Bills Digest 51 1996-97 Higher Education Legislation Amendment Bill 1996


Numerical Index | Alphabetical Index

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

Passage History

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

Purpose

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.

Background

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

Main Provisions

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.

Contact Officer and Copyright Details

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

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 13 November 1996

Back to top


Facebook LinkedIn Twitter Add | Email Print