WARNING:
This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 8 November 1996.
CONTENTS
Higher Education Legislation Amendment Bill
1996
Date Introduced: 9 October 1996
House: House of Representatives
Portfolio: Employment, Education, Training and
Youth Affairs
Commencement: As specified in the Main Provisions
section of this Digest
This Bill provides for the introduction of a number of measures
announced in the Higher Education Budget Statement of 9 August
1996. The major measures:
- allow students to be charged fees for both undergraduate and
postgraduate courses;
- exempt students awarded a merit-based equity scholarship from
HECS;
- introduce three contribution bands for students under the HECS;
and
- introduce new income thresholds at which a person is liable to
make HECS debt repayments.
The higher education system is funded in calendar year programs
on a triennial basis under the provisions of the Higher
Education Funding Act 1988. The same legislation covers the
operation of the Higher Education Contribution Scheme (HECS). This
Bill provides for the introduction of a number of measures
announced in the Higher Education Budget Statement of 9 August
1996. The major decisions were as follows:
Reductions in operating grants
These reductions are equivalent to 1% in 1997, a further 3% in
1998, and a further 1% in 1999 (a cumulative 4.9% reduction by
1999). It should be noted that these reductions are to the forward
estimates, rather than to the current grants, and that the 1997
operating grants will actually be higher than those for 1996. In
Budget terms, the estimated reductions to outlays will be $23.4
million in 1996-97, $118.5 million in 1997-98, $215.5 million in
1998-99 and $266.2 million in 1999-00. The reductions will be
applied through a fixed proportional reduction to the forward
estimates of the operating grant of each institution. The impact of
these decisions on particular institutions will vary according to
previous decisions on the distribution of growth. The range of
projected institutional operating grant variations for 1996 to 1998
is from -4.1% (Australian Maritime College) to +9.8% (Central
Queensland University), with an average of -1.2% over the system.
Institutions will be able to renegotiate their student load,
although the Government has indicated that it wishes undergraduate
load to be maintained with the cuts being applied to postgraduate
coursework places. The proportion of higher degree coursework
enrolments varies significantly between institutions: from 2.6%
(University of Newcastle) to 16.6% (University of NSW), with a
national average of 7.2%.
Introduction of an increased, differential rate of
HECS
The new charges will only apply to students undertaking a new
course after 1 January 1997. The new HECS rates for different
courses are based on a combination of the cost of courses and the
earning capacity of graduates. The rates are $3300 for Band 1
(Arts, Humanities, Social Studies, Behavioural Science,
Visual/Performing Arts, Education, Nursing); $4700 for Band 2
(Mathematics, Computing, other Health Sciences, Agriculture,
Architecture, Sciences, Engineering, Administration, Business and
Economics); and $5500 for Band 3 (Law, Legal Studies, Medicine,
Dentistry, Veterinary Science). The HECS rate for 1996 is $2442. In
Budget terms, the reductions to outlays from this move are
estimated at $22.6 million in 1996-97, $66.1 million in 1997-98,
$101.1 million in 1998-99, and $123.5 million in 1999-00.
Lower repayment thresholds for HECS
The new repayment levels will apply to all those with an
existing HECS debt as well as new students. The reductions to
outlays from this change are estimated at $229.9 million in
1997-98, $269.7 million in 1998-99 and $317.8 million in 1999-00.
The following table compares the existing and proposed HECS
repayment thresholds as they would be for the 1997-98 income
year.
| EXISTING RATES |
PROPOSED RATES |
| HEC repayment income ranges |
% rate to be applied |
HEC repayment income ranges |
% rate to be applied |
| Below $28,495 |
nil |
Below $20,701 |
nil |
$20,594 - $28,494
(voluntary) |
2.0% |
$20,701 - $21,830 |
3.0% |
| $28,495-$30,049 |
3.0% |
$21,831-$23,524 |
3.5% |
| $30,050-$32,381 |
3.5% |
$23,525-$27,288 |
4.0% |
| $32,382-$37,563 |
4.0% |
$27,289-$32,934 |
4.5% |
| $37,564-$45,335 |
4.5% |
$32,935-$34,665 |
5.0% |
| $45,336-$47,718 |
5.0% |
$34,666-$37,262 |
5.5% |
| $47,719-$51,292 |
5.5% |
$37,263 and above |
6.0% |
| $51,293 and above |
6.0% |
|
|
Sources: DEETYA, HECS information line (Ph.2409732), 12 August
1996; Higher Education Budget Statement 9 August 1996,
p.10
The Government estimates that that an additional 150,000 HECS
debtors will commence HECS repayments as a result of the lowering
of the compulsory threshold.
