House of Representatives

Explanatory Memorandum

(Circulated By The Authority of the Minister for Education and Minister for Employment and Workplace Relations the Honourable Julia Gillard MP)

Schedule 2 - Child care rebate in substitution

Part 1 - Amendments

A New Tax System (Family Assistance) Act 1999

Item 1 - After subsection 57F(1)

Inserts new subsection (1A) in section 57F dealing with eligibility for child care rebate for an income year. This new subsection provides the eligibility criteria for an individual for child care rebate in respect of a child, in substitution for a deceased individual.

Currently, if an individual is conditionally eligible for child care benefit by fee reduction for care provided to a child by an approved child care service, or is eligible for child care benefit for a past period for care provided to a child by an approved child care service, and that individual dies before an entitlement determination to be paid child care benefit has been made, the legislation provides that another individual may be eligible for child care benefit by single payment/in substitution for care provided to the child, for which the deceased individual would have been eligible.

The amendments made by this Schedule will align the operation of child care rebate with the operation of child care benefit by extending the eligibility for child care rebate in respect of care provided to a child of a deceased individual to the individual who is entitled to be paid child care benefit by single payment/in substitution in respect of that care.

New subsection 57F(1A) deals with eligibility for the rebate relating to child care benefit in substitution. It provides that an individual is eligible for child care rebate in substitution for a period in respect of a child where:

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care is provided by one or more approved child care services to a child during at least one week in the period;

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the care is covered by a determination under section 53D or subsection 53E(1) of the Family Assistance (Administration) Act (that the individual is entitled to be paid child care benefit by single payment/in substitution for that care because of the death of another individual or that the individual is not so entitled because the amount of the entitlement would be nil); and

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the weekly limit of 50 hours, more than 50 hours, or the 24 hour care limit applies to the deceased individual in the week under Subdivision G of Division 4 dealing with the limits on eligibility for child care benefit.

A note at the end of new subsection 57F(1A) informs the reader that if the specified limit of hours applies in a week, the condition relating to the limit of hours is met even if the deceased individual has used fewer hours of care in the week.

Note 1 alters the heading to section 57F to reflect the fact that it now also deals with eligibility for the rebate for a period.

Note 2 inserts a heading to subsection 57F(1) reflecting the fact that this section deals with eligibility for the rebate relating to child care benefit by fee reduction or for a past period.

Items 2, 3, 4 and 5 make amendments to subsections 57F(2) and (3) consequential to the amendment made by item 1. The conditions specified in those subsections apply currently to the individual who is the claimant for the rebate. In the context of eligibility for child care rebate in substitution, those conditions are to apply to the deceased individual, not to the individual whose eligibility is being considered. Amendments are therefore made to make this distinction clear.

Item 2 - Paragraph 57F(2)(a)

Repeals and substitutes paragraph 57F(2)(a) to insert a reference to new paragraph (1A)(c) and 'the individual concerned'.

Item 3 - Subsection 57F (2) (note)

Repeals the note contained at the end of subsection 57F(2) and inserts two new notes.

Note 1 clarifies that 'the individual concerned' referred to in new paragraph (1A)(c) refers to the deceased individual.

Note 2 clarifies that 'the individual concerned' would not satisfy paragraph (1)(c) or (1A)(c) where the only limit applicable to that individual is the limit of 24 hours under subsection 53(3).

Item 4 - Subsection 57F(3)

Inserts into subsection 57F(3) a reference to new subsection (1A)(c) and to 'the individual concerned'.

Item 5 - At the end of subsection 57F(3)

Inserts a note which clarifies that, for the purposes of (1A)(c), the individual concerned is the deceased individual.

Item 6 - Subsection 84B(2)

Repeals and substitutes subsection 84B(2).

Subsection 84B(1) defines approved child care fees for a base week, required to be worked out when calculating the amount of child care rebate as the fees for which the individual or the individual partner is liable to pay. Subsection 84B(2) provides a special rule where the base week for the individual and the child is shared with the individual's partner who may be eligible for the rebate in his or her own right. This amendment will extend the rule in this section to the situation where the base week is shared with the individual who may be eligible for child care rebate in substitution.

