the Secretary is satisfied that the person into whose account the amount was paid is the wrong person, then that person has a debt owing to the Commonwealth for an amount equal to the amount credited to that person's account.

New section 71CAB - Debts arising in respect of child care tax rebate where overpayment

New section 71CAB relates to partial recovery of payments. It provides that, if there has been an overpayment of CCTR to a person, the difference between the amount received and the correct amount is a debt due to the Commonwealth by the person. This section may be used to recover debts where the amount of CCTR that was paid to the individual was more than the individual was entitled to be paid.

Item 14 inserts reference to new sections 71CAA and 71CAB in the definition of 'debt' in subsection 82(3). Section 82 deals with the methods available to the Commonwealth to recover debts that are owed to the Commonwealth in circumstances where there has been an overpayment or where wrong payments have been made to persons or approved child care services. As a result of the amendment, an individual's family assistance debts will be recoverable from the individual's arrears of CCTR and the individual's CCTR debt will be recoverable in the same way other family assistance debts are recoverable.

Item 15 amends subsection 92A(2) by adding the words 'child care tax rebate' and has the effect of preventing the setting off of arrears of family assistance of a person against another person's debt where there is an entitlement to arrears of CCTR, as is currently the case for CCB.

Item 16 amends subsection 93A(6) to include a payment of CCTR made under section 65EF in the definition of 'family assistance payment'. Section 93A deals with the Secretary's right to recover amounts of family assistance payments from financial institutions where these amounts have been paid incorrectly.

Item 17 inserts new subsection 154(4A) to provide the Secretary with an additional information gathering power to require a person to give information or produce a document in the person's custody or control with respect to information relevant to an individual's eligibility for CCTR or the amount of CCTR entitlement to which the individual is entitled. This new subsection is subject to section 159, which makes it an offence of strict liability for a person to refuse or fail to comply with a requirement under Division 1 of Part 6. Strict liability is an appropriate basis for the offence because of the difficulty the prosecution would have in proving fault (especially knowledge or intention) in this case and the fact that the offence does not involve dishonesty or serious imputation affecting a person's reputation.

Item 18 amends section 219TA by inserting new paragraph 219TA(6)(ha) to include CCTR in the definition of 'relevant benefit' for the purposes of Part 8B, which relates to the making of family assistance payments to a nominee.

Amendments to the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997

Items 19 to 22 amend the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 as a consequence of the amendments made by items 5, 6 and 12 to the family assistance law for the purposes of the CCTR. As a result of these amendments, the child care tax offset provided for in the income tax legislation will not be available in respect of care provided in the 2006-07 income year and later years.

Item 19 amends paragraph 159J(6)(ac) of the Income Tax Assessment Act 1936 to exclude CCTR from the definition of 'separate net income' for the purposes of section 159J, which provides that an individual is entitled to certain rebates where the taxpayer contributes to the maintenance of a dependant.

Item 20 amends section 11-15 of the Income Tax Assessment Act 1997 , which lists ordinary and statutory income which is exempt for taxation purposes. Item 20 includes CCTR in that list.

Item 21 amends subsection 52-150(1) of the Income Tax Assessment Act 1997 , which provides for family assistance payments under the family Assistance Administration Act that are exempt from income tax. This amendment ensures that CCTR is exempt from income tax (as is CCB).

Item 22 inserts the words 'ending before 1 July 2007' after the words 'for an income year' in subsection 61-470(1) of the Income Tax Assessment Act 1997 . The effect of this amendment is that the child care tax offset will not apply for out-of-pocket child care expenses incurred in the 2006-07 income year or later income years.

Part 2 - Application

Item 23 provides that the amendments made by items 5, 6 and 12 for the purposes of CCTR apply in relation to income years ending after 30 June 2006.

Schedule 2 - Amendments relating to health care cards

Summary

This measure is aimed at giving full-time students aged 16 to 25 years who are ex-carer allowance (child) care receivers continued access to the HCC.

