Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Employment, Workforce, Skills, Small and Family Business

A New Tax System (Family Assistance) Act 1999

Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021

AUTHORITY

The Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021 (Amendment Rules) are made under subsection 85GB(1) of the A New Tax System (Family Assistance) Act 1999 (Family Assistance Act) as construed in accordance with subsection 33(3) of the Acts Interpretation Act 1901 (Acts Interpretation Act).

Under subsection 33(3) of the Acts Interpretation Act, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke and amend or vary any such instrument.

PURPOSE AND OPERATION

The Amendment Rules amend the Child Care Subsidy Minister’s Rules 2017 (Principal Rules) to allow child care providers to not enforce the full payment of gap fees for educators employed, contracted or engaged by the provider.  This will ease the financial burden on child care educators with children at a service of the employing provider, may incentivise an increase in the number of hours an educator is willing to work and make the Early Childhood Education and Care (ECEC) sector a more appealing option to workers with young children. To maintain the fundamental principle of co-contribution, families will still be asked to contribute a modest amount to the cost of child care of five per cent of the gap fee.

The gap fee is the hourly session fee, minus the fee reduction amount and any other prescribed amount. Effectively, it is the amount that parents are required to pay for child care, with the remainder of fee liability being covered by child care subsidy.

The Amendment Rules will exempt a provider from having to enforce the full payment of the gap fees for sessions of care provided to a child in a week in circumstances where:

• for any period in the week the individual, or the individual’s partner, is an individual (the employed individual) employed, contracted or otherwise engaged by the provider as an educator; and
• the service in which the employed individual is working in that role for the provider is not a Family Day Care service or an In Home Care service.

The exemption from enforcing the payment of gap fees in these circumstances will apply from 24 January 2022 to 20 January 2023 and will be conditional upon the provider having taken reasonable steps to enforce the payment of at least 5% of the gap fee. 

Child care providers are contractually entitled to session fees and may continue to collect them if they choose. This amendment merely gives them the option to not enforce up to 95% of the gap fee for educators employed, contracted or otherwise engaged by the provider.  Providers may choose to exercise this option in order to attract and retain workers for their services.

REGULATORY IMPACT

The Office of Best Practice Regulation (OBPR) has advised that the measure in Schedule 1 of the Amendment Rules requires a Minor Regulation Impact Statement (Minor RIS) (OBPR reference 44833). The Minor RIS is attached to this statement at Attachment A.

COMMENCEMENT

The Amendment Rules commence on the day after they are registered. However, the amendment made by Schedule 1 of the Amendment Rules applies to sessions of care between 24 January 2022 and 20 January 2023 and has no effective operation prior to 24 January 2022.

CONSULTATION

The Department of Education, Skills and Employment has consulted with stakeholders in the Early Childhood Education and Care (ECEC) sector. The sector is broadly supportive of the proposal which will contribute to the retention of ECEC workers.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021

The Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021 (the Amendment Rules) are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The Amendment Rules amend the Child Care Subsidy Minister’s Rules 2017 (Principal Rules) to allow child care providers to not enforce the payment of gap fees for educators employed, contracted or engaged by the provider. 

The gap fee is the hourly session fee, minus the fee reduction amount and any other prescribed amount. Effectively, it is the amount that parents are required to pay for child care, with the remainder of fee liability being covered by child care subsidy.

The Amendment Rules will exempt a provider from having to enforce the full payment of the gap fees for sessions of care provided to a child in a week in circumstances where:

• the individual, or the individual’s partner, is an individual (the employed individual) employed, contracted or otherwise engaged by the provider as an educator; and
• the service in which the employed individual is working in that role for the provider is not a Family Day Care service or an In Home Care service.

The exemption from enforcing the payment of gap fees in these circumstances will apply from 24 January 2022 to 20 January 2023 and will be conditional upon the provider having taken reasonable steps to enforce the payment of at least 5% of the gap fee. 

