House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Early Childhood Education, Childcare and Youth the Honourable Kate Ellis MP)

Schedule 4 - Notification of cessation of operation of approved child care services

Summary

This Schedule amends the Family Assistance Administration Act to require the operator of an approved child care service to provide to the Secretary at least 42 days notice of the operator's decision to cease operating the service. Where an operator decides to cease operating the service to avoid being in breach of a law of the Commonwealth, a State or a Territory, or due to circumstances beyond the operator's control, the operator must notify the Secretary of that decision as soon as possible after that decision.

Background

Currently, where an operator intends to cease operating an approved child care service, the operator must give at least 30 days notice of intention to cease the operation (whether due to closure of the service or transfer of the operation to another operator) (subsection 219M(1) refers). This requirement is intended to provide the department with the time to take steps, if necessary, to ensure that the children from an affected service are not left without the availability of care and that continued care can be provided for the children by another service. Early notification of the intended cessation is also required to ensure that in circumstances where, for example, a service has been purchased by a new operator, the process that the legislation requires to be followed in relation to the new operator seeking approval of the service for the purposes of the family assistance law does not result in the gaps in the entitlement to child care benefit or child care rebate of the individuals using the service.

The current 30 days notice requirement provides insufficient time for the department to assess the child care situation and/or take any necessary steps to alleviate the impact of the closure or transfer of the operation on the children and parents affected. Therefore, the amendments made by this Schedule require that, as a rule, the provision of a notice relating to the cessation must be made at least 42 days before the cessation.

Explanation of the changes

A New Tax System (Family Assistance)(Administration) Act 1999

Item 1 - Subsection 219M(1)

Item 1 repeals and substitutes subsection 219M(1). New subsection 219M(1) requires a person who operates an approved child care service to notify the Secretary if the person decides to cease operating the service. The cessation of operation includes, for example, a closure of the service or a transfer of the operation to a new operator resulting from sale of the child care service.

New paragraph 219M(1)(a) requires the operator, as a rule, to notify the Secretary of that decision at least 42 days before the cessation. This rule applies to most of the cessations; in particular to the cessations occurring as a result of the transfer of the operation to a new operator (new legal entity) as a result of sale or otherwise.

New paragraph 219M(1)(b) provides exceptions from the 42-day notice rule. In cases where the operator decides to cease the operation of a service to either avoid being in breach of a law of the Commonwealth, a State or a Territory or due to circumstances beyond the operator's control, the operator must notify the Secretary as soon as possible after that decision. If the cessation occurs in the circumstances to which this paragraph applies, this paragraph will enable the operator to notify the decision to cease operation later than 42 days before the cessation, that is, closer to the cessation day (but as soon as possible after that decision is made). An example of the operation of this shorter notification time-frame could be where a company operating a service becomes aware that it is insolvent and decides to immediately cease the operation to avoid penalties for insolvent trading under the Corporations Act 2001 .

Item 1 also inserts two notes at the end of new subsection 219M(1).

The first note alerts the reader that new subsection 219M(1) is a civil penalty provision, for the breach of which Part 8C provides pecuniary penalties. The civil penalty provision is defined in section 3; it includes the current section 219M(1). The amended notification requirement provision continues to be a civil penalty provision.

The second note alerts the reader that the heading to section 219M is changed by omitting the word "intends" and substituting the word "decides". This reflects the fact that subsection 219M(1) as amended refers to the operator's 'decision' to cease the operation rather than to the operator's 'intention', as is currently the case. It is considered that the reference to the operator's 'decision' provides a clearer legal test and, therefore, will assist in the administration of the notification obligation.

Items 2 and 3 - Paragraphs 219M(4)(a) and 219M(4)(b)

Items 2 and 3 are technical amendments consequential to the amendments made by Item 1 .

Item 4 - Paragraph 219M(6)(b)

If an operator notifies the Secretary of the cessation, as required by amended subsection 219M(1), the Secretary may request the operator, under subsection 219M(4), to provide the information specified in the request concerning the cessation, or the cessation decision, as the case may be.

Currently, paragraph 219M(6)(b) requires that the information requested be given to the Secretary within 7 days after the day on which the request was given to the operator. Item 4 amends paragraph 219M(6)(b). It preserves the 7-day time-frame for the provision of the specified information relating to the cessations to which the 42-day notification requirement in paragraph 219M(1)(a) applies (new subparagraph 210M(6)(b(i) refers). If the notification requirement in paragraph 219M(1)(b) applies to a cessation decision (that is, 'as soon as possible' after the decision to cease to operate the service), the specified additional information must be provided within the time specified by the Secretary in the request for that information (new subparagraph 219M(6)(b)(ii) refers).

Item 5 - Application

Item 5 provides that the amendments made by this Schedule apply in relation to decisions to cease operating an approved child care service made on or after the commencement of this Schedule.