Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

 

2019-2020

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

HIGHER EDUCATION (UP-FRONT PAYMENTS TUITION PROTECTION LEVY) BILL 2020

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

(Circulated by the authority of the Minister for Education,

the Honourable Dan Tehan MP)

 



Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020

OUTLINE

The purpose of the Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020 ( Bill ) is to impose the up-front payments tuition protection levy, specify the amounts that are payable by providers and prescribe the levy components and the manner in which, and by whom, they will be determined each year. The Bill is part of a package of legislation to expand the Australian Government’s tuition assurance arrangements to protect domestic up-front fee paying students ( up-front payment students ) at private higher education providers. The Bill is a taxation Bill as it imposes a tax for the purposes of section 55 of the Constitution. 

 

The tuition protection arrangements for up-front payment students that apply to private higher education providers are specified in the Education Legislation Amendment (Up-front Payments Tuition Protection) Bill 2020 ( Tuition Protection Bill ). Details of the collection and recovery of the up-front payments tuition protection levy will be set out in the Up-front Payments Guidelines ( Guidelines ), a legislative instrument, made by the Minister under the Tuition Protection Bill.

 

The up-front payments tuition protection levy amounts collected will be credited into the same special account as the “HELP tuition protection fund” (which was established under the Higher Education Support Act 2003 ( HESA )) for the purposes of the Public Governance, Performance and Accountability Act 2013 ), as the majority of higher education providers affected by this Bill will also have students that access the Higher Education Loan Program ( HELP ). However, that special account will be renamed as the Higher Education Tuition Protection Fund, with consequential amendments made to HESA, by the Tuition Protection Bill. By renaming the special account, it will avoid higher education providers being required to pay into two separate special accounts for tuition assurance, thereby streamlining levy payments by providers who are required to pay levies for both HELP students, and up-front payment students.

 

Together, the Tuition Protection Bill and this Bill, will implement the expansion of the tuition protection service ( TPS ) to cover domestic students who pay their tuition fees up-front for their higher education courses at private higher education providers, with effect from 1 January 2021. This will ensure these students receive the same protection as students who access FEE-HELP or HECS-HELP assistance at private higher education providers.

 

There will be three elements to the up-front payments tuition protection levy:

 

·          the administrative fee component - this is intended to cover the ongoing administration costs of the tuition protection arrangements, such as the remuneration of the Higher Education Tuition Protection Director and the Higher Education Tuition Protection Fund Advisory Board and any consultants engaged by the Higher Education Tuition Protection Director to assist and support the performance of their role and functions. This component of the up-front payments tuition protection levy is payable by all leviable providers. However, a new provider (that is, a leviable provider that was not a registered higher education provider at any time during the previous year) pays a pro-rated amount of the component in their first year

·          the risk rated premium component - this is intended to cover the risk of each provider defaulting. This component is payable by leviable providers, but if the leviable provider is a new provider for a year, then the amount of the risk rated premium component for the year is zero

·          the special tuition protection component - this is intended to be imposed in instances where the up-front payments tuition protection levy funds are below the ‘target fund size’, or to ensure against future systemic shocks and sustainability of the Higher Education Tuition Protection Fund. This component is payable by leviable providers but, if the leviable provider is a new provider for a year, then this component of the levy is not payable by the provider in that year.

 

The responsibility for determining the components of the up-front payments tuition protection levy is as follows:

 

·          the Minister will determine the administrative fee component

·          the Higher Education Tuition Protection Director will determine the risk rated premium component and special tuition protection component.

 

In making the instrument for the purposes of the administrative fee component, the Minister is required to have regard to the sustainability of the Higher Education Tuition Protection Fund and any other matters the Minister considers appropriate. The Bill provides for an upper limit for the administrative fee component (which is subject to indexation). This upper limit was determined in consultation with the Australian Government Actuary.

 

The risk rated premium component of the up-front payments tuition protection levy is calculated according to a detailed methodology provided for in the Bill (see proposed section 11), which was developed by the Australian Government Actuary. This methodology takes into consideration the provider's level of exposure in terms of total student numbers and tuition fee amounts paid up-front, as well as the provider's risk of default based on certain risk factors including, for example, financial strength, course completion rates and non-compliance history.

