Explanatory Memorandum
Circulated by authority of the Minister for Education the Honourable Julia Gillard MPSchedule 3 - Recovery of debts
This Schedule contains amendments relevant to recovery of debts under the Family Assistance Administration Act.
Part 1 makes amendments to clarify which family assistance amounts can be set off against debts.
Amendments in Part 2 clarify the operation of section 71G of the Family Assistance Administration Act to ensure a debt is created under this section out of specified payments made to an approved child care service (amounts of fee reductions, enrolment advances and advances) in all instances of cancellation and suspension of a services approval under the Family Assistance Administration Act ( items 18 to 27 refer).
Part 3 amends Division 1 of Part 4 of the Family Assistance Administration Act dealing with overpayments and debt recovery. The amendment clarifies that references to a debt due to the Commonwealth by a service mean the debt is due by the operator on whose application the service was approved.
Part 1 - Setting off of entitlements
Background
Part 4 of the Family Assistance Administration Act deals with overpayments and debt recovery. Section 82 sets out the methods of recovery of debts. One way in which a debt may be recovered is through setting off 'arrears' of family assistance against the debt. Debts recoverable under the Family Assistance Administration Act are being recovered under these provisions from any amount of family assistance, to which the person who owes a debt, or another consenting person, is entitled.
Amendments are made for two purposes.
The amendments clarify debt recovery provisions to alleviate concerns that the current provisions authorising recovery of debts from 'arrears' of family assistance may not be robust enough to support recovery from any 'family assistance entitlement' amounts. The amendments made in this Part ensure that an amount of family assistance to which a person is entitled under the family assistance law may be set off against the person's debt due to the Commonwealth or against another person's debt if the entitled person consents to the set off. These amendments do not alter the range of family assistance payments from which debts may be recovered.
Amendments are also made to make CCB amounts also available for recovery of CCTR debts. Currently, CCB amounts are only available to for recovery of CCB debts.
These amendments commence on Royal Assent.
Explanation of the changes
Amendments to the Family Assistance Administration Act.
Generally, the amendments replace the reference to arrears of family assistance, with the reference to family assistance to which the person is entitled.
Section 82 of the Family Assistance Administration Act sets out the methods of recovery of debts, which are recoverable under this Act. One way in which a debt may be recovered is through setting off 'arrears' of family assistance to which the person is entitled against a debt of the person (subsection 82(1)(b)). Item 3 removes the reference to arrears from paragraph 82(1)(b), with the effect that any amount of a person's entitlement to family assistance payment can be used to offset the person's debt. Item 3 also makes it clear that recovery of a debt by deduction from instalments of family tax benefit under paragraph 82(1)(a) is a distinct method of recovery which does not fall in the ambit of the recovery method, to which paragraph 82(1)(b) applies.
Item 4 makes a similar amendment to paragraph 82(1)(e) which provides for setting off arrears of a consenting person's family assistance to which the person is entitled against another person's debt. Item 4 also makes it clear that recovery of a person's debt by deduction from a consenting person's instalments of family tax benefit under paragraph 82(1)(d) is a distinct method of recovery which does not fall in the ambit of the recovery method to which paragraph 82(1)(e) applies.
Section 84A sets out the rules that apply to setting off a person's entitlement to arrears of family assistance against the person's debt. Amendments made by items 5 to 9 remove the reference to 'arrears' from section 84A with the effect that the same rules apply to setting off a person's family assistance entitlement against the person's debt.
Following the amendments made to section 84A, item 1 removes the reference to 'arrears' from paragraph 66(2)(ba) which refers to a set off from arrears of family assistance under section 84A and items 15, 16 and 17 make similar consequential amendments to subparagraphs 95(3)(ia) and paragraphs 95(4)(b) and 99(2)(b) respectively.
Subsection 84A(3) limits availability of a person's CCB entitlement for recovery of the person's CCB debts only. Item 8 amends subsection 84A(3) further so that CCTR debts of the person may also be recovered from the person's CCB entitlement.
Section 92A sets out the rules that apply to setting off a consenting person's entitlement to arrears of family assistance against another person's debt. Amendments made by items 10 to 14 remove the reference to 'arrears' from section 92A with the effect that the same rules apply to setting off a consenting person's family assistance entitlement against another person's debt.
Following the amendments made to section 92A, item 2 removes the reference to 'arrears' from paragraph 66(2)(ca) which refers to a set off from arrears of family assistance under section 92A.
Part 2 - debts of approved child care service where fee reduction or enrolment advance paid
Background
Section 71G (as it applies prior to an approved child care service's application day under item 91 of the CCMS Act), creates a debt owed by the service to the Commonwealth, out of amounts of advances paid to the service under section 219R (as it applies prior to a service's application day) if the service's approval under section 195 for family assistance purposes is suspended under the Family Assistance Administration Act or cancelled under section 200 or when the service ceased to operate.
