House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Employment Participation and Childcare, the Honourable Kate Ellis MP)

Schedule 5 - Other amendments

Summary

This Schedule amends the Family Assistance Administration Act to:

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clarify and broaden the powers of the Secretary to refuse a service's approval for the purposes of the family assistance law; and

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broaden the scope of the condition for continued approval of child care services relating to the requirement to comply with child care laws to align with the scope of the similar requirement the services need to comply with as a condition of approval; and

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ensure that the same process applies in relation to the reduction of the amount of fee reduction for a reported period irrespective of whether the reduction results from recalculation triggered by a service substituting or withdrawing a previously given report for the period, or the Secretary recalculates the amount on her own initiative; and

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align the treatment of any reduced fee reduction amount payable to the service as a result of recalculation with the current treatment of a fee reduction amount payable in other situations (upon calculation or as an increase resulting from recalculation) and, by doing that, address the current omissions in the legislation.

Background Secretary's power to refuse a child care service's approval for the purposes of the family assistance law

Section 195 of the Family Assistance Administration Act empowers the Secretary to approve or refuse to approve a child care service for the purposes of the family assistance law. Approval of a service allows parents of children attending the service to be eligible for child care benefit (CCB).

The language and structure of the current provisions of the Family Assistance Administration Act relating to approval of a service for the purposes of the family assistance law and to refusal of approval has been a source of interpretational difficulties for the Department in approving or refusing to approve child care services for the purposes of the family assistance law. While the current provisions clearly specify that the Secretary must approve the service if the specified conditions are met, there is no clarity whether the Secretary may or must refuse approval if these conditions are not met. The difficulty is mainly due to the fact that subsection 195(2) appears to allow refusal only in some specified circumstances (when the service has been previously approved and has been sanctioned under the family assistance law); moreover, this provision is of limited practical application as the circumstances specified in it can seldom be met.

Amendments made by Items 8, 9 and 10 clarify the requirements relating to refusal of approval for the purposes of the family assistance law.

Requirement to comply with child care laws

It is a condition of a child care service's approval for the purposes of the family assistance law, and its continued approval, that the service complies with 'child care laws'. This requirement, expressed as a condition of a service's approval, is specified in the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 (Eligibility Determination). A similar requirement, expressed as a condition of continued approval, is specified in the Family Assistance Administration Act but it is differently worded, resulting in the scope of the requirement for the purposes of a service's approval being, arguably, broader than the scope of the requirement for continued approval.

Item 11 amends the requirement for continued approval in the Family Assistance Administration Act to align its scope with the requirement for approval and ensure that the same conditions apply for both approval and continued approval of a child care service. Recalculation of CCB fee reductions

CCB fee reductions for care provided by an approved child care service during an income year are calculated following the provision by the service of a periodic report relating to the usage of the care. The amount of fee reductions applicable for that period may be recalculated if the service subsequently withdrew the report or replaced the report, or if the Secretary decided that the previous calculation was incorrect. Calculations and recalculations of fee reductions are only made if a determination of CCB entitlement made for a particular income year after the income year has not yet been made.

Currently, if a service changed the report and the recalculation results in reduction of the fee reduction amount for the period, the higher amount previously paid to the service is recovered via a set off against any subsequent payments (from which a set off can occur) made to the service and the lower amount is paid to the service. The service has to pass that lower amount onto the individual for whose benefit fee reductions were calculated.

If the recalculation resulting in reduction of fee reduction amount occurs without the service changing the report, the higher amount previously paid to the service is not recovered from the service and the difference between the higher amount passed by the service on to the individual and the lower amount that applies to the period is recovered as a debt from the individual.

Amendments made by Items 1 to 4, 6, 7 and 12 to 19 ensure that the same process applies in relation to the reduction of the amount of fee reduction for a reported period irrespective of whether the fee reductions were calculated for the benefit of an individual or a service itself and whether the reduction results from recalculation triggered by a service substituting or withdrawing a previously given report for the period, or the Secretary recalculates the amount on her own initiative.

Amendments made by Items 20 and 5 further align the treatment of any reduced fee reduction amount payable to the service as a result of recalculation with the current treatment of a fee reduction amount payable in other situations (upon calculation or as an increase resulting from recalculation) and, by doing that, address the current omissions in the legislation.