 

In making the instrument for the purposes of the risk rated premium component, the Higher Education Tuition Protection Director is required to have regard to the advice of the Higher Education Tuition Protection Fund Advisory Board, as well as the sustainability of the Higher Education Tuition Protection Fund. Notably, members of the Advisory Board are required to include, amongst others, representatives from the Department of Finance, the Australian Prudential Regulatory Authority and the Australian Government Actuary (see section 55C of the Education Services for Overseas Students Act 2000 ). Thus, the Advisory Board will be well positioned to provide transparent and sound advice. The Treasurer is also required to approve the legislative instrument before the Higher Education Tuition Protection Director makes the instrument, providing an extra measure of scrutiny over the legislative instrument.

 

The Higher Education Tuition Protection Director is similarly responsible for determining in the same legislative instrument (and so with the same checks and guidance) the percentage, to multiply the provider’s total up-front tuition fee amounts by, in order to calculate the special tuition protection component. This component of the up-front payments tuition protection levy is intended to be imposed on providers to enable the Higher Education Tuition Protection Fund to grow to a point where it is self-sustaining.

 

The up-front payments tuition protection levy will be reviewed annually. A key objective of the Bill is to ensure there is sufficient flexibility to allow the levy to respond to sector trends through regular review. This is essential to ensure the sustainability of these arrangements to Government and to ensure that leviable providers are charged reasonably and proportionately in line with the actual market costs of delivering tuition protection for higher education students who pay their tuition fees up-front, and to reflect their actual risk levels from year to year.

 

Consistent with other delegated legislation, the Minister and the Higher Education Tuition Protection Director will consult with the higher education sector as part of the annual levy setting process and, similarly, both instruments will be subject to Parliamentary scrutiny through the disallowance process after tabling in both Houses of the Parliament.

 

The Bill also allows the Guidelines to specify classes of providers to be exempt from paying one or more of the components of the up-front payments tuition protection levy. This is essential to provide flexibility and responsiveness in the requirements imposed on providers and the management of the Higher Education Tuition Protection Fund. The Guidelines are an effective mechanism for setting out these exemptions due to the ability to be able to quickly adjust the administrative and technical details of the arrangements in response to changes in provider circumstances. For example, to make provision for reduced levies for providers who have significantly reduced their risk factor to minimal risk of default, and/or have the capability to protect students in the event of a default.



 

FINANCIAL IMPACT STATEMENT

 

The measure to expand the Australian Government’s tuition protection service to cover domestic up-front fee paying students studying at private education providers through the Bill and the Tuition Protection Bill is expected to generate $0.1 million in underlying cash and fiscal balance terms over the forward estimates.

 

Impact on underlying cash ($ millions)

 

2020-21

2021-22

2022-23

2023-24

Total

New tuition protection measure - domestic up-front fee paying higher education students

-0.3

+0.0

+0.2

+0.2

+0.1

 



 



STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020

The Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020 ( Bill ) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Bill

The purpose of the Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020 ( Bill ) is to impose the up-front payments tuition protection levy, specify the amounts that are payable by providers and prescribe the levy components and the manner in which, and by whom, they will be determined each year. The Bill is part of a package of legislation to expand the Australian Government’s tuition assurance arrangements to protect domestic up-front fee paying students ( up-front payment students ) at private higher education providers. The Bill is a taxation Bill as it imposes a tax for the purposes of section 55 of the Constitution. 

 

The tuition protection arrangements for up-front payment students that apply to private higher education providers are specified in the Education Legislation Amendment (Up-front Payments Tuition Protection) Bill 2020 ( Tuition Protection Bill ). Details of the collection and recovery of the up-front payments tuition protection levy will be set out in the Up-front Payments Guidelines ( Guidelines ), a legislative instrument, made by the Minister under the Tuition Protection Bill.

 

The up-front payments tuition protection levy amounts collected will be credited into the same special account as the “HELP tuition protection fund” (which was established under the Higher Education Support Act 2003 ( HESA )) for the purposes of the Public Governance, Performance and Accountability Act 2013 ), as the majority of higher education providers affected by this Bill will also have students that access the Higher Education Loan Program ( HELP ). However, that special account will be renamed as the Higher Education Tuition Protection Fund, with consequential amendments made to HESA, by the Tuition Protection Bill. By renaming the special account, it will avoid higher education providers being required to pay into two separate special accounts for tuition assurance, thereby streamlining levy payments by providers who are required to pay levies for both HELP students, and up-front payment students.

