Childcare confusion: jobkeeper loophole may give some educators access

Family daycare educators may continue to be eligible for jobkeeper despite the Australian government’s decision to cut off the childcare sector’s access to the wage subsidy scheme.

The discovery of the loophole for sole traders providing family daycare has sparked calls for the government to bring all childcare educators back onto jobkeeper, amid concerns the Covid-19 second wave will lengthen the period of disruption. Some operators say they are “desperate”.

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At the same time, the Grattan Institute thinktank is making the case for bigger reforms to the childcare sector, saying the government should spend an extra $5bn a year on subsidies to unlock a $11bn annual boost to the economy from increasing workforce participation.

When the government switched off its emergency “free childcare” package and returned to the old childcare subsidy scheme last month, it announced new transition payments that would be a replacement for jobkeeper across the sector.

But advice from the Australian Taxation Office shows that while the removal of jobkeeper applies to the providers of childcare services, it does not prevent access to the scheme for sole traders who have contracts with those same services.

“For example, a family daycare educator who is a sole trader may have a contract to provide childcare services to an approved provider organisation,” the ATO advice says.

“The changes apply to the organisation, not to the family daycare educator who is working as a contractor.”

Kathi Hewitson, the coordinator of Foundations Family Day Care, which serves about 100 children in Melbourne’s north and east, has written to the education department to ask to be removed from the transition payments in a bid to prevent any obstacle to her 10 educators still claiming jobkeeper.

She said her educators – all of them sole traders – would collectively have access to $15,000 a fortnight with jobkeeper, compared with her service receiving an estimated $6,780 per fortnight in the transition payments which is supposed to flow through to the workforce. That lower estimate even includes last week’s announcement of a top-up for Melbourne services affected by the strict stage 4 lockdown.

The government had previously claimed the transition funding would “probably be a tiny bit less than what jobkeeper would be” across the childcare sector.

According to education department guidelines, childcare providers that sign an agreement to receive the transition payments are required not to claim jobkeeper for any of their direct employees and to “take all reasonable steps” to ensure sole traders and independent contractors also do not claim jobkeeper.

“At the time of signing, we were under the impression that self-employed educators, as is the case for almost all educators in family daycare, would not be able to access jobkeeper,” Hewitson told Guardian Australia.

“It turned out that is not true, according to the ATO, as the jobkeeper legislation does not allow for that.”

In an email sent to the education department on Thursday and seen by Guardian Australia, Hewitson wrote to “formally request our service no longer get the transition payment/grant” and acknowledging that she was “likely to have to repay the money already paid”.

In an interview, Hewitson said the conflict between the department’s transition payment guidelines and the ATO’s jobkeeper rules were the latest case of government announcements being more complex than suggested by the simplistic “soundbites” that appeared in the media.

“We have got to the point where we are desperate and this is the only way that our service will be able to survive this,” she said.

“I thought the introduction of ‘free childcare’ in April was the worst week. I’ve been in family daycare for 26 years and this last week makes that week look like a walk in the park.

“I have put in over 90 hours trying to juggle everything just this week alone. I was getting messages through from our educators late into the night because they are distraught – I have to be there to help them.

“The other day I had to send them out an email telling them that if this doesn’t work they should be seriously considering applying for Centrelink benefits.”

Hewitson said she was aware of others in the family daycare sector who were considering following suit, but they were first watching to see how the education department handled her request.

When asked about family daycare providers opting out of the transition package in order to receive jobkeeper, an education department spokesperson told Guardian Australia: “More than 96% of eligible providers signed up for the transition package, and no providers have requested a release from the agreement.”

Samantha Page, from Early Childhood Australia, said it would be positive if family day care educators could continue to access jobkeeper because “their earnings have been severely impacted by Covid-19 and they remain precarious”.

“More broadly, ECA believes that the decision to remove early childhood educators and teachers from the jobkeeeper payment was a mistake,” she said.

“The impact has been to substantially disenfranchise those people – mostly women - working on the front line of child care and disadvantage employers with permanent staff who now can’t cover their payroll.”

Andrew Paterson, the chief executive of peak body Family Day Care Australia, said the majority of educators who worked in that sector were sole traders with contracts with particular services.

Paterson said the success of the family daycare model hinged on a good relationship between educators and services, so the differences between the ATO and department rules relating to jobkeeper had “the potential to put those relationships under pressure”.

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But he argued that, on the whole, the sector had worked cooperatively to resolve those issues.

In a new report published on Sunday evening, the Grattan Institute called on the government to increase the childcare subsidy for low-income families from 85% to 95%, gradually tapering for households with income above $68,000.

It argued the extra $5bn a year in government investment would boost the economy and female workforce participation – leading to $150,000 in higher lifetime earnings for the typical Australian mother.