These amendments ensure that

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any lower amount paid to the service as a result of recalculation must be remitted if it is not passed by the service on to the eligible individual (or the service itself, if the service is eligible); if not remitted, the amount is a debt to be paid by the service;

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any lower amount paid to the service as a result of recalculation is the amount against which other amounts may be set off;

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the service is always notified of the recalculated amount of fee reductions, must pass the amount on to the eligible individual and the service is taken to have done so on the day on which it is notified of the amount.

Explanation of the changes

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

Secretary's power to refuse a child care service's approval for the purposes of the family assistance law

Items 8, 9 and 10 - Subsection 195(1) and Subsection 195(2) and At the end of section 195

Subsection 195(1) provides that the Secretary must approve a child care service for the purposes of the family assistance law if the Secretary is satisfied that the conditions specified in this subsection are met.

Subsection 195(2) gives the Secretary a discretion to refuse to approve a child care service in limited circumstances: if the service has been previously approved and was sanctioned under the family assistance law or convicted of an offence under the Family Assistance Administration Act.

Item 9 repeals subsection 195(2). Item 8 makes a consequential amendment to subsection 195(1) to omit a redundant reference to subsection 195(2).

Item 10 inserts new subsections 195(5) and (6). The new subsection 195(5) requires the Secretary to refuse to approve a child care service for the purposes of the family assistance law, if the Secretary is not satisfied that the conditions for approval specified in subsection 195(1) are met. The new subsection 195(6) provides that if the Secretary refuses to approve a child care service for the purposes of the family assistance law, the Secretary must give the applicant written notice of the decision and the reasons for the decision and specify the applicant's review rights.

Requirement to comply with child care laws

Item 11 - Subsection 196(3)

Subsection 196(3) provides that it is a condition for the continued approval of an approved child care service that the provision of care by the service complies with all applicable requirements imposed by a law of the Commonwealth, or of the State or Territory in which the service is situated relating to child care.

Item 11 amends subsection 196(3) so as to broaden the scope of this condition for continued approval by aligning this condition with the scope of the condition for approval in the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 to capture the requirements imposed by a law of the Commonwealth, State or Territory, relating to the operation of the service (including construction of premises and equipment, provision of care and licensing requirements).

Amendments relevant to recalculation of fee reductions

Amendments made by Items 1 to 4, 6, 7 and 12 to 19 align the process relating to recalculation of fee reductions for a period by the Secretary on the Secretary's own initiative, and the treatment of the recalculated amount, with the process, and the treatment, that applies to the reduction of the fee reduction amount for a period resulting from recalculation triggered by a service substituting or withdrawing a previously given report for the period.

Items 18 and 19 - Subsection 219QA(1) and Subsection 219QA(2)

Section 219QA deals with set off of a previously calculated higher amount of fee reduction where the amount of applicable fee reduction is reduced on recalculation. Subsection 219QA(1) provides that section 219QA applies if the Secretary, on recalculating under section 50ZA or 50ZC the amount in which the Secretary considers fee reduction is applicable in respect of a session or sessions of care provided by a service to a child in a week, reduces the amount and the amount is reduced because of the substitution or withdrawal by the service of a report given under section 219N. Subsection 219QA(2) provides that the Secretary must pay the amount as last recalculated to the credit of a bank account nominated and maintained by the service.

Item 18 repeals subsection 219QA(1) and substitutes a new subsection 219QA(1) that makes section 219QA applicable to any situation in which the Secretary recalculates fee reductions and reduces the amount applicable.

Item 19 amends subsection 219QA(2) that requires the Secretary to pay to the service the recalculated amount of fee reductions. It inserts the words '(if any)' after the reference to 'amount' to acknowledge that the recalculation may result in a nil amount.

The amended section 219QA operates to the effect that if the Secretary reduces the amount of fee reduction on recalculation, the Secretary must pay the amount as last recalculated to the service (if any), irrespective of whether the reduction results from recalculation triggered by a service substituting or withdrawing a previously given report for the week, or the Secretary recalculates the amount for the week on the Secretary's own initiative.

Items 12 and 13 - Subsection 219B(2) and Subsection 219B(3)

Subsection 219B(2) provides that the service must, within 14 days after being notified of the amount as calculated or recalculated, pass the amount on to the claimant, except to the extent that the service is required to remit the amount to the Secretary under section 219QB of the Act.

Subsection 219B(3) provides that if the Secretary, on recalculating under section 50ZA the amount in which the Secretary considers fee reduction is applicable in respect of the session of care (the last recalculation), reduces the amount, and the amount is reduced for a reason other than the substitution or withdrawal by the service of a report given under section 219N, the service must pass on to the claimant the amount as calculated, or recalculated, immediately before the last recalculation, rather than the amount last recalculated.

