I have a 3 & 4 year old that both use pillows at home but have been told recently that following guidelines from red nose they can no longer have them during daycare. Is there any clarification on this.

Red Nose recommends only using a pillow once your child is over 2 years of age and no longer sleeping in a cot.
https://rednose.org.au/article/at-what-age-can-i-introduce-cot-bumpers-and-pillows
https://rednose.org.au/article/can-baby-use-a-pillow-to-prevent-flat-head

ACECQA, the National Regulatory Authority for all Child Care Services in Australia recommends that
equipment such as ......... pillows (& other soft padded items) should not be used until child is 2 years of age.
P4 - https://www.acecqa.gov.au/sites/default/files/2024-08/PolicyGuidelines_SleepRestForChildren_August2024.pdf

Some Child Care Centres may vary in their practice in relation to pillow use beyond 2 years but this is usually reflected in their Policy.

Pillow use beyond 2 years is not part of Red Nose recommendations for safe sleeping, however the size & weight of the pillow should be considered when using for young children eg avoiding large, heavy pillows, particularly if the child places them over their face during sleep.
Supervision of sleeping children in Child Care Services is highly regulated to ensure any risk to babies & children in their care is reduced.