 

Together, the Tuition Protection Bill and this Bill, will implement the expansion of the tuition protection service ( TPS ) to cover domestic students who pay their tuition fees up-front for their higher education courses at private higher education providers, with effect from 1 January 2021. This will ensure these students receive the same protection as students who access FEE-HELP or HECS-HELP assistance at private higher education providers.

 

There will be three elements to the up-front payments tuition protection levy:

 

·          the administrative fee component - this is intended to cover the ongoing administration costs of the tuition protection arrangements, such as the remuneration of the Higher Education Tuition Protection Director and the Higher Education Tuition Protection Fund Advisory Board and any consultants engaged by the Higher Education Tuition Protection Director to assist and support the performance of their role and functions. This component of the up-front payments tuition protection levy is payable by all leviable providers. However, a new provider (that is, a leviable provider that was not a registered higher education provider at any time during the previous year) pays a pro-rated amount of the component in their first year

·          the risk rated premium component - this is intended to cover the risk of each provider defaulting. This component is payable by leviable providers, but if the leviable provider is a new provider for a year, then the amount of the risk rated premium component for the year is zero

·          the special tuition protection component - this is intended to be imposed in instances where the up-front payments tuition protection levy funds are below the ‘target fund size’, or to ensure against future systemic shocks and sustainability of the Higher Education Tuition Protection Fund. This component is payable by leviable providers but, if the leviable provider is a new provider for a year, then this component of the levy is not payable by the provider in that year.

 

The responsibility for determining the components of the up-front payments tuition protection levy is as follows:

 

·          the Minister will determine the administrative fee component

·          the Higher Education Tuition Protection Director will determine the risk rated premium component and special tuition protection component.

 

In making the instrument for the purposes of the administrative fee component, the Minister is required to have regard to the sustainability of the Higher Education Tuition Protection Fund and any other matters the Minister considers appropriate. The Bill provides for an upper limit for the administrative fee component (which is subject to indexation). This upper limit was determined in consultation with the Australian Government Actuary.

 

The risk rated premium component of the up-front payments tuition protection levy is calculated according to a detailed methodology provided for in the Bill (see proposed section 11), which was developed by the Australian Government Actuary. This methodology takes into consideration the provider's level of exposure in terms of total student numbers and tuition fee amounts paid up-front, as well as the provider's risk of default based on certain risk factors including, for example, financial strength, course completion rates and non-compliance history.

 

In making the instrument for the purposes of the risk rated premium component, the Higher Education Tuition Protection Director is required to have regard to the advice of the Higher Education Tuition Protection Fund Advisory Board, as well as the sustainability of the Higher Education Tuition Protection Fund. Notably, members of the Advisory Board are required to include, amongst others, representatives from the Department of Finance, the Australian Prudential Regulatory Authority and the Australian Government Actuary (see section 55C of the Education Services for Overseas Students Act 2000 ). Thus, the Advisory Board will be well positioned to provide transparent and sound advice. The Treasurer is also required to approve the legislative instrument before the Higher Education Tuition Protection Director makes the instrument, providing an extra measure of scrutiny over the legislative instrument.

 

The Higher Education Tuition Protection Director is similarly responsible for determining in the same legislative instrument (and so with the same checks and guidance) the percentage, to multiply the provider’s total up-front tuition fee amounts by, in order to calculate the special tuition protection component. This component of the up-front payments tuition protection levy is intended to be imposed on providers to enable the Higher Education Tuition Protection Fund to grow to a point where it is self-sustaining.

 

The up-front payments tuition protection levy will be reviewed annually. A key objective of the Bill is to ensure there is sufficient flexibility to allow the levy to respond to sector trends through regular review. This is essential to ensure the sustainability of these arrangements to Government and to ensure that leviable providers are charged reasonably and proportionately in line with the actual market costs of delivering tuition protection for higher education students who pay their tuition fees up-front, and to reflect their actual risk levels from year to year.

 

Consistent with other delegated legislation, the Minister and the Higher Education Tuition Protection Director will consult with the higher education sector as part of the annual levy setting process and, similarly, both instruments will be subject to Parliamentary scrutiny through the disallowance process after tabling in both Houses of the Parliament.