For example, the rule in subsection 84B(2) would apply in the situation when one member of a couple has died and the surviving member has both an entitlement to the rebate in his/her own right and a separate entitlement to the rebate in substitution.

Item 7 - After subdivision B of Division 4A of Part 4

Inserts new Subdivision BA dealing with the calculation of child care rebate relating to child care benefit in substitution. New subdivision BA provides for the calculation of the amount of child care rebate to which an individual is entitled in substitution for a deceased individual.

New section 84DA provides that, if a determination of entitlement for child care rebate is made under section 65ECA of the Family Assistance (Administration) Act in respect of a period (the entitlement period ), an individual (the substitute individual ), and a deceased individual, for child care provided by one or more approved child care services to a child during that period, the amount of child care 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.

Step 1 of the method statement involves working out the rebate periods. The rebate period is the entitlement period where the period falls wholly within one income year. Where the entitlement period is spread over two income years, the part of the entitlement period in each of those years will be a rebate period .

Step 2 requires the calculation of the total amount of the deceased individual's approved child care fees that the service charged the deceased individual for the child in each base week in each rebate period.

Approved child care fees is defined in new section 84DB and base week is defined in new section 84DC.

Step 3 requires the calculation of the total amount of the substitute individual's entitlement to child care benefit by single payment/in substitution for the care for the child in each base week that is a base week for the deceased individual and the child, in each rebate period.

The amount of a substitute individual's child care benefit entitlement is defined in new section 84DD.

Step 4 requires the calculation of the deceased individual's entitlement to Jobs Education and Training (JET) Child Care fee assistance (if any) that the deceased individual was eligible to receive for the child in each rebate period.

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

Step 5 requires the calculation of, for each rebate period, the lesser amount of: an amount worked out using the formula contained in this step and the child care rebate limit for the income year that includes the rebate period. If there are 2 rebate periods, the obtained results are to be added.

Step 6 provides that the amount calculated using the method statement is the amount of the substitute individual's child care rebate for the child for the entitlement period.

New section 84DB defines approved child care fees referred to in Step 1 of the method statement in new section 84DA.

New subsection 84DB(1) provides that the amount of approved child care fees for the base week for the deceased individual and the child is the amount of fees, for which the deceased individual or the deceased individual's partner is liable to pay for care provided to the child by an approved child care service during the base week. Subject to subsection (2), it is irrelevant to the calculation of the amount of approved child care fees for the week of care whether or not the individual is entitled to child care benefit for all of that care.

New subsection 84DB(2) provides a special rule relating to the calculation of approved child care fees where the base week for the deceased individual and the child is also the base week for the deceased individual's partner and the child (these are the situations where somebody else is eligible for the rebate in substitution for that partner - paragraph 2(a), or where the surviving partner is eligible for the rebate for the week in his/her own right - paragraph 2(b)). Where this special rule applies, the deceased individual's fees for the week do not include any fees that the deceased individual's partner is liable to pay for care provided to the child.

New subsection 84DB(3) ensures that the amount of fees to be worked out under Step 1 of the method statement in new section 84DA takes into account the full fees for which the deceased individual is liable in respect of the base week and the child (before the child care benefit reduction is applied), and not the reduced amount. If child care benefit fee reductions have been passed onto the deceased individual under section 219B of Division 1 of Part 8A of the Family Assistance (Administration) Act, then a reference to those fees for which the individual 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 84DC provides a definition of base week referred to in the method statement in new section 84DA.

A week is a base week for a deceased individual for a child in a rebate period if:

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it either fully or partly falls within the rebate period; and

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the care to the child is provided by one or more approved child care services during the week; and

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for the income year in which the base week falls, a determination of entitlement for child care benefit by single payment/in substitution has been made for a substitute individual and the child under section 53D of the Family Assistance (Administration) Act or a determination of no entitlement has been made under the subsection 53E (due to the nil entitlement amount); and

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new paragraph 57F(1A)(c) is satisfied for the week.