Background

The Government announced, as part of its 2007-08 Budget, a measure to give all students who held the carer allowance (child) HCC up to the age of 16 years, access to an HCC after turning 16, while they are full-time students and until they reach 26 years of age.

Carer allowance is an income supplement available to people who provide daily care and attention in a private home to a person who has a disability or severe medical condition or who is frail aged. Carer allowance is not taxable or income and assets tested. It can be paid in addition to a social security income support payment.

Carer allowance (child) provides an HCC in the name of the care receiver. In some circumstances, the care needs of the child entitle the care receiver to an HCC only, without attracting payment of carer allowance (child). Currently, once the child turns 16 years of age, continued access to a concession card relies on the child meeting eligibility for either a low income HCC (which is not available to secondary students aged 16-18 years) or another payment that includes a pension concession card (PCC), such as disability support pension. The PCC provides medical concessions similar to the HCC.

The HCC provides Pharmaceutical Benefits Scheme prescription items and certain Medicare services at a cheaper rate.

Explanation of the changes

Amendments to the Social Security Act 1991

Item 1 inserts a new subsection 1061ZO(9), which sets out the qualification requirements that certain students, who are aged 16 to 25 years and who were former carer allowance (child) HCC holders, must meet, to continue to receive an HCC. Provided a person meets the requirements of paragraph 1061ZO(9)(b), a person does not need to meet the qualification criteria under paragraph 1061ZO(9)(a) continuously to be eligible for an HCC (that is, a person may lose qualification for a period but can resume qualification at any time after turning 16 and before reaching 26 years of age). A further requirement is that a person must have qualified for, and held, an HCC (issued on the basis of either Part 2.19 or subsection 1061ZK(3)) on the day before they turned 16 years of age.

Paragraph 1061ZO(9)(a) provides that a person is qualified for an HCC on a day if, on that day, the person is:

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aged at least 16 and has not turned 26; and

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a full-time student; and

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an Australian resident; and

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living in Australia.

Paragraph 1061ZO(9)(b) further provides that, in addition to the qualification requirements under paragraph 1061ZO(9)(a), a person is qualified for an HCC on a day if, on the day before the person turned 16:

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another person was qualified under Part 2.19 for carer allowance for the person; or

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subsection 1061ZK(3) applied to the person (subsection 1061ZK(3) defines the circumstances in which a disabled child can qualify for an HCC).

Lastly, paragraph 1061ZO(9)(c) must be met. This requires that, on the day before the person turned 16, the person was qualified for, and held, an HCC.

This new subsection inserts a note signposting the definition of 'Australian resident' in subsection 7(2).

Item 2 provides transitional rules in the event that a person made a claim for carer allowance before 1 October 2007, which was not determined before the person (to whom section 1016ZO(9) applies) turned 16 years of age. Item 2 provides that, despite paragraph 1061ZO(9)(c), subsection 1061ZO(9) is also taken to apply to a person on a day if:

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the person satisfies the requirements of paragraphs 1061ZO(9)(a) and (b) but not (c); and

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before 1 October 2007, another person had made a claim for carer allowance for the person; and

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the claim for carer allowance had not been determined before the day on which the person turned 16; and

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if the claim had been determined before that day, the person would have been granted an HCC before the day on which the person turned 16.

Item 3 inserts a reference to subsection 1061ZO(9) into paragraph 1061ZT(2)(b). The effect of the amendment is that the general rule in subsection 1061ZT(1), which is that a person is not qualified for an HCC if the person:

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is a dependant of any person; or

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is wholly or substantially dependent on:

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a resident of; or

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a corporation carrying on business in; or

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the government of;

a country other than Australia;

does not apply to a person qualified for an HCC under new subsection 1061ZO(9).

Amendments to the Social Security (Administration) Act 1999

Item 4 includes a reference to subsection 1061ZO(9) in subsection 240B(2), which will then provide that the name of any dependants of the holder of the card cannot be listed on an HCC issued under either subsection 1061ZK(7) or subsection 1061ZO(9).