Human rights implications

The Amendment Rules engage the following human rights:

• Article 18 of the Convention on the Rights of the Child (CRC), which requires States Parties to take all appropriate measures to ensure that children of working parents can benefit from child care services and facilities.

Article 18 of the CRC

Article 18 of the CRC, and particularly paragraph 3 of article 18, requires States Parties to take all appropriate measures to ensure that children of working parents have the right to benefit from child care services and facilities for which they are eligible.

This measure will incentivise employment at child care services for parents with young children by making it possible for the costs of child care, for educators employed or engaged by the provider, to, in effect, be significantly reduced. This will allow educators to benefit from child care services as well as assisting other working parents to benefit from child care by an increase of workers willing and able to work as educators at child care services. 

Accordingly, these Amendment Rules will support children and families to continue to be able to afford and access child care.

Conclusion

The Instrument is compatible with human rights because it promotes the protection of human rights.

Minister for Employment, Workforce, Skills, Small and Family Business, the Hon Stuart Robert MP

Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021

EXPLANATION OF PROVISIONS

Section 1: Name

1. This is a formal provision specifying the name of the instrument as the Child Care Subsidy Amendment (Reducing Costs for Early Childhood Education and Care Workers) Minister’s Rules 2021 (Amendment Rules).

Section 2: Commencement

2.             The Amendment Rules commence on the day after they are registered on the Federal register of Legislation.  However, the amendment made by Schedule 1 of the Amendment Rules applies to sessions of care between 24 January 2022 and 20 January 2023 and has no effective operation prior to 24 January 2022.

Section 3: Authority

3.             This section provides that the Amendment Rules are made under the A New Tax System (Family Assistance) Act 1999 (Family Assistance Act), which allows the Minister to make rules required or permitted to be prescribed by either the Family Assistance Act or the A New Tax System (Family Assistance) (Administration) Act 1999 (Family Assistance Administration Act).

Section 4: Schedules

4.             This section provides that the Child Care Subsidy Minister’s Rules 2017 (Principal Rules) are amended as set out in the Schedules to the Amendment Rules. 

SCHEDULE 1 – Amendments

Child Care Subsidy Minister’s Rules 2017

Item 1

5.      This item inserts new section 54A into Part 4 of the Principal Rules to prescribe the circumstance (as well as relevant period and conditions) in which a provider is not required to take reasonable steps to enforce payment of session fees where the individual or individual’s partner is engaged by the provider as an educator.

6.      Subsection 201B(1) of the Family Assistance Administration Act requires approved providers to take all reasonable steps to ensure that individuals pay the provider the difference between the fee charged and the Child Care Subsidy (CCS) paid (often referred to as the ‘gap fee’). To enable child care services to provide fee relief to families, subsection 201B(1A) permits providers to not comply with subsection 201B(1):

• in particular circumstances or events prescribed by the Minister’s rules; and
• where the session of care occurs during the period prescribed by the Minister’s rule for the event or circumstance; and
• where any other conditions prescribed by the Minister’s rule are met.

7.      Subsection 54A(1) provides that section 54A sets out the circumstances in which a provider is not required to take reasonable steps under section 201B of the Family Assistance Administration Act to ensure that an individual pays the provider and amount, under that section, for the sessions of care provided by a service to a child in a week.

8.      Subsection 54A(2) provides that the circumstance is that the individual or the individual’s partner is, for any period in the week referred to in subsection (1), an individual (the ‘employed individual’) employed, contracted or otherwise engaged by the provider as an educator and that the service in which the employed individual is working in that role is not a Family Day Care or an In Home Care service. 

9.      Subsection 54A(3) prescribes 24 January 2022 to 20 January 2023 as the period in which the exemption from enforcing gap fees applies.

10.  Subsection 54A(4) prescribes that, it a condition for the exemption to apply, that the provider has taken reasonable steps to ensure that the individual pays the provider at least 5% of the difference referred to in subsection 201B(1) of the Family Assistance Administration Act (i.e. 5% of the gap fee). Requiring the employed individual to contribute a modest amount towards the cost of child care is consistent with the fundamental principle of co-contribution that underpins the Family Assistance Law.