Removal of the prohibition on tuition fees for
Australian undergraduate students
This will only apply to students above the target number of
Commonwealth-funded places, with the number of fee-paying
Australian undergraduates being limited to 25% of the total
enrolment of Australian undergraduates in any one course.
Increase in research funds
According to the Statement, targeted higher education
research programs will increase by $22.4 million in 1997, and by a
further $27.6 million in 1998. Under the previous Government's
triennial program, funding would have increased by $8.7 million in
1997 and $4.2 million in 1998.
New HECS exemption scholarships
Between 1997 and 2000 up to 4000 scholarships will be awarded to
students from target equity groups ie. students from low
socio-economic, rural and isolated backgrounds and indigenous
Australians. The scholarships will exempt the recipients from HECS
and be awarded by institutions on the basis of merit.
Open Learning Fees
The Bill contains a number of changes to the Open Learning
Deferred Payment Scheme (OLDPS). Previously, the Commonwealth
provided a HECS-type loan to Open Learning students to meet the
cost of the 'basic charge' - a fee agreed to by the Commonwealth
and the Open Learning Agency. The effect of the amendments will be
to set the OLDPS basic charge at $326 for 1997 (with indexation for
future years), but allow the Agency to set fees at a higher
level.
The Policy Context
The Government has announced a major independent review of
higher education policy with the focus set on the future of higher
education over the next ten to twenty years. The review will
presumably consider existing and alternative funding arrangements,
such as that proposed by the Commission of Audit. The Commission
recommended that the Commonwealth fund higher education through a
fixed number of scholarships which would replace all operating
grants to institutions. HECS would be available to cover the
difference between the scholarships and the fees charged by
institutions.
The following table compares higher education funding for the
1997-99 triennium (if the Government's proposals are legislated),
with the funding available in 1983 and 1996.
Commonwealth Resources Available to Higher Education
Institutions, 1983 & 1996-1999 (Budget 1996 price
levels)
| Type of Grant |
1983 ($m) |
1996 ($m) |
1997 ($m) |
1998 ($m) |
1999 ($m) |
| Operating Grants(1) |
3066.2 |
4909.5 |
4893.6 |
4804.4 |
4793.8 |
| Research Programs |
78.9 |
385.7 |
408.0 |
435.6 |
425.7 |
| Capital Program |
53.3 |
36.9 |
36.9 |
36.9 |
36.9 |
| Other |
0.7 |
19.0 |
6.0 |
6.0 |
6.0 |
| TOTAL GRANTS |
3199.2 |
5351.2 |
5344.6 |
5283.0 |
5262.4 |
| $ per Planned EFTSU(2)(3) |
12305 |
12784 |
12687 |
12747 |
12680 |
| $ per Actual EFTSU(3) |
12541 |
12358 |
na |
na |
na |
(1) Includes Capital Roll In (2) EFTSU = Equivalent Full Time
Student Units (3) Excludes Commonwealth Industry Places Scheme
Source: Australian Vice-Chancellor's Committee
Schedule 1 Amendments
Item 1 amends subsection 13(1) of the
Higher Education Funding Act 1988 (the Principal Act) and
provides the Minister with power to make guidelines in relation to
graduate and post-graduate courses provided by higher education
institutions for which fees may be charged.
Commencement: 1 January 1998.
Note: Currently the Minister
only has power to make guidelines in relation to post-graduate
courses provided by higher education institutions for which fees
may be charged. It may also be noted that section 13 guidelines are
not disallowable instruments under the current law. However,
if the Legislative Instruments Bill 1996 were to be passed by
Parliament the guidelines might be a disallowable instrument.
Item 2 amends subsection 13(2) of the Principal
Act by removing the term 'post-graduate'. The amended subsection
will provide that a person undertaking a course provided in
accordance with guidelines issued under subsection (1) (see above)
may be charged fees in respect of the undertaking of that course.