 

The Bill also allows the Guidelines to specify classes of providers to be exempt from paying one or more of the components of the up-front payments tuition protection levy. This is essential to provide flexibility and responsiveness in the requirements imposed on providers and the management of the Higher Education Tuition Protection Fund. The Guidelines are an effective mechanism for setting out these exemptions due to the ability to be able to quickly adjust the administrative and technical details of the arrangements in response to changes in provider circumstances. For example, to make provision for reduced levies for providers who have significantly reduced their risk factor to minimal risk of default, and/or have the capability to protect students in the event of a default.



 

Analysis of human rights implications

The Bill in isolation does not engage any of the applicable rights or freedoms. It provides for a higher education tuition protection levy, to be imposed on leviable providers as a tax. This Bill is necessary to give effect to the tuition protection measure to expand the tuition assurance arrangements to domestic up-front fee paying higher education students at private higher education providers. The tuition protection measure is set out in the Tuition Protection Bill. A Statement of Compatibility with Human Rights in relation to the tuition protection measure is attached to the Explanatory Memorandum for that Bill.

Conclusion

The Bill is compatible with human rights because it does not, in itself, raise any human rights.

 



 

 

 

List of abbreviations

 

HESA                        

 

Higher Education Support Act 2003

TEQSA Act               

 

T ertiary Education Quality and Standards Agency Act 2011

 

Tuition Protection Bill

Education Legislation Amendment (Up-front Payments Tuition Protection) Bill 2020



Higher Education (Up-front Payments Tuition Protection Levy) Bill 2020

NOTES ON CLAUSES

Part 1 - Preliminary

 

Clause 1 - Short title

 

This clause provides for the Act to be the Higher Education (Up-front Payments Tuition Protection Levy) Act 2020.

 

Clause 2 - Commencement

 

The table in subclause 2(1) sets out when the Act’s provisions will commence. The table provides that the whole of the Act commences at the same time the Education Legislation Amendment (Up-front Payments Tuition Protection) Act 2020 commences.

 

Subclause 2(2) provides that information in column 3 of the table at subclause 2(1) is not part of the Act and information may be inserted into column 3 or information in it may be edited in any published version of the Act.

 

Clause 3 - Crown to be bound

 

Clause 3 provides that the Bill binds the Crown in each of its capacities. This clause will ensure that, in keeping with principles of competitive neutrality, leviable providers that are instrumentalities of the Crown in right of the Commonwealth or of a State or Territory, are not excluded from paying the levy merely because they are instrumentalities of the Crown. 

 

Clause 4 - Act does not impose tax on property of a State

 

Subclause 4(1) provides that the Bill does not impose a tax on property of any kind belonging to a State and subclause 4(2) defines property of any kind belonging to a State as having the same meaning as in section 114 of the Constitution. Clause 4 ensures the Bill does not contravene section 114 of the Constitution, which prohibits the Commonwealth imposing any tax on the property of any kind belonging to a State.

 

Clause 5 - Definitions

 

Clause 5 contains definitions of the following terms and expressions used in the Bill:

 

·          administrative fee component , for a leviable provider for a year, has the meaning given in clause 8

·          Australian course of study has the same meaning as in the TEQSA Act (see section 5)

·          domestic student has the same meaning as in the TEQSA Act (see Item 3 of Schedule 1 to the Tuition Protection Bill)

·          Higher Education Tuition Protection Director means the person referred to in section 167-15 of HESA

·          Higher Education Tuition Protection Fund Advisory Board means the Board established by section 167-30 of HESA

·          Higher Education Tuition Protection Fund means the Fund established by section 167-1 of HESA

·          leviable provider means a registered provider to whom Part 5A of the TEQSA Act applies (see Item 8 of Schedule 1 to the Tuition Protection Bill )

·          new provider for a year is a leviable provider that was not a registered higher education provider at any time during the previous year

·          property of any kind belonging to a State has the meaning given in subclause 4(2) (i.e. the same meaning as in section 114 of the Constitution)

·          registered higher education provider has the same meaning as in the TEQSA Act (see section 5)

·          risk rated premium component for a leviable provider for a year has the meaning given in clause 11

·          special tuition protection component for a leviable provider for a year has the meaning given in clause 12

·          total up-front fee paying students for a leviable provider for a year means the total number of domestic students for which the provider received (directly or indirectly) during the year one or more up-front payments for one or more units of study

