CCS balancing is coming – is your service ready to support families?
The Child Care Subsidy (CCS) balancing period will occur at the end of July. Whilst the balancing process – in which actual adjusted taxable income and the amount of benefit received are reconciled – is not new, for some families this will be the first time their actual adjusted taxable income has been used to calculate their CCS, which may result in the incursion of a debt.
CCS balancing (also referred to as the ‘reconciliation’ or ‘income review’ process) is a process that occurs after the end of each financial year whereby the Federal Department of Human Services compares families’ income estimates with their actual adjusted taxable income to ensure families have received their correct CCS entitlement.
While some families, who qualified for both Child Care Benefits (CCB) and Child Care Rebate (CCR) combined under the previous funding model, will be familiar with the balancing process, families who previously only qualified for CCR may be unfamiliar with the balancing process, and may direct questions to early childhood education and care (ECEC) service providers.
In a statement issued in relation to the impact of the change from CCR to CCS, the New South Wales branch of the Australian Childcare Alliance (ACA) said:
“Whilst it is impossible to predict how accurately families have estimated their income it is likely that there are a group of families who may have underestimated and as a result incur a debt.
We also don’t know whether the 5 per cent withholding adequately covers most debt and it will be interesting to observe the trends when this reconciliation process concludes. I am in no doubt that this will occupy much of ACA’s time when this process begins from July 29, 2019.”
The DHS will commence the balancing process for the 2018/19 financial year from 29 July 2019. CCS payments can only be reconciled, or balanced, after a tax return is lodged, or after a family informs DHS they do not need to lodge a tax return.
Once the DHS has compared a family’s income estimate with their actual adjusted taxable income, the DHS will advise them of their balancing outcome in a letter, or if the family receives letters electronically, the outcome will be sent to their myGov inbox.
When the DHS balances a family’s payments, there are three possible outcomes that will be outlined in the letter. This is a normal part of the balancing process.
1. For some families, there won’t be any further action, provided they received the correct amount of CCS during the year.
2. Some families may not have been paid enough CCS during the year. If this happens, they’ll be paid any outstanding amounts directly when the DHS balances their payments. The DHS call this a ‘top up’ payment.
3. Other families may have been paid too much CCS during the year. If this happens, families may owe money, which they have to pay back to the DHS. The DHS may recover overpayments of CCS from future CCS, Family Tax Benefit (FTB) payments (including arrears), FTB top ups and supplements as well as tax refunds.
In information provided about the balancing process, the DHS highlighted the importance of families seeking support from the DHS with any questions in relation to paying back a CCS overpayment. If providers and services receive questions from families, there is more information on the DHS website to help families understand the balancing process.
Provider action required
In order to support the balancing process, it is important for providers to be aware of key dates in relation to the closure of the financial year.
All session reports for the 2018/19 financial year must be submitted by 14 July 2019.
By 28 July 2019, session reports need to be accurate and finalised as they are essential for reconciling (or balancing) family CCS entitlements after the end of the financial year.
From 29 July 2019, the CCS System will be closed for the 2018/19 financial year. This means providers will not be able to submit new session reports, or vary or withdraw existing session reports, for any period between 2 July 2018 and 30 June 2019.
Where providers have submitted new applications for CCS approval and are granted approval with a start date occurring in the 2018/19 financial year, CCS will still be able to be paid for sessions delivered after the start date.
Similar to previous years, the amount of CCS a provider receives on behalf of a family may change after DHS completes the balancing process.
To support services in understanding the balancing process, the Department of Education and DHS are holding two webcasts for providers and services to explain CCS balancing. These are being held on Monday 15 July from 12:00 pm – 1:00 pm (AEST) and Tuesday 16 July from 6:30 pm – 7:30 pm (AEST).
The webcasts are designed to assist providers and services to help families understand this process. They also cover what providers and services need to do to enable CCS balancing to occur. The sessions will be identical.