Commencement: 1 January 1998.
Note: While the term
'course' is not defined in the definition section to the Principal
Act, it may be inferred from the amended subsection and the
Government's Explanatory Memorandum to the Bill that the
term refers to graduate and post-graduate courses.
Item 3 substitutes new paragraphs 20(3)(h)-(j)
in the Principal Act. Paragraphs (h)-(j) provide grants to higher
education institutions for staff superannuation expenses for the
years 1996-1998. The effect of the new paragraphs is to increase
the maximum grants payable in respect of each of the relevant years
from $73.009 million ($95 million on assent of the proposed
Higher Education Funding Amendment Act (No. 1) 1996) to
$102.027 million. Commencement: 1 January
1997.
Note: The rationale given by
the Government in the Second Reading Speech for the
increases is that they reflect supplementation for price movements.
The rationale given by the Government in the Explanatory
Memorandum to the Bill for the increases is supplementation
for price movements and for the increase in claims for
superannuation expenses from institutions.
Item 4 repeals sections 20A and 20B (which are
contained in the Higher Education Amendment Bill (No. 1) 1996) and
substitutes a new section 20A in the Principal Act. Under proposed
section 20A the Minister is accorded a discretion to provide to a
higher education institution such financial assistance as the
Minister determines, for such purposes as the Minister
determines [emphasis added], in relation to expenditure of the
institution. Total assistance for a year must not exceed the total
grants payable to higher education institutions as grants for
operating purposes for that year. Assistance for expenditure for
operating purposes payable to a higher education institution under
sections 15 or 16 of the Principal Act will be reduced by an amount
equal to that provided under section 20A. Ministerial
determinations must be made in accordance with guidelines issued by
the Minister. The amendment proposed by item 27 of
the Bill will make such guidelines subject to disallowance by
Parliament. Commencement: 1 January 1997.
Note: The Higher Education
Funding Amendment Bill (No. 1) 1996 proposes to insert new sections
20A and 20B in the Principal Act. Under the proposed sections the
Minister is accorded a discretion to provide a higher education
institution,
for operating purposes or limited operating
purposes [emphasis added], such financial assistance as the
Minister determines. Assistance for expenditure for operating
purposes payable to a higher education institution under section 15
or 16 of the Principal Act will be reduced by an amount equal to
that provided under section 20A. Determinations and reductions must
be in accordance with guidelines issued under proposed section 20B.
Proposed section 20B provides the Minister with power to issue such
guidelines. Determinations and guidelines are subject to
disallowance by Parliament.
The rationale given by the Government in the Explanatory
Memorandum to the Bill for the repeal of sections 20A and 20B
is that '[T]here is some ambiguity as to whether the definition of
operating purposes would enable advances to be made to higher
education institutions for such purposes as redundancy expenses and
assisting with the costs of restructuring.'
Item 5 substitutes new paragraphs 22A(5)(e) and
(f) in the Principal Act. Paragraphs (e) and (f) provide for grants
to open learning organisations for the years 1997 and 1998. The
effect of the new paragraphs is to increase the level of grants in
respect of each of the relevant years from $211 million to $215
million. Commencement: 1 January 1997.
Note: The rationale given by
the Government in both the Second Reading Speech and
Explanatory Memorandum to the Bill for the increases is
that they reflect supplementation for price movements.
Item 6 substitutes new paragraph 23C(2)(e) in
the Principal Act. Section 23C of the Principal Act provides for
grants for projects of national priority; innovation or the quality
of higher education; equality of opportunity; special research
assistance; advanced engineering centres and co-operative
multimedia centres. Paragraph 23C(2)(e) provides for grants for the
year 1998. The effect of the new paragraph is to increase the level
of grants for 1998 from $453.482 million ($451.083 million on
assent of the proposed Higher Education Funding Amendment Act
(No. 1) 1996) to $467.843 million.
Commencement: 1 January 1997.
Note: The rationale given by
the Government in the Explanatory Memorandum to the Bill
for the increases is that they reflect increased funding for
Australian Postgraduate Awards, Collaborative Grants and
Infrastructure Grants, and supplementation for price
movements.