New paragraph 57(1A)(c) relates to the required level of the weekly limit of hours applicable to the deceased individual and the child.

New section 84DD provides the definition of amount of the substitute individual's entitlement to child care benefit referred to in the method statement in new section 84DA.

The amount of a substitute individual's entitlement to child care benefit by single payment/in substitution for care of a child in a base week is so much of the child care benefit amount determined under section 53D or subsection 53E(1) of the Family Assistance (Administration) Act as it is attributable to that week, and it is a nil amount if a determination of no entitlement made under subsection 53E(1) of the Family Assistance (Administration) Act is in force for the substitute individual.

Item 8 - Section 84E

Inserts a reference to new section 84DA into section 84E. This extends the application of the definition of Jobs Education and Training (JET) Child Care fee assistance in section 84E to new subsection 84DA relating to calculation of the amount of child care rebate in substitution. This is a consequential amendment relating to item 7 .

Item 9 - At the end of section 84E

Inserts a note at the end of section 84E. This note clarifies that a reference in this section to an individual being able to qualify for Jobs Education and Training (JET) Child Care fee assistance may be a reference to a deceased individual. This amendment is consequential to amendments made by item 7.

Item 10 - Subsection 84F(1)

Inserts a reference to new section 84DA into section 84F, which specifies child care rebate limits. This extends the application of child care rebate limits specified in that section to the amount of child care rebate in substitution calculated under new section 84DA. This is a consequential amendment relating to item 7 .

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

Item 11 - After section 65EC

Inserts new section 65ECA relating to determination of entitlement, or no entitlement, for child care rebate relating to eligibility for child care benefit in substitution.

New subsection (1) operates to the effect that the Secretary must make a determination under this section for an individual and a child if the Secretary has made:

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a determination under section 53D that the individual is entitled to child care benefit in substitution for the child; or

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a determination under subsections 53E(1) or (2) that the individual is not entitled to child care benefit in substitution for the child and a period.

New subsection (2) operates to the effect that if the Secretary is satisfied that the individual is eligible for child care rebate in substitution under subsection 57F(1A) of the Family Assistance Act in respect of a child and a period, and if the individual were to be entitled to that rebate for the child and the period, the amount of the rebate would be more than a nil amount, then the Secretary must determine the amount of the rebate which the Secretary considers the individual is entitled to for the child and the period because of the death of the other individual. The determination must include the amount of rebate the Secretary considers the individual to be entitled.

New subsection (3) provides that subsections 65EA(3) and 65EB(3) do not limit the operation of subsection 65ECA(2). Therefore, a child care rebate determination under subsection 65ECA(2) must be made even if a determination of no entitlement to child care rebate for the individual and the child is in force under subsection 65EA(3) or 65EB(3) (relating to the rebate for the child in the individual's own right, not as a substitute individual). This may apply where, for example, the individual may be entitled to child care rebate in substitution for a child and a period and may also be entitled to child care rebate relating to the individual's own entitlement to child care benefit by fee reduction for the child for the same period but for different sessions of care.

New subsection (4) operates to the effect that if the Secretary is not satisfied that the individual is eligible for child care rebate in substitution under subsection 57F(1A) in respect of a child and a period, or the individual is eligible but the amount of the individual's child care rebate entitlement would be a nil amount, the Secretary must determine that the individual is not entitled to be paid child care rebate for the child and the period because of the death of the other individual.

Item 12 - Paragraphs 65EE(1)(a) and (b)

Repeals and replaces paragraphs 65EE(1)(a) and (b). Subsection 65EE(1) imposes an obligation on the Secretary to give notice of determinations of entitlement, or no entitlement, to child care rebate and specifies the information that must be contained in these notices.

New paragraph 65EE(1)(a) provides that, for a determination made under a provision other than 65ECA relating to child care rebate in substitution, the notice of a determination must specify the income year in respect of which the determination is made and whether the individual is entitled to be paid chid care rebate in respect of the income year.

