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Wednesday, 8 June 1994
Page: 1463

Senator WATSON (11.11 a.m.) —In view of the far-reaching nature of the changes that are before the committee at the present time, I think perhaps this would be a more satisfactory outcome for that section of the community that is most closely interested in the passage of this legislation.

The TEMPORARY CHAIRMAN (Senator McGauran) —Senator Watson, as I understand it, you are asking that the minister's answers to your questions be included in the Hansard now, albeit that he will answer at a later date. Is that right?

Senator WATSON —That they be included at a later date in the relevant Hansard when the government has had a full opportunity—

Senator Cook —As part of this debate.

Senator WATSON —Yes—at a later date, but regarded as part of this debate for the purpose of interpretation.

Senator Cook —And that is what we are agreeing to.

Senator WATSON —I also inform the committee that, with respect to HECS, earlier in the committee stage we tabled and debated a number of amendments relating to the instalment deductions for PAYE taxpayers and provisional taxpayers. I now advise the committee that I will not be proceeding with those amendments. As honourable senators will be aware, there has been a great deal of activity since this matter was debated last Thursday, and that activity extended over the weekend. Representations opposing the amendments the coalition foreshadowed have been forthcoming from the Australian Vice-Chancellors Committee, the National Union of Students and the National Tertiary Education Industry Union. I seek leave to incorporate those three letters in Hansard.

  Leave granted.

  The letters read as follows—

Senator Robert Hill

Shadow Minister for Education

Parliament House

Canberra ACT 2600

Sunday June 5 1994

Dear Senator

I write to inform you of the NUS position with regard to HECS repayments under PAYE and provisional taxation schemes.

NUS opposes HECS outright as a user pays mechanism for education which automatically limits access to higher education.

However, while ever HECS exists NUS will work towards making the system as it currently stands more equitable for all students burdened with HECS repayments.

NUS supports PAYE mechanisms for HECS repayments for the reason that without PAYE mechanisms, at the end of a financial year students are forced to pay a HECS bill upwards of $800.

At the present time PAYE for HECS exemptions is optional where PAYE deductions are dependent upon employer consent. The current system sees many students denied access to this option through employer resistance and lack of information informing graduates of this option.

With regard to provisional tax arrangements NUS has concerns that the levying of provisional tax on HECS debts will see an extra lump sum payment forced upon graduates who are provisional taxpayers. If however this method of payment is available in instalments (ie removing any lump sum payments) we believe that it lessens the burden on graduates and should be supported.

We understand that the Opposition moved amendments to the Taxation Laws Amendment Bill No 2 1994 which would delete the provisional tax arrangements for HECS repayments.

We see no reason to do this unless this will increase up front payments for HECS debts for graduates.

NUS is extremely concerned at the lack of notice given to students with regard to these changes introduced by the Government (ie six weeks before the bill had even been passed by the Parliament). We seek an immediate extension of the start date to at least 1 Jan 1995.

We have communicated this view to the Minister, Democrats and Greens.

Yours sincerely

Penny Sharpe


cc Senator Watson

National Tertiary Education Industry Union

Senator Watson

Parliament House

Canberra 2600

3 June 1994

Dear Senator Watson,

I write regarding amendments to the Taxation Laws Amendment Bill (No. 2) moved by yourself yesterday.

The National Tertiary Education Union represents approximately 25,000 staff employed in tertiary education, most of them in higher education institutions.

While we oppose HECS on the basis of our opposition to user-pays measures in higher education, we believe that where such measures exist they should be administered as fairly and equitably as possible. Therefore, we support the announcement in the 1993 Higher Education Budget Statement that HECS will be repaid through PAYE or provisional tax arrangements. This removes the onus on graduates to pay a lump sum at the end of the year, and ensures their right to access this option via their employer.

I urge you to take this viewpoint into consideration when debate on the matter resumes on Monday.

Yours sincerely

Kerry Lewis

Joint General Secretary

cc  Senator Robert Hill,

  Shadow Minister for Education

Australian Vice-Chancellors' Committee

The Honourable Simon Crean, MP

Minister for Employment, Education and Training

Parliament House

Canberra ACT 2601

Dear Mr Crean

Amendments to the HECS Legislation

While it is the AVCC's position that it would prefer that all access to higher education should be provided through Government funding, it has recognised that there are limitations on the funding that can be allocated to higher education.

The AVCC has, therefore, accepted and endorsed the introduction of HECS as an acceptable instrument to introduce an element of funding from those who benefit personally from university education. There has been wide acceptance of HECS, documented in successive reports from the Higher Education Council, and universities have welcomed the increased funding which HECS has provided for the expansion of the system which has occurred since 1988.