Item 7 substitutes new paragraphs 24(3)(i) and
(j) in the Principal Act. Section 24 of the Principal Act provides
for grants in respect of teaching hospitals. Paragraphs 24(3)(i)
and (j) provide for grants for the years 1997 and 1998. The effect
of the new paragraphs is to increase the level of grants for 1997
and 1998 from $4.734 million ($4.738 million on assent of the
proposed Higher Education Funding Amendment Act (No. 1)
1996)) to $4.819 million. Commencement: 1
January 1997.
Note: The rationale given by
the Government in the Explanatory Memorandum to the Bill
for the increases is that they reflect price movements.
Item 8 substitutes new paragraphs 27A(6)(d) and
(e) in the Principal Act. Section 27A of the Principal Act provides
for grants for special capital projects. Paragraphs 27A(6)(d) and
(e) provide for grants for the years 1997 and 1998. The effect of
the new paragraphs is to increase the level of grants for 1997 and
1998 from $36.893 million ($36.927 million on assent of the
proposed Higher Education Funding Amendment Act (No. 1)
1996) to $37.556 million. Commencement: 1
January 1997.
Note: The rationale given by
the Government in the Explanatory Memorandum to the Bill
for the increases is that they reflect price movements.
Item 11 omits the word 'post-graduate' from the
definition of 'designated course of study' in paragraph (b) of
subsection 34(1). In conjunction with the amendments proposed by
items 1 and 2, the effect of the
amendment is to exempt fee paying undergraduates and post-graduate
students from HECS. Commencement: 1 January
1998.
Item 12 inserts a new subsection 35(7) in the
Principal Act which exempts from HECS students awarded a
merit-based equity scholarship. A merit-based equity scholarship
must be awarded in accordance with guidelines issued by the
Minister. Commencement: 1 January 1997.
Note: While the term
'merit-based equity scholarship' is not defined in the Principal
Act, it may be inferred from proposed subsection 35(6) the meaning
of 'merit-based equity scholarship' is to be determined by
reference to guidelines issued by the Minister under proposed
paragraph 35(6)(b).
Item 13 repeals subsection 39(3) and (4) and
substitutes new subsections 39(3)-(7) in the Principal Act. Section
39 of the Principal Act deals with the requirement to pay HECS and
the contribution payable. The effect of proposed subsections 39(3)
and (4) is to provide the HECS calculation method for pre-1997
students and ensures that pre-1997 students will have their HECS
calculated at the contribution rate currently applicable.
Commencement: 1 January 1997.
Note: A pre-1997 student is
defined to be student who commenced a course before 1997 or a
student the higher education institution has determined to be a
pre-1997 student in accordance with guidelines issued by the
Minister [the guidelines are subject to disallowance by Parliament
by virtue of the amendment proposed by item
27].
Proposed subsections 39(5)and (6), in conjunction with proposed
section 40A, which is inserted in the Principal Act by item
14, provide the HECS calculation method for students other
than pre-1997 students. Basically, the amount of HECS payable by a
student will depend on the type and number of units a student
chooses.
Each higher education institution is required to allocate each
unit of study to one of three Bands in accordance with guidelines
issued by the Minister. These guidelines will be disallowable by
virtue of an amendment proposed by item 27. Each
Band is allocated a dollar value. For 1997 a Band 3 unit of study
is valued at $5 500; a Band 2 unit of study at $4 700; and a Band 1
unity of study at $3 300. For 1988 onwards, the Minister is
required to gazette the dollar value for the Band for the
year concerned. Commencement: 1 January 1997.
Note: The Gazette
notice by which the Minister is empowered to determine the dollar
value for a Band for a year is not a disallowable instrument
under the current law. However, if the Legislative Instruments Bill
1996 were to be passed by Parliament it might be a disallowable
instrument.
Item 17 amends section 99 of the Principal Act
by omitting subsection 104(2) from the definition of 'basic charge'
and substituting section 104. A new section 104 is being
substituted in the Principal Act by item 20.
Subsection 104(2) currently provides a definition of the term
'basic charge'. The 'basic charge' is the amount the Open Learning
Agency of Australia (the Agency) may charge a student for a unit of
study. The level of the basic charge is currently specified in the
agreement between the Commonwealth and the Agency. The effect of
the amendment and the repeal of section 104 is to allow the Agency
to set fees for a unit of study at a higher level.