Item 13 repeals subsection 219B(3). As a result of this amendment, a service will be required, under subsection 219B(2), to pass on to the claimant any amount calculated or recalculated of which the service has been notified, regardless of the reason for which the recalculation occurred. Item 12 makes an amendment to subsection 219B(2) consequential to the amendment made by Item 13 , to omit a redundant reference to subsection 219B(3).

Items 15 and 16 - Subsection 219BA(2) and Subsection 219BA(3)

Subsections 219BA(2) and 219BA(3) apply when an approved child care service is eligible for fee reductions (for a child at risk of serious abuse or neglect), not an individual. These subsections replicate the requirements of subsections 219B(2) and 219B(3) applicable when an individual is conditionally eligible for fee reductions (amended by Items 12 and 13 ).

Items 15 and 16 replicate the amendments to section 219B made by Items 12 and 13. Item 16 repeals subsection 219BA(3). Item 15 amends subsection 219BA(2) to remove a redundant reference to subsection 219B(3) repealed by the amendment made by Item 16 .

Items 1 and 2 - Subsection 50ZA(2) and Subsection 50ZA(3)

Section 50ZA relates to recalculation of fee reductions for which an individual is conditionally eligible.

Subsection 50ZA(1) provides that the Secretary may recalculate the rate at which, and the amount in which, the Secretary considers fee reduction is applicable in respect of a session or sessions of care provided by the service to the child in the week, provided no determination has been made under section 51B (a determination of entitlement to CCB by fee reduction) of the rate at which and the amount in which the Secretary considers the claimant eligible for the income year in which the week falls.

Subsection 50ZA(2) provides that the Secretary must notify an approved child care service of the recalculated rate and amount. Subsection 50ZA(3) provides that the Secretary need not notify the approved child care service of the recalculated rate and amount if the rate or amount is reduced, and the recalculation is for a reason other than the substitution or withdrawal by the service of a report given under section 219N.

Item 2 repeals subsection 50ZA(3), with the effect that, if the Secretary recalculates fee reductions for any reason, the Secretary must notify the service of the recalculated amount. This ensures that the requirement in sections 219B and 219BA to pass on the recalculated amount will apply in respect of all the recalculated amounts including the reduced amounts.

Item 1 makes an amendment to subsection 50ZA(2), consequential on the amendment made by Item 2 , to omit a redundant reference to subsection 50ZA(3).

Items 3 and 4 - Subsection 50ZC(2) and Subsection 50ZC(3)

Section 50ZC relates to recalculation of fee reductions for which an approved child care service is eligible; it replicates the requirements of section 50ZA relating to recalculation of fee reductions for which an individual is conditionally eligible.

Subsection 50ZC(1) provides that the Secretary may recalculate the amount in which the Secretary considers child care benefit by fee reduction is applicable in respect of a session or sessions of care provided to the child in the week, provided no determination has been made under section 54B ( a determination of entitlement to CCB by fee reduction) of the amount in which the Secretary considers the service eligible in respect of the care provided to the child for the financial year in which the week falls.

Subsection 50ZC(2) provides that 'subject to subsection (3)', the Secretary must notify the approved child care service of the recalculated amount. Subsection 50ZC(3) provides that the Secretary need not notify the approved child care service of the recalculated amount if the amount is reduced, and the recalculation is for a reason other than the substitution or withdrawal by the service of a report given under section 219N.

Items 3 and 4 replicate the amendments to section 50ZA made by Items 1 and 2. Item 4 repeals subsection 50ZC(3), with the effect that, if the Secretary recalculates fee reductions for any reason, the Secretary must notify the service of the recalculated amount. Item 3 makes an amendment to subsection 50ZC(2), consequential on the amendment made by Item 4 , to omit a redundant reference to subsection 50ZC(3).

Items 6 and 7 - Subparagraph 111(2)(a)(vii)

Subsections 50ZA(4) and 50ZC(4) specify that a notice of recalculated amount must be given to the service in the form, and in the manner or way, approved by the Secretary.

Subsection 111(2) provides that a person cannot apply to the Social Security Appeals Tribunal under subsection 111(1) or 111(1A) for a review of a decision made under any of the provisions set out in paragraph 111(2)(a) relating to the form and manner of claims and notices, etc.

