I thank the previous two speakers for their contributions. I am one of, I understand, only two people in this chamber who have actually worked in the childcare industry—and here comes the other one in the door now: Senator Jacinta Collins. I am happy to be corrected if that is not the case. Senator Collins and I have both worked in the childcare industry. In fact I spent 12 years in the industry—
Senator McLucas —Three!
Senator BILYK —Sorry, Senator McLucas. I apologise. There are three people in this place who have worked in the childcare industry. I did say that I was happy to stand corrected, so my apologies to you.
Having spent 12 years in the industry both in the ACT and in Tasmania I would like to speak about the Family Assistance Legislation Amendment (Child Care Rebate) Bill 2011 and the important changes it makes to Australia’s system of childcare assistance payments. As we have heard from other speakers tonight, these are the really formative years and people have to be able to afford their child care.
The Gillard government is certainly making sure that people are more able to afford their child care by giving them a choice. It is an important change for Australian parents and it is an important change for Australian families. It gives Australian families choice and flexibility as to how their childcare rebate payments are made. It allows families to choose a frequency of payments and a rebate method that suits them. It builds upon the significant reforms the government has already made in improving the affordability of early education and child care. It is the most critical area, I believe. It shapes a person’s future so it is absolutely critical that child care is not only of a high quality but affordable.
This legislation will make paying for childcare services easier for around 700,000 Australian families. It shows that the Australian government understands the needs of families, because it gives families access to the childcare rebate when they need it most: when the child care fees are due. This bill will make a number of key changes. The first is that it will allow families to choose how their childcare rebate payment is made. Under the arrangements introduced by the Howard government, families had no choice as to when the payment was made. They had to wait until the end of the financial year to receive this very important payment whether it was convenient or not. For the majority of families it was not convenient.
Senator Nash mentioned that she thought Centrelink might be already enacting this procedure. I have not heard that from anywhere. I stand to be corrected, but maybe Senator Nash is confused, because the Labor government introduced changes to allow families the choice of receiving quarterly payments. So maybe she is a bit confused about that. Now we are again expanding the range of choices that families have.
With the passing of this bill, from July 2011 families will have a number of options in regard to when and how they receive their childcare rebate payments—options that they can choose to suit their needs in the circumstances of their families. Firstly, they can have their childcare rebate payment paid fortnightly direct to an approved childcare service provider on their behalf by way of a fee reduction. As at June 2010 there were around 14,000 approved childcare services in Australia, including long day care, family day care, outside-school-hours care, occasional care and in-home care. This is the fist time that these various childcare service providers are able to receive the rebate on behalf of families. This will significantly reduce the up-front costs of child care. Currently, 98 per cent of families receive their childcare benefit this way, and it can be assumed that many families will wish to take up this option, not least because it is probably the most convenient.
Families can elect to receive their childcare rebate payment directly into their bank account following the submission of the approved childcare service’s usage report to the government. Childcare service providers are required to submit their usage data to the government fortnightly, although the majority actually report weekly. That means that those families that choose this option will be paid their childcare rebate either fortnightly or weekly, depending upon when their chosen childcare service provider does their reporting.
Families can elect to have the child care rebate deposited into their bank account quarterly. This gives parents a significant quarterly payment which they can rely upon to meet expected household expenses. Finally, families can continue to receive their payments annually as a lump sum payment, as many currently do. Some families may prefer to stay with this option and, if this is the most convenient option, it is right that they be allowed to keep it that way.
Families currently receiving the child care rebate will be contacted prior to the commencement of the financial year to ascertain their preferred method and frequency of payment. Those who are unable to be contacted will default to their current quarterly or annual payments. To ensure fairness, families that were unable to be contacted and, consequently, were unaware that they were able to change the method of payment, will be allowed to change their payment method during the first year of operation.
The next major change is that this protects families from accidentally accumulating debts. In the past, some families have accumulated unforeseen debts due to mistakenly underestimating their income—a situation that has caused many families financial stress and heartache.
This bill includes a safeguard, which is the temporary withholding of 15 per cent of each child care rebate payment for those who are on higher than the zero rate of child care benefit, to ensure that families do not incur such a debt. This will ensure that families will not have to deal with the shock of receiving a significant debt due to changes in their taxable income, by offsetting any potential debts that may arise. This is a fairer mechanism than the current arrangements for the child care rebate, where the final quarterly payment is withheld until the end of financial year reconciliation.
The bill will make the payment of the child care rebate simpler for the many families who elect to have their child care rebate payment paid directly to their childcare service provider. Never before has this option been made available to Australian families. Currently, a family earning $80,000 per annum, with one child in full-time care, faces $240 per week in out-of-pocket childcare costs while waiting for their child care rebate to be paid quarterly or annually. By opting to have their child care rebate paid directly to the childcare service provider or paid into their own bank accounts fortnightly, these costs drop to around $138 a week—a significant sum for families trying to meet their day-to-day expenses.
The bill also allows families to change their payment method if they meet with exceptional circumstances, such as hardship or family break-up, part way through the financial year. The government understands that families are not static, that family income and expenses change and that flexibility is required for households to meet their expenses. A lump sum payment that may have been convenient at the start of the financial year may no longer be convenient, and families should not be tied to a payment delivery type that no longer meets their needs.
These changes continue the government’s unprecedented investment in child care and early education. It is this government that understands just how important investment in child care and early education is for Australian families. It is the Labor government that understands just how much child care costs take out of the family budget and it is the Labor government that understands that Australian families need flexibility and assistance.
It is also the Labor government that is providing them with this flexibility and assistance. We are providing $14.9 billion over the next four years through the child care rebate and the child care benefit to assist 800,000 Australian families annually to pay for the costs of child care. This includes $8.7 billion over the four years to 2013-14 to reduce childcare fees for low- and middle-income earners under the child care benefit and $6.2 billion to assist working families with out-of-pocket childcare expenses under the child care rebate.
It was this government that in 2008 delivered on our election commitment to increase the child care rebate from 30 to 50 per cent of out-of-pocket costs, from a maximum of $4,354 to a maximum of $7,500 per child per year. This is a fundamental change to this payment and it highlights the difference between us and the opposition. Under the Howard government, families could claim a maximum of only $4,354 per child per year—some 72 per cent less than under the Gillard Labor government.
It is this government that is delivering decreases in the cost of child care for families. As a result of increasing the child care rebate for out-of-pocket costs, after subsidies, for a family earning $55,000 a year with one child in long day care, costs have fallen from 13 per cent of disposable income in 2004 to seven per cent in 2010. Changes like these show that the government understands just how significant a cost child care is to families and their household budgets. It is changes like these which show that the government is doing everything in its power to reduce these costs for Australian families. Australian families have never had access to more financial assistance with child care than they have under this government. And now, thanks to this legislation, they will have even greater access and even greater choice.
In closing, because Senator Nash did get off the track a bit over there and started talking about all sorts of things, I would like to publicly say thank you to the workers in the childcare industry, who work very hard to deliver quality care to Australian children and to give them the best start that they can in their early education. As other people have mentioned tonight, it is very important for the future of Australia that we continue to have an affordable and quality childcare system in Australia. Certainly, the Gillard government is moving to make sure that we continue to improve it all time.