Commencement: 1 January 1997.
Note: The rationale given by
the Government in the Second Reading Speech to the Bill
for the amendment is '[I]f this constraint [the level of the basic
charge being constrained by the agreement] is not lifted, the
Agency will be required to charge at a level that is below the new
differential HECS level, and lower than the level of fees
institutions may charge.'
Item 20 substitutes a new section 104 in the
Principal Act. Effectively, proposed section 104 provides a new
definition of the 'basic charge', that is, the amount the Agency
may charge in respect of a unit of study. It is proposed that the
basic charge for a unit of study will be the lesser of the
statutory amount (ie. $326 for 1997) and the amount the Agency
charges for the unit. From 1988 onwards, the Minister is required
to gazette the statutory amount for the year concerned.
Commencement: 1 January 1997.
Note: The Gazette
notice by which the Minister determines the statutory amount for a
particular year is not a disallowable instrument under the
current law. However, if the Legislative Instruments Bill 1996 were
to be passed by Parliament it might be a disallowable
instrument.
Subsection 106PB of the Principal Act allows a person with a
HECS debt to elect, at any time [emphasis added], to make
certain repayments of that debt when their HECS repayment income
exceeds the prescribed amount for a particular year of income. The
effect of item 23 is to require a person who
wishes to make such repayments to give notice of that intention on
or before 31 December 1996. HECS debtors will no longer have this
option after that date. Commencement: 1 January
1997.
Note: While no clear
rationale for this amendment is given in the Government's
Second Reading Speech and Explanatory Memorandum
to the Bill, it may be inferred from both Government documents that
the lowering of the minimum HECS repayment threshold to $20 700
proposed by item 25 means that the current
discount of 10% for voluntary payments at this income level is
redundant.
Item 24 inserts a new subsection 106PC(1A) in
the Principal Act which provides that subsection 106PC(1) does not
apply in relation to the 1997-98 income year or any later income
years. Subsection 106PC(1), which operates in conjunction with
subsection 106PB(1) (see above), provides for the 10% discount. The
effect of the amendment is to remove the discount for the 1997-98
and later years of income. Commencement: 1 January
1997.
Note: While the Bill removes
the 10% discount option, the existing discounts of 25% for up-from
payments and 15% for voluntary payments of $500 at any time
remain.
The Explanatory Memorandum
to the Bill contains a minor technical error in relation to
item 24, in that, it states 'Item
24 inserts new subsection 106PC(1)... ' Item
24 does not insert a new subsection 106PC(1) in the
Principal Act, rather, it inserts a new subsection 106PC(1A).
Item 25 substitutes a new subsection 106Q(4) in
the Principal Act which sets out new income thresholds at which a
person is liable to make HECS debt repayments. Proposed subsection
106Q(4) provides for seven repayment levels, and at each level a
HECS debtor is required to pay a specified percentage of income.
These percentages, which are set out in subsection 106Q(1) of the
Principal Act, range from 3% to 6%. Under proposed subsection
106Q(4) the income thresholds for the 1997-98 year of income are
set at: $20 700 for the minimum prescribed amount; $21 830 for the
first intermediate prescribed amount; $23 524 for the second
intermediate prescribed amount; $27 288 for the third intermediate
prescribed amount; $32 934 for the fourth intermediate prescribed
amount; $34 665 for the fifth intermediate prescribed amount; and
$37 262 for the maximum prescribed amount. A formula is provided
for calculating the income thresholds for later income years. The
thresholds for later years are to be indexed based on movements in
the level of average weekly earnings for Australian employees.
Commencement: 1 January 1997.
Item 26 requires the Minister to
gazette the income threshold levels from the 1998-99
income year onwards. Commencement: 1 January
1997.
Note: The Gazette
notice by which the Minister is empowered to determine the
threshold levels for a particular year is not a disallowable
instrument under the current law. However, if the Legislative
Instruments Bill 1996 were to be passed by Parliament it might be a
disallowable instrument.
Ian Ireland Ph. 06 277 2438
Dr. K.Jackson Ph. 06 277 2416
6 November 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
PRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
the public.
ISSN 1323-9032
© Commonwealth of Australia 1996
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1996.
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Last updated: 13 November 1996
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