Items 6 and 7 amend subparagraph 111(2)(a)(vii), to omit misdescribed and redundant references to subsections 50ZA(3) and 50ZC(3), respectively, (repealed by the amendments made by Items 2 and 4 ) and insert instead references to subsections 50ZA(4) and 50ZC(4) to ensure that the approval of a particular form, manner or way of a notice of a recalculated fee reduction amount is not reviewable by the Tribunal (this is consistent with the treatment of other 'decisions' relevant to approval of a form, manner or way of doing things).

Items 14 and 17 -At the end of subsection 219B(5) and At the end of subsection 219BA(5)

A service's obligation to pass on to a claimant the amount of fee reduction for a period is triggered by the notification of the calculation of that amount. As a result of the amendments made by Items 13 and 16 obligation to pass on will also apply to all recalculated amounts (regardless of the reason for recalculation). As a result of the amendments made by Items 2 and 4 a service will have to be notified about all recalculated amounts (regardless of the reason for recalculation).

Subsection 219B(5), which applies to passing on calculated and recalculated amounts for which an individual is conditionally eligible, provides that the amount is taken to have been passed on to the claimant on the day on which the Secretary notified the service of the amount calculated in accordance with subsection 50Z(3). Item 14 amends subsection 219B(5) to ensure that this provision applies equally to the notification of the amount recalculated in accordance with subsection 50ZA(2).

Section 219BA applies to impose the requirement to pass on calculated and recalculated amount on to the service itself. This section replicates the requirements of section 219B which applies to passing the amounts on to eligible individuals. Subsection 219BA(5) replicates subsection 219B(5). Item 17 amends subsection 219BA(5) to replicate the amendment made by Item 14 to subsection 219B(5).

Item 20 - Subparagraph 219QB(1)(a)(i)

Section 219QB requires a service to remit any fee reduction amount paid to the service under section 219Q (the calculated amounts or the increase resulting from recalculation) if it is not reasonably practicable for the service to pass on that amount to the individual or the service itself (if the service is eligible for CCB by fee reduction) within the time required under subsections 219B(2) or 219BA(2) (that is, within 14 days after being notified of the amount calculated or recalculated). The amount 'paid' includes an amount that would be paid but for a set off under subsection 82(2) (debt recovery), section 219QA (set off of a previously calculated higher amount) or section 219RC (set off of an enrolment advance). The current remittance requirement does not operate, by a legislative omission, in respect of the amounts paid under subsection 219QA(2) (reduced amounts paid as a result of recalculation).

Item 20 inserts in subparagraph 219QB(1 )( a )( i ) a reference to subsection 219QA(2) to ensure that a service is also required to remit any fee reduction amount paid to it under subsection 219QA(2) (the recalculated lower amount) and not passed on within 14 days, as required.

Item 5 - Subparagraph 71G(1)(a)(i)

Section 71G creates a debt due by an approved child care service if an amount is paid to the service by way of weekly fee reduction payments under section 219Q for sessions of care provided by the service and where the service's approval was suspended or cancelled before the payment was made for the session of care. The amount paid for the sessions of care occurring after the suspension or cancellation is a debt due to the Commonwealth by the service.

An approved child care service may also be paid fee reduction amounts under subsection 219QA(2), where recalculation of fee reductions for a period results in the lower amount of the applicable fee reduction amount. In such a case, the previously paid higher amount is set off against the subsequent payments to be made to the service and the lower recalculated amount is paid to the service.

Item 5 amends subparagraph 71G(1)(a)(i) to include a reference to an amount paid under subsection 219QA(2) to ensure that debt creation under section 71G applies also to the payment made under subsection 219QA(2).

Item 21 - Application

Item 21 is an application provision which provides the following.

The amendments made by Items 1 to 4 and 12 to 19 apply in relation to recalculations done under section 50ZA or 50ZC of the Family Assistance Administration Act on or after the commencement of those items (the day after the Royal Assent) in respect of weeks beginning before, on or after that commencement.

The amendments made by Items 5 and 20 apply in relation to amounts paid on or after the commencement of those items (the day after the Royal Assent).

The amendments made by Items 8 to 10 apply in relation to applications made under section 194 of the Family Assistance Administration Act on or after the commencement of those items (the day after the Royal Assent).

The amendments made by Item 11 apply, on and after the commencement of this item (the day after the Royal Assent) in relation to child care services approved before, on or after that commencement.