·          unit of study means:

o    has the same meaning as in HESA (see subclause 1(1) of Schedule 1 to HESA) - for those units that relate to an Australian course of study of a registered higher education provider that is also a higher education provider within the meaning of HESA

o    for other units outside of the HESA meaning that relate to an Australian course of study and a registered higher education provider - a subject or unit (however described) that a person may undertake as part of a course or, if the course is not comprised of subjects or units, the course itself

·          up-front payment has the same meaning as in the TEQSA Act (see Item 5 of Schedule 1 to the Tuition Protection Bill)

·          Up-front Payments Guidelines means guidelines that are made by the Minister under section 26B of the TEQSA Act (see Item 7 of Schedule 1 to the Tuition Protection Bill)

·          up-front payments tuition protection levy means the levy that is imposed under clause 6

·          year means a calendar year.

 



 

 

Part 2 - Up-front payments tuition protection levy

 

Clause 6 - Imposition of up-front payments tuition protection levy

 

This clause imposes the up-front payments tuition protection levy on a body for a year if the body is a leviable provider at any time during the year.

 

Clause 7 - Amount of up-front payments tuition protection levy

 

This clause provides that the amount of the up-front payments tuition protection levy for a year for a leviable provider is the sum of the provider’s administrative fee component, risk rated premium component and special tuition protection component for that year. These components are calculated in accordance with the methods set out in clauses 8, 11 and 12 of the Bill.

 

A note assists the reader by referring to section 14, which enables the Up-front Payments Guidelines to prescribe classes of providers that may be exempt from the requirement to pay one or more components of the up-front payments tuition protection levy.

 

Subclauses 11(1) and 12(1) also deem a new provider’s risk rated premium component and special tuition protection component as both being zero.

 

Clause 8 - Administrative fee component

 

The administrative fee component is intended to cover the Commonwealth’s operational costs of tuition protection under Part 5A of the TEQSA Act (tuition protection) and Part 5-1B of HESA (Higher Education Tuition Protection Fund, Higher Education Tuition Protection Director and Higher Education Tuition Protection Fund Advisory Board) (see Schedules 1 and 2 to the Tuition Protection Bill ).

 

A leviable provider’s administrative fee component for a year is the sum of:

 

  • the amount determined in an instrument made under section 9 for the purposes of paragraph 8(2)(a) for the year; and
  • the amount determined in an instrument made under section 9 for the purposes of paragraph 8(2)(b) for the year, multiplied by the total up-front fee paying students for the provider for the previous year.

 

Factoring in a provider’s total up-front fee paying student numbers for the year allows for the provider’s degree of exposure to be taken into account.

 

If the leviable provider is a new provider, subclause 8(1) provides that the amount of the provider’s administrative fee component is the amount determined for the purposes of paragraph 8(2)(a) only.

 

New providers pay a pro-rated amount of the administrative fee component in their first year. A provider who has been a registered provider for the whole year will not have their administrative fee component reduced.

 

Subclause (3) provides for a reduction in the total number of up-front fee paying students for the previous year, if the student would also fall into the definition of total HELP students (within the meaning of the Higher Education Support (HELP Tuition Protection Levy) Act 2020) for that previous year.

 

Clause 9 - Legislative instrument for the purposes of section 8

 

The Minister is responsible for making the legislative instrument setting the amounts used to calculate a leviable provider’s administrative fee component.

 

Subclause 9(1) provides that, before 1 August 2021, the Minister must, by legislative instrument, determine amounts for the purposes of paragraphs 8(2)(a) and (b) for 2021. Subclause 9(2) gives the Minister the discretion whether to determine a legislative instrument in subsequent years. If no instrument is made for a particular year before 1 August of that year, the administrative fee component of the levy is the same as the previous year, subject to indexation as per clause 10.

 

Subclause 9(3) provides that the amount the Minister determines for the purposes of paragraph 8(2)(a) cannot exceed $325 and the amount for paragraph 8(2)(b) cannot exceed $31. The Australian Government Actuary was consulted in setting these upper limit amounts. This provision gives providers transparency and certainty as to the maximum possible amounts that can be charged for the administrative fee component. The note underneath subclause 9(3) clarifies that amounts under this subsection are to be indexed pursuant to clause 10.

