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HANSARD EXTRACT

Tax Laws Amendment (2005 Measures No.4) Bill 2005: Second Reading

10 August 2005

 Mr HAYES (Werriwa) (12.29 p.m.)—The Tax Laws Amendment (2005 Measures No. 4) Bill 2005 before us today seeks to implement a number of changes to the tax laws but in particular one very important tax change for families across the length and breadth of Australia, introducing a significant election commitment of the government. But in the bill the 30 per cent child-care rebate seems to be somewhat different from the promise that the coalition made—or at least what they tried to sell—to Australian families during the last election campaign.

What we have before us today is another example of how out of touch this government is. This is simply a desperate attempt to fix ill-considered policies in a hope that no-one will notice. But, unfortunately for the government, people have noticed. I refer of course to the mess that the government has managed to create in implementing the 30 per cent child-care tax rebate. Access to affordable child care is an issue close to the hearts of most parents and that is certainly not at the heart of this bill. Child care has become almost an essential condition for working families, and hardworking families will suffer from the government’s maladministration in the introduction of this electoral promise.

The typical Australian family has two working parents just to make ends meet. More often than not, two working parents are needed in modern Australian families to pay the mortgage, to pay the rising fuel costs, to pay the rising health costs and to pay the ever-increasing education costs that this government has allowed. Two working parents means that child-care is essential. Working parents will suffer and face financial hardship because they are going to have to wait up to 30 months after they have incurred child-care expenses to receive the tax offset. Let us not be fooled by this, because this is exactly what it is: a tax offset. It is certainly not a rebate. No matter how often the government chooses to use the term, it does not fit the definition of a rebate. It is an offset, because that is exactly how it works. If you do not have a tax liability that is greater than the amount you are entitled to receive, you will not receive the full value of the so-called rebate, so therefore it cannot be a rebate.

If you want to look at issues that could be considered barbecue stoppers in the community, I do not think you would have to look much beyond this particular issue. Child care is in the forefront of the minds of young families as they seek to keep their heads above financial waters. Many families are walking a tightrope when it comes to managing the household budget and they realise that, to achieve some semblance of financial security, both parents have to work, and in order to work they have to find someone to mind their young children. I have no doubt that many families who have both parents working and who are paying up to $90 a day in child-care costs would rather be doing things differently, but in many cases that is simply not possible.

In my electorate alone there are some 21,000 families with dependent children under the age of 15. Where isn’t an electorate filled with young families? The 2001 census recorded that nearly 10 per cent of the population in the electorate were under the age of four. In the 2004 financial year nearly 9,000 children were using services approved for the payment of child-care benefits in some 40 community based child-care centres and in some 50 private service providers. At the end of June 2003 it was estimated that nearly 5,000 children in the electorate were under the age of two. The figures speak for themselves. Child care is a significant issue for families in Werriwa.

Families are under pressure every day when it comes to child care. They are certainly feeling the pinch when it comes to child-care fees, which continue to soar. The average child-care bill for a child using private long day care services is $208 a week. That is nearly $10,000 a year. Over last year alone the costs of child care have risen by 12.4 per cent—of course, that is if the parents are lucky enough to find a place. The more the electors of Werriwa hear about the changes that the government is making to its election promise, the more concerned they become. Parents are concerned because every time they hear another announcement on this policy it is another policy reversal by this government. Quite legitimately, they are starting to question whether or not there is to be any real benefit at all for them under this policy. On any given Saturday or Sunday afternoon I bet we could stop many a barbecue in south-western Sydney by simply raising the child-care topic.

Parents making use of child-care services feel that they are being led up the garden path on this issue. When the policy was announced during the election campaign it was sold as a 30 per cent rebate on out-of-pocket child-care costs. I am sure that when the policy was announced a lot of people would have thought that it was quite simple. It could be understood. It appeared straightforward and, to me, it would have been seen as quite attractive. The government made no mention of the limitations in access to the rebate that it would soon impose on the electorate. The coalition’s election policy document made no mention of caps or the long time between spending the money and when it would be able to be reclaimed. The coalition in its policy entitled ‘Extra assistance for families’ said quite clearly and plainly that a re-elected coalition government would provide ‘families with extra assistance in meeting the cost of child care by introducing a 30 per cent child-care rebate on out-of-pocket costs’. That is pretty straightforward and quite clear.

Only when the government began backing away from its promise in December last year did the cracks start to emerge in this policy. Under the guise of announcing a benefit to parents through a new early start for child-care rebate did the Treasurer set about breaking the coalition’s promise. It was by press release that parents found out that the child rebate was going to be capped. It took another six months for parents to find out that the minimum number of hours that parents had to work to be eligible for the rebate would change.

But the hits keep coming for young working parents. As we examine the details of the bill, we find that parents will not be able to claim the child-care rebate for preschool fees and it does not stop there. I am certain that parents are not fully aware of what the rebate is all about and I am in no doubt that parents are not quite sure in their own minds what will constitute eligibility for this claim. In fact, I do not know whether the parents are aware that it is a tax offset. I am not sure that parents realise that they must keep receipts for out-of-pocket expenses and that, unless they do, they run the risk of missing out. One thing I am sure about is that low-income earners know that they will miss out altogether because they are not paying enough tax to gain the entire value of the offset.