New paragraph 65EE(1)(b) provides that, for a determination made under new section 65ECA relating to child care rebate in substitution, the notice of a determination must specify the period in respect of which the determination is made and whether the individual is entitled to be paid child care rebate in respect of that period.

Item 13 - After subsection 65EF(2C)

Inserts new subsections 65EF(2D) and (2E). These amendments concern the payment of child care rebate resulting from a determination of entitlement to child care benefit in substitution.

New subsection (2D) provides that, where a determination is made under new section 65ECA that an individual is entitled to child care rebate in substitution for a period, the Secretary must pay the amount of child care rebate to which the person is entitled to a bank account nominated and maintained by the individual at such time as the Secretary considers appropriate.

New subsection (2E) provides that any amount paid under new subsection (2D) must be reduced by any amount of child care rebate already paid in respect of the deceased individual and the child for a quarter wholly or partly included in the period.

Item 14 - Subsection 65EF(3)

Inserts a reference to new subsection 65EF(2D) into subsection 65EF(3). This is a consequential amendment relating to item 13.

Items 15, 16 and 17 - Subsection 109A(1) (note), 111(1) (note) and 142(1) (note)

Repeal and substitute notes contained in subsections 109A(1), 111(1) and 142(1). These are consequential amendments resulting from the amendments made by item 18.

Item 18 - Section 152A

Section 152A provides for automatic (without an application) review of a determination of entitlement relating to child care rebate for an income year in respect of an individual and a child if an application is made for review of a decision relating to child care benefit entitlement of the individual for care provided by an approved child care service to the child during the income year. Section 152A does not operate so as to automatically review a child care rebate determination of no entitlement. In the current form, this section would not operate to mandate an automatic review of determinations relating to child care rebate in substitution.

Amendments made by item 18 ensure that:

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an application for review of a determination of entitlement, or no entitlement, for child care benefit by fee reduction relating to an individual, the child and the period, triggers a review of a determination of entitlement, or no entitlement, to child care rebate for the individual and the child arising from the determination of child care benefit by fee reduction; and

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an application for review of a determination of entitlement, or no entitlement, for child care benefit for a past period relating to an individual and the child, triggers a review of a determination of entitlement, or no entitlement, to child care rebate for the individual and the child arising from the child care benefit determination for that period; and

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an application for review of a determination of entitlement, or no entitlement, for child care benefit by single payment/in substitution relating to an individual, the child, and a period triggers a review of a determination of entitlement, or no entitlement, to child care rebate for the individual and the child arising from the determination for child care benefit in substitution.

As is currently the case, automatic review of a child care rebate determination does not need to occur if child care benefit entitlement is not affected by the outcome of the review (in such a case, child care rebate entitlement does not change so there is no need to review the child care rebate determination).

Item 18 repeals section 152A and substitutes new sections 152A and 152B.

New sections 152A and 152B specify when an automatic review of a child care rebate decision is to occur.

New section 152A provides that where the following conditions are met:

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an application for review has been made under section 109A (internal review), 111 (SSAT review) or 142 (AAT review) for review of a decision relating to an individual's child care benefit entitlement (whether it is a determination of entitlement under section 51B or 52E or no entitlement under section 51C or 52G); and

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the child care benefit determination was in respect of one or more sessions of care provided to a child during a period in an income year; and

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a determination relating to the individual's entitlement to child care rebate (whether a determination of entitlement or no entitlement) for the child for the period in an income year to which child care benefit determination applied was made under section 65EA (child care rebate for an income year for child care benefit by fee reduction) or 65EB (child care rebate for child care benefit for a past period in an income year) or 65EC (a replacement child care rebate determination for additional periods of care covered by an additional child care benefit determination for the same income year); and

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the child care benefit entitlement is affected by the review;

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the Act has the effect as if the original application for review of the child care benefit determination included an application for review of a determination under section 65EA, 65EB or 65CA relating to child care rebate.