 

Subclause 9(4) requires the Minister, in making a legislative instrument under clause 9, to have regard to the sustainability of the Higher Education Tuition Protection Fund. Subclause 9(5) enables the Minister to also have regard to any other matter the Minister considers appropriate.

 

Clause 10 - indexation of administrative fee components etc.

 

Clause 10 provides for the indexation of both the administrative fee component of the up-front payments tuition protection levy and also the upper limits of the amounts of the administrative fee component prescribed in subclause 9(3). The Australian Bureau of Statistics was consulted on this clause.

 

Subclause 10(1) provides for indexation to apply in accordance with a prescribed formula from 1 August 2022, and each year later, to amounts mentioned in paragraphs 8(2)(a) or (b) or 9(3)(a) or (b). The prescribed formula multiplies the amount under the respective paragraph for the previous year, by the indexation factor for that 1 August. The amount mentioned in paragraphs 8(2)(a) or (b) or 9(3)(a) or (b) is then replaced by the new amount.

 

Subclause 10(2) provides that subclause 10(1) does not apply to an amount mentioned in paragraph 8(2)(a) or (b), if the Minister has determined an amount for the purposes of that paragraph for the current year.

 

Subclause 10(3) sets out the formula for working out the indexation factor for the purposes of subclause 10(1). The indexation factor for a 1 August is the index number for the reference quarter divided by the index number for the base quarter. The index number for a quarter means the All Groups Consumer Price Index number from the original series (being the weighted average of the eight capital cities) published by the Australian Statistician for that quarter. The base quarter means the last September quarter before the reference quarter and the reference quarter means the September quarter in the year before the current year.

 

Subclauses 10(4) to 10(7) provide for rounding factors to apply to the indexation factor and the amounts worked out under subclause 10(1). Subclause 10(4) provides that the indexation factor worked out under subclause 10(3) must be rounded up or down to 3 places and subclauses 10(5) and 10(6) provide for the rounding of amounts worked out under subclause 10(1). Subclause 10(7) provides that an indexation factor that is less than 1 is to be increased to 1. This ensures that amounts to be indexed are not reduced. Subclause 10(8) provides that, if at any time the Australian Statistician has changed or changes the index reference period for the Consumer Price Index, then, for the purposes of applying clause 10 after the change, only index numbers published in terms of the new index reference period are to be used.

 

Subclause 10(9) requires the Minister to cause each amount worked out under subclause 10(1) to be made publically available in any manner the Minister considers appropriate. For example, the Minister may require that the Higher Education Tuition Protection Director publishes the indexed amounts on a particular website. 

 

Clause 11 - Risk rated premium component

 

The risk rated premium component is calculated based on the provider’s level of exposure, in terms of total up-front fee paying student numbers and up-front payment amounts, as well as the provider’s risk of default based on certain risk factors.

 

Subclause 11(1) provides that, if a leviable provider is a new provider for a year, the amount of the provider’s risk rated premium component for the year is zero.

 

Subclause 11(2) sets out a six-step method statement for calculating a leviable provider’s risk rated premium component (for the current year), as follows:

 

  1. The first step is to multiply the total up-front fee paying students for the provider for the year (as reduced under subsection 11(3)) by the amount determined in an instrument under section 13 for the purposes of this step for the current year - this allows for the provider’s level of exposure based on up-front student numbers to be taken into account.

 

  1. The second step is to multiply the amount equal to the total up-front payments received by the provider (directly or indirectly) for domestic students for units of study during the previous year, by the percentage determined in an instrument under section 13 for the purposes of this step for the current year - this allows for the provider’s level of exposure based on actual up-front payments received for the previous year to be taken into account.

 

  1. The third step is to add up the results of steps 1 and 2.

 

  1. The fourth step is, for each risk factor determined in an instrument under section 13 for the purposes of this step for the current year, work out the risk factor value for the provider for the current year in accordance with the instrument. Examples of risk factors that may be specified in the instrument are: financial strength, course completion rates and non-compliance history as a registered higher education provider. These are all factors which could impact on a provider’s risk of default.

 

  1. The fifth step is to add up the provider’s risk factor values worked out under step 4 and add 1.

 

  1. The sixth step is to multiply the results of step 3 (i.e. exposure based on up-front fee paying student numbers and up-front payments received) by the results of step 5 (i.e. exposure based on risk factors). The result is the provider’s risk rated premium component for the current year.

