Unpacking the new Family Assistance Legislation – What are the key elements and how will they impact ECEC providers?

On Wednesday the Federal Government introduced its Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 to the House of Representatives with the aim of enshrining into law the pre-election commitments outlined in Labor’s Plan for Cheaper Child Care.

Reforms to early childhood education and care (ECEC), its affordability, accessibility and transparency, have been key focus points for the Labor Party since then Federal Labor leader Anthony Albanese MP’s Budget Reply speech in October 2020 and this new Bill goes someway to delivering on those promises. 

 

This piece aims to unpack the key elements of the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 that relate to both providers and families and to support the ECEC community at large to be better informed and prepared ahead of their implementation in 2023. 

 

Purpose of the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022

 

The purpose of the Family Assistance Legislation Amendment (Cheaper Child Care) Bill 2022 is to give effect to the Australian Government’s Plan for Cheaper Child Care, fulfilling commitments it made in the 2022 Federal election.

 

The Bill implements a range of measures that aim to: 

 

• Improve affordability by increasing the level of Child Care Subsidy (CCS) for families
• Improve accessibility by removing barriers to access ECEC 
• Improve transparency and accountability of ECEC providers
• Improve and strengthen payment integrity

 

Affordability measures introduced in the Bill

 

Improving the affordability of ECEC will be addressed via two key changes:

 

1. An increase to the maximum CCS percentage available to families
2. A simplification of the calculation of a families applicable CCS percentage

 

Under the new rules families earning up to $80,000 will now be eligible for a 90 per cent CCS subsidy with families earning over $80,000 given a CCS rate that tapers down by one percentage point for each additional $5,000 of family income until it reaches zero per cent for families earning $530,000.

 

So a family earning $150,000 will receive a 76 per cent subsidy, a family that earns $250,000 will see their CCS subsidy at 56 per cent and a family earning $250,000 will see their subsidy set at 36 per cent.

 

Existing measures in place to support families with multiple children in care will be retained with the new measures due to come into effect on 1 July 2023.  

 

Accessibility measures introduced in the Bill

 

The Bill introduces a new base level of 36 subsidised hours of child care per fortnight for First Nations children, regardless of activity levels. 

 

Currently, the lower band for allocation of subsidised hours via the activity test is zero to eight hours of recognised activity affords 24 hours of subsidised care in a fortnight. The new rules will see the allocation increased by 12 hours a fortnight. 

 

These changes are to apply from the first CCS fortnight of the income year starting on 1 July 2023. 

 

The CCS income test will continue to apply to determine the CCS percentage payable for the 36 hours of subsidised care - that is, families will still be required to pay gap fees for subsidised hours in accordance with their income level. 

 

Transparency measures introduced in the Bill

 

The new Bill provides for a range of new measures that will impact certain ECEC providers regardless of governance type or setting type. 

 

The measures are designed to enable the Department to improve visibility over the financial health of large providers and better identify, monitor and mitigate any risks arising. 

 

The key measures are as follows:

 

• Creating a new definition of a large provider as “one that operates 25 or more approved services regardless of setting”
• Requiring large providers to report specified financial information (net revenue and profit), and details of lease arrangements, once a year to the Department of Education
• Introducing civil penalties for non compliance with the requirement to submit specified financial information between $13,320 and $66,600 depending on circumstances 
• Authorising the Department to publish provider names and services it operates, ABNs, current fees and fee increases online and for large providers financial information

 

The Bill also gives the Department the right to publish additional information about an ECEC provider if it is in the public interest to do so. This may, for instance, include information about particular expenses, acting as cost-drivers for fees.

 

These changes are to apply from 1 July 2023. 

 

Integrity measures introduced in the Bill

 

It is understood by the Government that the increase in Commonwealth’s spending on ECEC may make fraud within the sector more attractive to bad actors. The Bill allows for a number of amendments aimed at managing this risk and focus on payment integrity.

 

There are three sets of measures in this area:

 

• Upgrading a provider’s obligation to ensure that all persons employed in their organisation that engage in the provision of ECEC have made arrangements to ensure they comply with the requirements of Family Assistance Law namely; they submit accurate records, ensure gap fees are paid by families and keep proper records. This requirement is now a core part of provider eligibility as opposed to just a fit and proper assessment previously.
• Eliminating cash payments in favour of electronic payments for the collection of gap fees. For centre based services, this will involve gap fees being paid to the service itself. Civil penalties of between $13,320 and $17,760 will be introduced to enforce compliance.
• Provisioning for the inclusion of additional information to be submitted by services as part of their weekly session reporting processes. The additional information required has yet to be determined but will be in due course.

 

With respect to Family Day Care Settings providers are able to appoint “an agent” ie: an educator, to collect the gap fee on their behalf as long as the provider has appropriate oversight that the fee has been paid.*

 

Additional measures raised in the Bill

 

The Bill also provided for a range of other clarifications and adjustments to existing measures already legislated in a bid to improve the understanding and their application in practice. 

 

Examples of these include enshrining the rules around the amount of CCS extended in circumstances where an employed educator receives a discount on fees for their children enrolled in the service where they work, the rules around extending gap fee waivers to families without this affecting their CCS entitlement and; rules around additional absences in particular sessions of care that are provided before the child’s first attendance at the service or after the child’s last attendance at the service.

 

After being passed by the House of Representatives the Bill will transfer to the Senate for review.

 

*This segment referring to Family Day Care has been updated since original publication.

 

More information about the changes is available here.