When the Federal Government proposed, in its 1993-94 Budget, a number of changes to the Higher Education Contribution Scheme (HECS), although the Australian Vice-Chancellors' Committee (AVCC) raised concerns about the administration implications of and some of the retrospective aspects of the proposed changes, it did not oppose the changes as there was recognition of the justification for the position and the equity arguments which supported it. No AVCC comment was made on the changes proposed.

With respect to the changes proposed which would allow recovery of HECS through the PAYE and Provisional Tax systems, it was clear that this would be of positive benefit to students, in the rationalisation of HECS repayments over the financial year, rather than the imposition of a large debt, additional to tax assessment, at the end of the financial year. In the absence of the more radical changes to the HECS structure, there is implicit AVCC support for the introduction of measures such as this which are of practical benefit to students.

Yours sincerely

T J Mullarvey

Acting Executive Director

Senator WATSON —I have accepted in good faith that these bodies and groups are acting in the best interests of their students. Initially, I was surprised by the opposition to the stance we have taken—for example, some of the draconian provisions requiring employers effectively to garnishee wages at the request of the ATO. On the other hand, having been given the opportunity of the weekend for reflection and for discussing the matter with individual students, I believe that, as parliamentarians, we should reflect the views of those constituencies that are subject to this legislation. Acknowledging that point of view, listening to these groups is a proper and appropriate parliamentary procedure because, having weighed the pain against the gain, they would like us to pass this legislation without amendment.

  There is considerable gain, and I will reiterate some of the criticisms I raised earlier because I do not want to shrink from the seriousness of the issues we raised. So this should not be regarded so much as a backdown on the principles we espoused but as a desire to meet the genuine concerns of the students, on balance. As outlined in the letters that have been incorporated, there are features about which the students are unhappy. Therefore, we withdraw those amendments since they do not meet with the full approval of those constituencies, after due consideration and debate within those organisations.

  Those groups—the Australian Vice-Chancellors Committee, the National Tertiary Education Industry Union and the National Union of Students—have asked us to withdraw those issues, and I do so. As honourable senators would appreciate, it has not been an easy task, but it is one that is in the best interests of the democratic processes of the chamber.

  The government should not take much heart from this changed position because the issues I have raised as issues have really not diminished: that is, changing the rules between individuals and the government after they have been agreed upon, which is a serious issue that has all the hallmarks of retrospectivity; placing onerous conditions on employers that were not previously imposed in relation to the new measures; and failing to outline the financial impact in the explanatory memorandum of the training guarantee funding legislation in relation to particular amendments.

  It is now standard practice, and I congratulate the Taxation Office, in relation to tax bills that wherever an amendment occurs a financial impact is given in relation to the particular clause or group of clauses. Unfortunately, the training guarantee funding legislation contained no such detailed breakdown, although there was an overall figure. The executive sending letters ahead of the passage of legislation really goes to the sovereignty of this parliament and is still a very real issue. I remind the committee that the philosopher Montesquieu was right when he said:

When the legislature and executive powers are united, there indeed can be no liberty.

  I mentioned earlier the draconian nature of the PAYE payments. If an employee fails to complete a new declaration form, the employer will be advised by the Taxation Office to deduct tax at the maximum rate of 48.4 per cent, regardless of the employee's income. We are certainly heading down this path. The parliament, through the executive, has given the ATO not only extra powers but also extra responsibilities—collecting revenue, the superannuation guarantee charge, child support, the training guarantee levy, which is currently in suspension, perhaps a role as the nation's banker for small amounts of superannuation, and now additional powers in relation to bringing forth HECS amounts.

  This bill before us today talks about notional and unrealised accruals, deemed capital gains when underlying investments have not been sold, and profits attributable to trusts when there is no beneficial change in the ownership of the asset. On Monday afternoon I had a very interesting discussion with one of the student representatives, Rebecca Shinnick—she does not mind me mentioning her name—of the students association of the Adelaide university. She calls for an assurance from the government that students who undertake holiday employment prior to the completion of their courses will not be subject to the onerous PAYE HECS arrangements in the light of what has been foreshadowed, particularly in relation to the pro rata legislation that has yet to come before the chamber, and this legislation is certainly the forerunner of that.

  The legislation will open a pandora's box for the government but particularly for the Taxation Office and the constituents who will be affected. The implementation of these measures will not be easy for anyone. Had the government listened to the views we raised during the committee stage, it certainly would have had more time to reflect and perhaps get some of these issues right. I am worried about the impact on employers, on those who will be affected.

  As I have already indicated, the government has already foreshadowed legislation affecting the pro rata amendments, especially operating from 1 January 1995. Perhaps I should give an opportunity to other colleagues to respond in relation to HECS matters before I proceed to other issues, because I know that other senators do have issues to raise in relation to the HECS provision. If that is not the case I will proceed to consideration of the capital gains issues.