 

Subclause 11(3) provides for a reduction in the total number of up-front fee paying students when working out the total up-front fee paying students for a provider for the previous year in step 1 of the method statement, if the student would also fall into the definition of total HELP students (within the meaning of the Higher Education Support (HELP Tuition Protection Levy) Act 2020 for that previous year.

 

Under section 5 of the Higher Education Support (HELP Tuition Protection Levy) Act 2020 , total HELP students , for a leviable provider for a year, means the total number of students who: were enrolled during the previous year in at least one unit of study that forms part of a course of study and that has its census date in the previous year; and were entitled to HECS-HELP assistance or FEE-HELP assistance for that unit.

 

Clause 12 - Special tuition protection component

 

The special tuition protection component is intended to be imposed on providers to allow the Higher Education Tuition Protection Fund to grow. For example, it might be imposed in the early years to allow the Fund to grow to its target size. Alternatively, it might also be imposed in years of growth in up-front fee paying student numbers to build up contingency amounts in the Fund for future years. 

 

Paragraph 12(a) provides that, if a leviable provider is a new provider for a year, the amount of the provider’s special tuition protection component for the year is zero.

 

Otherwise, clause 12 provides that a leviable provider’s special tuition protection component for a year is the amount equal to the total up-front payments received by the provider (directly or indirectly) for domestic students for units of study during the previous year, multiplied by the percentage determined in an instrument made under section 13 for the purposes of section 12 for a year. Factoring in a provider’s total up-front payments received for the previous year allows for each provider’s contribution to be fair and proportionate.

 

Clause 13 - Legislative instrument for purposes of section 11 or 12

 

The Higher Education Tuition Protection Director is responsible for making the legislative instrument that is necessary to calculate a leviable provider’s risk rated premium component under clause 11 and its special tuition protection component under clause 12.

 

Subclause 13(1) provides that the Higher Education Tuition Protection Director must, by legislative instrument, determine before 1 August 2021 and for each later year, each of the following for the year:

 

  • an amount for the purposes of step 1 of the method statement in subsection 11(2);
  • a percentage for the purposes of step 2 of the method statement in subsection 11(2);
  • one or more risk factors that reflect the risk of payments being made out of the Higher Education Tuition Protection Fund in respect of leviable providers with that factor or those factors, and for each risk factor, the risk factor value, or a method for working out the risk factor value, for leviable providers, or a class of leviable providers. This is for the purposes of step 4 of the method statement in subsection 11(2);
  • a percentage for the purposes of paragraph 12(b).

 

Subclause 13(2) provides that the percentage determined for the purposes of paragraphs 13(1)(b) or (d) may be zero. Subclause 13(3) provides that a risk factor value for a risk factor must be a number between zero and 10 inclusive.

 

Subclause 13(4) provides that, in making a legislative instrument under subsection 13(1), the Higher Education Tuition Protection Director must have regard to both any advice of the Higher Education Tuition Protection Fund Advisory Board and the sustainability of the Higher Education Tuition Protection Fund. Under subclause 13(5), the Higher Education Tuition Protection Director may also have regard to any other matter that the Director considers appropriate.

 

Before the Higher Education Tuition Protection Director makes a legislative instrument for the purposes of clause 13, subclause 13(6) requires the Treasurer to approve the legislative instrument in writing. This provides an extra measure of scrutiny to the legislative instrument. 

 

Part 3 - Other matters

 

Clause 14 - Exemptions

 

This clause provides that the Up-front Payments Guidelines (a legislative instrument made under section 26B of the TEQSA Act - see Item 7 of Schedule 1 to the Tuition Protection Bill) may prescribe one or more classes of leviable providers who are exempt from the requirement to pay one or more of the components of the levy. Notably, only classes of providers may be prescribed, and not individual providers.

 

This power to make a rule exempting a class of providers is necessary to provide flexibility and responsiveness in the requirements imposed on providers and the management of the Higher Education Tuition Protection Fund. It means that, if it becomes apparent that it is no longer appropriate for a class of providers to pay a particular component of the levy, for example due to their risk of default, they can be exempted from the requirement to pay one or more of the components.

 

Clause 15 - Regulations

 

This clause enables the Governor-General to make regulations prescribing matters required or permitted by this Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to this Act.