New subsection 152B provides for an automatic review of a determination made under section 65ECA in relation to an individual's entitlement to child care rebate in substitution, for a child and a period (this period may include more than one income year), if an application was made for review of a determination relating to the individual's entitlement to child care benefit by single payment/in substitution in respect of the child and the period. New section 152B mirrors the conditions for automatic review in section 152A.

Item 19 - Paragraph 154(4A)(c)

Inserts a reference to new subsection 57F(1A) into section 154(4A)(c). This is a consequential amendment relating to item 1. It provides the Secretary with the power to request a person (under section 154) to provide information relevant to eligibility of an individual for child care rebate in substitution.

Part 2 - Application and transitional

Item 20 - Application

Inserts an application provision, which provides that amendments made by this Schedule, other than by items 15 to 18, apply in relation to care provided by an approved child care service on or after 1 July 2007. These amendments relate to the introduction of the payment of child care rebate in substitution.

Amendments made by items 15 to 18, relating to automatic review of child care rebate determinations where a corresponding child care benefit determination is reviewed under Part 5 of the Family Assistance (Administration) Act, apply in relation to applications for review of an individual's child care benefit entitlement, under section 109A, 111 or 142, made after the commencement of those items. Those items commence on Royal Assent.

Items 21 and 22 are transitional provisions relevant to the operation of new subsection 84DB(3), inserted by item 7, which provides that the amounts of fee reductions passed onto the deceased individual (or the partner, as applicable) by the service in respect of a particular week of care are not to be counted when working out the approved child care fees amount for that week needed for the calculation of child care rebate.

New subsection 84DB(3) refers to section 219B as the provision which requires an approved child care service to pass fee reductions onto the individuals who are eligible for fee reductions. Section 219B applies to an approved child care service, in respect of which the Secretary has determined an application day under item 91 of Schedule 1 to the Family Assistance Legislation Amendment (Child Care Management System and Other Measures) Act 2007 . If an application day has not been determined for an approved child care service, the reduction of fees for care provided by the service occurs under Division 1 of Part 8A of the Family Assistance (Administration) Act as it applies to those services (not under section 219B as currently in force).

The transitional provisions in items 21 and 22 modify subsection 84DB(3) so, in the situations specified by those provisions (when fee reductions relate to sessions of care provided before the application day of a service), the reference to fee reductions passed on under section 219B by the service is substituted with the reference to reduction of fees under Division 1 of Part 8A of the Family Assistance (Administration) Act as it applies to the service in respect of sessions of care provided before the service's application day.

Item 21 - Transitional - service's application day happens after the period for which child care rebate is applicable

Subitem (1) provides that this item applies if one or more sessions of care are provided by an approved child care service during a week that falls wholly or partly in a rebate period and the service's application day has not happened before the last week that falls wholly or partly in that period.

Subitem (2) provides that, if subitem (1) applies, the Family Assistance Act has the effect (in relation to the care) as if new subsection 84DB(3) were substituted with the subsection contained in this subitem.

Substituted subsection 84DB(3) contained in subitem (2) provides that if fees for child care by an approved child care service have been reduced under Division 1 of Part 8A of the Family Assistance (Administration) Act, then a reference to the fees for which a deceased individual or the deceased individual's partner is liable is a reference to the fees the deceased individual or the deceased individual's partner would have been liable if they had not been reduced.

Item 22 - Transitional - service's application day happens during the period for which child care rebate is applicable

Subitem (1) provides that this item applies if one or more sessions of care are provided to an approved child care service during a week that falls wholly or partly in a rebate period and the service's application day happens during that period (other than during the last week that falls wholly or partly in that period).

Subitem (2) provides that if subitem (1) applies, it has the effect in relation to the care as though new subsection 84DB(3) were substituted with the subsection contained in this subitem.

Substituted 84DB(3) contained in subitem (2) provides that if fees for child care by an approved child care service have been reduced under Division 1 of Part 8A of the Family Assistance (Administration) Act, then a reference to the fees for which a deceased individual or the deceased individual's partner is liable is a reference to the fees the deceased individual or the deceased individual's partner would have been liable if they had not been reduced.