Minor Regulation Impact Statement

Gap Fee Discount for Early Childhood Education and Care workers

Department of Education Skills and Employment

OBPR Reference number:  44833

Summary of the proposed policy and any options considered:

This proposal facilitates the retention and attraction of early childhood educators (ECEs) and early childhood teachers (ECTs) at approved child care services by reducing out of pocket costs for their own child care. For educators, 97 per cent of whom are women, it could effectively provide greater take home pay if they have children in child care that their employer operates.

The Child Care Subsidy (CCS) paid by the Commonwealth to families is a percentage of the child care fees, up to an hourly rate cap (currently $12.31 an hour in centre-based day care). The subsidy covers between 20 and 85 per cent of the child care fees, with higher subsidies for lower income families. From 7 March 2022, higher subsidies will be payable up to 95 per cent for the second or subsequent child under the age of six in child care. The gap between the subsidy and the child care fees is the “gap fee” paid by parents and this is the out-of-pocket cost for families. This proposal will reduce the fees paid by ECEs and ECTs for their own child/children to attend an ECEC service that they work at or their employer operates.

The proposal will ensure that child care providers are able to still receive the full amount of CCS as they do for other children attending their service. This incentive may attract new ECEs and ECTs to work at their service and could also encourage existing part-time workers to increase the hours they work.

To maintain the fundamental principle of co-contribution, families would still be required to contribute a modest amount to the cost of child care, of at least five per cent of the gap fee. As the cost of the discount is borne by the employer, and remains a choice for those employers, this proposal has no impact on underlying cash. 

Outline of the options

To reduce fees and encourage staff to remain employed in the sector the Commonwealth could undertake other options to the proposed NPP. These include:

• Subsidise wages for the same group of ECEs and ECTs through payments to either child care providers or staff
• Adjust components of the CCS to specifically increase the amount of CCS for ECEC workers with children in care.

Each of these options carries higher risks and an increase in money paid by the Commonwealth than the option proposed. These risks include that the increase in CCS may not be able to be targeted and may have significantly wider application.

What are the regulatory impacts associated with this proposal? Explain. 

This policy is optional for child care providers. For those who do wish to utilise this policy it would be implemented initially through amendments to the Child Care Subsidy Minister’s Rules 2017. Subsection 201BA(1A) of the A New Tax System (Family Assistance) (Administration) Act 1999 (Administration Act) allows the Minister to set out circumstances in Ministerial Rules where providers are exempt from enforcing payment of the hourly session fee. These provisions have recently been used to waive gap fees in COVID-19 hot spots.

Amendments to the Administration Act would also be progressed.

In relation to the Gap Fee Discounts, services will report the non-discounted fee in the session reports that they submit to Services Australia, as per current processes. This fee will be used to calculate the CCS entitlement in the normal manner. As the fee in the system will remain unchanged, there will be no change to entitlement nor impact on CCS supplied on behalf of the family to the child care provider. As with all costings, this assumes no behavioural change on the part of services or ECEC workers.

There is a minor change to the regulatory interaction with the Family Assistance Administration Act 1999, for the child care provider should they choose to enact this policy.  From a regulatory perspective, the policy is not changing the services offered by ECEC services. Should providers choose to utilise this option, there will be a minimal administration cost to child care providers to work out 5 per cent of the gap fee and through their invoicing system.

What are the regulatory costs/savings associated with this proposal? Explain and quantify. Have offsets been identified for increases in regulatory costs? If not, why?

The proposal does not recommend any increase in coverage of the current regulation framework. As the gap fee discount will not require enforcement or monitoring from a regulatory perspective, there will be no change in regulatory costs or burden on the early childhood education and care (ECEC) sector.

Regulatory burden estimate (RBE) table