It astounds me that the government can see no way of speeding up the process of parents receiving the offset. It is staggering that parents have to wait between 14 and 30 months after they spend the money to be able to claim it back. It is a most ridiculous situation that a child could be already at school when parents become eligible to submit their claim for the offset. A child may no longer require child care, but parents will be still clinging to their receipts patiently waiting for enough time to pass to be eligible to claim their offset. It is even more ridiculous that parents who are in need of child care, for whom the tax offset will make the difference between being able to afford it and not being able to afford it, may have to forgo child care altogether because they cannot afford to carry the cost burden until they are eligible to claim the offset long into the future. I cannot understand that there is not a means available for the government to enable parents to claim their out-of-pocket expenses when they complete their tax returns for the year in which the expense occurred. The government is relying on excuses about the provision of information, the provision of financial returns from child-care providers and the process taking too long for the tax office to verify rebate claims.

People are managing to get their private health insurance costs included in the calculation of their tax return immediately after they have been paid, so why should they not have a similar expectation that their out-of-pocket child-care costs will also be dealt with at that time? I do not think it is an unreasonable expectation. Accordingly, I find it easy to support the opposition’s amendment that would require the offset to be claimable at the end of the financial year in which the expense was incurred. I have no doubt that eligible parents would be willing to hold off submitting their tax return for a short period if they were confident that that would enable their out-of-pocket child-care expenses to be claimed in that financial year.

It seems that the underlying philosophy of this government is that people should be able to look after themselves. It supports self-assessment for income tax and the return of business activity statements, yet when it comes to allowing parents to have returned to them some of the costs of child care it sets about introducing an administrative system that is more akin to one that we would have had some 50 years ago.

I also support the amendment that would guarantee parents will get the full rebate they are entitled to even if they do not have all of their receipts. You do not have to keep every receipt to claim the private health insurance rebate. That is because private health insurance providers can provide their customers with a summary that is adequate for tax calculations. So why, with the appropriate information technology and government support, cannot child-care service providers be equipped to do the same? The opposition’s amendment that would enable either a self-assessment based on receipts or a tax office reconciliation upon receipt of the relevant data are sound administrative measures that would go a long way to making sure that the offset actually helps parents.

The fact that the government has not been able to come up with a better administrative system that would allow parents to claim the offset is because this is not a policy that would be classified as an article of faith. This government speaks often about its concern for families but, when it comes to the crunch, it fails them badly. Simply including a family impact statement when considering cabinet documents is not nearly good enough for Australian families. It is not adequate enough to dismiss the argument that each day this government is becoming more and more arrogant and increasingly out of touch with the needs and aspirations of suburban families.

There is no doubt that parents need assistance to meet the costs of child care. Without it, they face even greater difficulty in balancing the family budget. As I noted earlier, child care has become a necessary condition for most families as the financial pressure of paying the mortgage, facing increased petrol costs and paying more and more for health care means that both parents are required to work. With both parents in the work force, someone has to look after the kids. Because of the serious lack of child-care places, this responsibility is falling more and more to grandparents. In fact, a recent survey by the ABS found that grandparents provide around a third of all child care in Australia. Grandparents are being forced to make up for this government’s failings.

The statistics also show that more than half of all parents use informal child care, often grandparents and other relatives, so that their time can be freed up to either work or look for work. This is the manifestation of a supply shortage, not necessarily a reflection of cost. A 30 per cent rebate will do nothing for parents who are forced to leave their children in informal arrangements. A rebate does nothing about the problems of the affordability of child care or the supply of places. It is nothing more than a short-term fix. And this is not just the opinion of the opposition. In an article in the Sydney Morning Herald on 1 July this year titled ‘Child-care fees soar—if you can find it’, it was reported that even operators have deep concerns about the appropriateness of the rebate as a policy response. The article reports:

Child-care operators warned fees will continue to rise in the new financial year, which marks the first year in which parents can receive the new 30 percent rebate.

It goes on to say:

Operators say the rebate will create even greater demand while it will do nothing to address the lack of places ...

Even the industry understands the simple economics at work here. Operators realise that if you do nothing about the supply side then demand will continue to grow and prices will ultimately have to rise, with the limited number of places going to the highest bidder. I can only presume that the government will expect that the unpaid child-care workers of Australian society—the grandparents, friends and relatives—who so generously give up their time to help out, will once again take up the slack.

This is the market at work. This is a government that prides itself on understanding economics but it cannot see that the primary problem with child care—the problem that is forcing up the cost to parents—is supply. Trying to fiddle with the price and dressing it up as a solution to the problem does not help one bit. Australian parents understand the problem, so why does this government find it so difficult to comprehend? If this is the best solution that the self-appointed best friend of the Australian worker can come up with to assist working parents, then with friends like that I guess we do not need too many enemies.

This was policy on the run that has culminated in legislation and administration on the run. Working families in south-west Sydney, in fact all over Australia, need a break. They need the government to get serious about providing affordable child care so that parents can work and not have to worry about child-care places being available. This policy is not about affordability; it is about electoral success.

As I said earlier, parents have been led up the garden path, particularly on this issue. This is the policy of an arrogant and out-of-touch government that does not really have the concerns of working parents at the centre of its consideration. Parents need help today, not in 30 months time, so it is incumbent upon the members of this place to take the issue seriously and not try to hide behind a poorly thought-out bandaid solution. Australian parents need certainty and they need affordable child care—two significant elements missing from this policy and from this legislation. I support the opposition’s amendment to the bill and encourage members opposite who really give—(Time expired)

 

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