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 4 - Civil penalties

The civil penalty and infringement notice scheme for failure to comply with certain obligations imposed on approved child care services by the family assistance law was introduced on 1 July 2007, and subsequently extended on 1 July 2008. The civil penalty and infringement notice provisions are located in the Family Assistance (Administration) Act, Part 8C.

Amendments made in this Schedule amend the Family Assistance (Administration) Act so that civil penalties in relation to specific obligations of approved child care services may be imposed through the regulations made under the Family Assistance (Administration) Act. This mechanism will allow for greater flexibility in responding to compliance issues in the child care industry and, ultimately, will enhance the compliance of approved child care services with obligations imposed on them under the family assistance law (including under subordinate legislation).

Part 1 - Civil penalties in regulations

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

Item 1 - Subsection 3(1)

Section 3 defines certain terms used in the Family Assistance (Administration) Act. Item 1 inserts a reference to new paragraph 235(1A)(b) into the definition of civil penalty provision . This definition sets out the provisions which are civil penalty provisions, the breach of which may attract a pecuniary penalty. This amendment is consequential to item 9.

Item 2 - Subsection 219TSD(2)

Repeals and substitutes new subsection 219TSD(2). Subsection 219TSD(1) sets out the maximum pecuniary penalty payable for a contravention of a civil penalty provision. Subsection (2) exempts contraventions of subsection 219EA(2) or 219L(3) from the operation of subsection (1) and provides a lower penalty limit for those contraventions. New subsection (2) retains the exemption for contraventions of subsection 219EA(2) or 219L(3) and extends the exemption to contraventions of provisions of the regulations declared to be civil penalty provisions.

A note at the end of new subsection 219TSD(2) informs the reader of the maximum pecuniary penalty for contravention of a provision of the regulations declared to be civil penalty provision, as specified in new subsection 235(1A) inserted by item 9.

Item 3 - Subsection 219TSK(1) (table items 1 and 2)

Subsection 219TSK(1) specifies the amount of penalty for an alleged contravention of the specified provisions that are to be specified in an infringement notice given to a body corporate. Item 3 amends cross-references in table items 1 and 2 as a consequence of the amendment made by item 4.

Item 4 - Subsection 219TSK(1) (at end of table)

Inserts two new table items, 7 and 8, into the table contained in subsection 219TSK(1). The table in subsection 219TSK(1) lists the pecuniary penalties to be specified in an infringement notice given to a body corporate for an alleged contravention, or multiple contraventions, of a civil penalty provision.

New table item 7 provides that for the alleged contravention of a civil penalty provision declared in the regulations, the pecuniary penalty to be specified in an infringement notice given to a body corporate is 24 penalty units.

New table item 8 provides that where the infringement notice relates to more than one alleged contravention of a civil penalty provision declared in the regulations, the relevant number of pecuniary penalty units is obtained by multiplying 24 by the number of alleged contraventions. If the number of alleged contraventions is 8 or more, the penalty that can be imposed is 24 penalty units multiplied by 8.

Item 5 - Subsection 219TSK(2)(table items 1 and 2)

Subsection 219TSK(2) specifies the amount of penalty for an alleged contravention of the specified provisions that are to be specified in an infringement notice given to a person other than a body corporate. Item 5 amends cross-references in table items 1 and 2 as a consequence of the amendment made by item 6.

Item 6 - Subsection 219TSK(2)(at the end of the table)

Inserts new items 7 and 8 into the table in subsection 219TSK(2). The table in subsection 219TSK(2) lists the pecuniary penalties payable under an infringement notice given to a person other than a body corporate for an alleged contravention, or multiple contraventions, of a civil penalty provision.

New table item 7 provides that for the alleged contravention of a civil penalty provision in the regulations, the pecuniary penalty that can be specified in an infringement notice given to a person other than a body corporate is 12 penalty units.

New table item 8 provides that where the infringement notice relates to more than one civil penalty provision referred to in the regulations, the pecuniary penalty is obtained by multiplying 12 by the number of alleged contraventions. If the number of alleged contraventions is 8 or more, the penalty that can be imposed is 12 penalty units multiplied by 8.

Items 7 and 8 - Subsection 235(1)

Subsection 235(1) provides for regulations to be made under the Family Assistance (Administration) Act. Items 7 and 8 make amendments to remove the reference to the regulations prescribing penalties of a fine not exceeding 10 penalty units for a breach of the regulations. These amendments are consequential to the amendments made by item 9.

Item 9 - After subsection 235(1)

Inserts new subsection 235(1A) which deals with the maximum levels of penalties imposed under the regulations.

New paragraph (1A)(a) provides that the maximum fine for an offence against the regulations is 10 penalty units.

New paragraph (1A)(b) provides that the regulations may prescribe that specified provisions of the regulations are civil penalty provisions, and limits the penalty for contravention of these provisions to 250 penalty units for a body corporate and 50 penalty units in any other case. The maximum penalties are consistent with current Commonwealth policy relating to the level of penalties imposed by the regulations (see section 5.2 of the A Guide to Framing Commonwealth Offences, Civil Penalties and Enforcement Powers ).

Many obligations are imposed on approved child care services by the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 (the Eligibility Determination) made under subsection 205(1) of the Family Assistance (Administration) Act. Currently, failure to comply with the obligations imposed by the Eligibility Determination may result in sanctions under section 200 of the Family Assistance (Administration) Act. The sanctions that are most effective in terms of compliance, that is, suspension or cancellation of a service's approval for the purposes of the family assistance law, also affect the parents whose children are provided with care by the service because child care benefit and child care rebate are not paid for the period during which the approval has been suspended or after the cancellation of approval. Given the affect of the sanctions on parents' eligibility for those benefits, these sanctions are rarely used.

The extension of civil penalty provisions to the obligations included in the Eligibility Determination will strengthen compliance of the services with those obligations without affecting the service's primary function under the family assistance law, that is, provision of care for which parents may be eligible for child care benefit and child care rebate. The ability to impose civil penalties in the regulations will make it possible to impose, at the same time, a new, or a changed, obligation and a civil penalty for failure to comply with this obligation. If civil penalties in relation to services' obligations were to be imposed only in the Family Assistance (Administration) Act, this would create a lengthy delay between the imposition by a legislative instrument of a new, or amended, obligation and the imposition, by an amendment in that Act effected some months later, of a civil penalty for failure to comply with this obligation. It would result in a period of time during which the operation of the new obligation would be left without the protection of an effective compliance mechanism.

As a matter of policy, it is intended that civil penalties relating to obligations in the Family Assistance (Administration) Act be imposed in that Act while civil penalties relating to obligations in a legislative instrument made under that Act be imposed in the regulations.

Part 2 - Consequential amendments

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

Items 10, 11, 12, 13 and 14

Item 11 repeals section 219EA of the Family Assistance (Administration) Act as it is a civil penalty provision that imposes a penalty for non-compliance with a request for information issued by the Secretary under section 21 of the Eligibility Determination. The amendments in Part 1 will allow this penalty to be included in the regulations, thus making section 219EA redundant. This amendment results in a consequential cross- referencing amendment to section 3(1) of the Family Assistance (Administration) Act (item 10). As the result of the amendment made by item 11, further consequential amendments are made by items 12, 13 and 14.

These amendments commence on the day fixed by Proclamation.