Section 71G (as it applies after a service's application day under item 91 of the CCMS Act) creates a debt owed by the service to the Commonwealth, out of amounts of fee reductions and enrolment advances paid under sections 219Q and 219RA respectively, if the services approval under section 195 for family assistance purposes is suspended under the Family Assistance Administration Act or cancelled under section 200 or when the service ceased to operate.
A service's approval may also be cancelled under section 202 of the Family Assistance Administration Act on either: the request of the service; if the service should not have been approved; if the service fails to provide care for three continuous months or if the service ceases to be operated by the person on whose application the approval was granted. Section 71G (as it applies before and after a service's application day) does not expressly refer to a cancellation under section 202. In most circumstances, cancellation of a service's approval under section 202 also involves cessation of operations, resulting in a debt under section 71G. However, there may be situations when cancellation of approval may not result from cessation. In this situation section 71G would not create a debt out of the relevant amount paid to the service in excess of what it should have been paid.
These amendments commence on Royal Assent.
Explanation of the changes
Items 18 and 19 amend section 71G(1) to clarify that a debt is created out of the amount of fee reduction payments made to a service under section 219Q if the amounts related to sessions of care or periods occurring after suspension or cancellation of a service's approval under the Family Assistance Administration Act.
Items 20, 21 and 22 amend section 71G(2) to clarify that a debt is created out of the amount of fee reductions that should have been set off against another fee reduction amount or against an enrolment amount, under subsection 219QA(3), but was not set off before suspension or cancellation of the service's approval under the Family Assistance Administration Act.
Items 23, 24 and 25 amend section 71G(3) to clarify that a debt is created out of an amount of enrolment advance paid to a service under section 219RA if the amount has not already been set off under section 219RC before the service's approval has been suspended or cancelled under the Family Assistance Administration Act.
Transitional
Item 26 amends section 71G as in force immediately before the commencement of Schedule 1 of the CCMS Act, which continues to apply for an approved child care as it applied prior to the first Monday after the service's application day. Subitem 26(1 ) provides that 'application day' has the meaning given to it by item 91 of the CCMS Act. The amendment creates a debt, owed by the service to the Commonwealth, out of amounts of overpaid advances paid to the service under section 219R (as it applies prior to a service's application day), if the service's approval under section 195 for family assistance purposes is suspended or cancelled under the Family Assistance Administration Act. Overpaid advances are the amount of advance paid but not used by the service to reimburse itself for fee reduction provided in the period before suspension or cancellation.
Application of amendments in Part 2
Item 27 is an application provision. It provides that the amendments made by this part apply to suspension or cancellation decisions made after the commencement of these amendments. Amendments made by items 18 to 25 only apply to an approved child care service on or after its application day.
Part 3 - responsibility for debts owed by an approved child care service
Background
Part 4 of the Family Assistance Administration Act deals with overpayments and debt recovery under the Act. In circumstances where the person who owes the debt is an approved child care service, Division 2 of Part 4 refers to a 'debt due to the Commonwealth by the service' (see, for example, section 71B(2)).
Beyond the technical definition of 'approved child care service' in section 3 of the Family Assistance Administration Act, 'service' is not defined in the Act.
Under sections 194 and 195 of the Family Assistance Administration Act, a person who is an operator of a child care service may apply for the service to be an approved child care service for the purposes of the family assistance law. If approved, that person is then an operator of an approved child care service.
Division 2 of Part 4 of the Family Assistance Administration Act includes debt creation provisions which specify amounts recoverable under the Act. In some circumstances, for example those specified in subsection 71B(2) the amount is a 'debt due to the Commonwealth by the service'. In this context, as the service itself is not a legal entity and can only be represented by its operator, the intent behind provisions creating a debt due by a 'service' is to make the operator on whose application the service was approved responsible for repayment of the service's debt.
To allay concerns that have been raised as to the intent of these provisions, amendments are made to clarify that the debt due by a service is a debt owed by the operator of the service.
The amendments commence on Royal Assent.
Explanation of the changes
Item 28 inserts new section 68A in Part 4, Division 1-Preliminary which deals with recovery from approved child care services. It provides that in circumstances where a debt is due to the Commonwealth by an approved child care service under Part 4 of the Family Assistance Administration Act, the debt is payable by the person who was the operator of the service. For this purpose, the operator of an approved child care service is defined as the person on whose application the service was approved.
For example, when an approved child care service does not remit to the Secretary fee reductions that are not reasonably practicable for the service to pass on, a debt is created under section 71CA of the Family Assistance Administration Act. In some circumstances, however the service may be sold prior to the deadline for the service to remit to the Secretary. As the service has been sold, the service's approval must be cancelled, and a new approval granted to the new operator. The debt under section 71CA, however, will attach to the previous operator to whom the fee reduction payments were provided.