1988-89 cabinet paper 5922

CABINET-IN -CONFIDENCE

Copy No. 44

C A B I N E T M I N U T E

Canberra, 4 August 1988

No. 11733

Submission No. 5922 - Establishing a Higher Educat~on Contribution Scheme

Memorandum No. 5925 and Minute No. 11582(ER)

Establishing a Higher Education Contribution Scheme

Further to Minute No. 11731 of 4 August 1988 the

Cabinet noted the requirement that the Commonwealth make an

explicit payment directly to higher education institutions

under its "benefits to students" power in discharge of

students' liabilities under the Higher Education Contribution

Scheme (HECS).

2. The Cabinet agreed that

(a) in order to satisfy the requirement under

paragraph 1 above, from 1989, Commonwealth funds

for higher education would be paid as follows :-

(i) approximately twenty percent directly

to higher education institutions via

the mechanism of a Higher Education

Trust Fund; and

... /2

This document is the property of t he A ustralian Government and is not t o be copied or reproduced

CABINET-IN-CONFIDENCE

[1]

CABINET-IN-CONFIDENCE 2.

No. 11733 (Cont'd)

(ii) approximately eighty percen~ ~o the

States as per current Sta~es Grants

legislative arrangements;

(b) it was disposed at this stage to introduction in

the 1988 Budget Sittings of a single legislative

package encompassing the funding arrangements

outlined in sub-paragraph 2(a) above, the

proposed abolition of the Higher Education

Administration Charge and the introduction of

HECS but that a final decision be taken after

further consideration of the issues; and

(c) use of the upgraded tax file number system to

facilitate allocation of student contributions

under HECS should be included in the Treasurer's

tax file number legislation, with this further

use of the system to be conditional on passage

of the HECS legislation.

(This endorses Minute No. 11582(ER) of 3 August 1988.)

Secretary to Cabinet

This document is the property of the Australian Government and is not to be copied or reproduced

CABINET -IN -CONFIDENCE

[2]


Copy No. 38



No. 11731

Submission No. 5922 Establishing a Higher Educa~ion Contribution Scheme

Memorandum No. 5925 and Minute


No. 11533 (ER)

The Cabinet noted the outcome of consultations

with various parties as required by Cabinet Minute No. 11302

of 16 June 1988.

2. The Cabinet agreed that :-

(a) a Higher Education Contribution Scheme (HECS) be

implemented from 1 January 1989, as set out in

detail at Attachment A to Submission No. 5922,

but with the removal of the exemption proposed

at paragraph 8, page 10, for students who have

undertaken year 12 (or its equivalent) on full

AUSTUDY or ABSTUDY benefits;

... /2

This document is t he p roperty of t he Australian Government and is not to be copied or reproduced


[3]

CABIN ET-1 N-CON Fl DENCE 2.

No. 11731 ( Cont'd)

(b) the Higher Education Administration Cha=;e be

abolished from 1 January 1989;

( c) the Minister for Employment, Educa~ion a~d

Training would examine the applicabilit7 to HECS

of the social security arrangements app ~ ying to

New Zealand citizens resident in Austra l ia;

(d) the HECS be implemented under the Commonwealth's

'benefits to students' head of power (S. 51

(xxiiiA)) of the Constitution, on the

understandings that :-

(i) the enabling legislation (a Higher

(ii)

(iii)

Education Contribution Scheme Act) be

introduced for passage in the 1988

Budget sittings, with additional

legislative drafting resources engaged

as necessary for this purpose;

the legislation would incorporate

appropriate provisions to fully

assimilate the collection of HECS

payments with normal income tax

assessment and collection procedures;

the legislation implementing the

Government's decisions on an upgraded

tax file number system would proceed as

originally planned, subject to an

amendment at time of passage of the

... / 3


CAB I ET-IN-CONFIDENCE

[4]


No. 11731 (Cont'd)

HECS legislation to facilitate use of

the tax file number for tax

administration purposes related to the

collection of HECS payments; and

( iv) the legislation governing higher

education grants to the States for the

1989-91 triennium would be drafted to

include the current provisions relating

to the Higher Education Administration

Charge, for repeal on passage of the

HECS legislation; and

(e) in developing the HECS legislation, the Minister

for Employment, Education and Training would

examine the feasibility of waiving indexation of

HECS debts for persons out of the workforce for

long periods due to, for example, unemployment

or invalidity.

(This endorses Minute No. 11533 (ER) of 28 July 1988.)

Secretary to Cabinet


CABIN ET-1 N-CON Fl DENCE

[5]


Copy N o. 38



Submission No. 5923

Submission No. 5922 - Attachment H and Minute No. 11532(ER)

No. 11730

Higher Education Resources for 1989-91 Triennium


The Cabinet agreed to :-

(a) higher education intake increases on 1988 levels

of 6,500 in 1989, 12,300 in 1990 and 17,100 in

1991;

(b) additional operating grants for new intakes,

costed at $8,000 per equivalent full-time

student unit (in December 1987 prices), of $27.4

million in 1988-89, $102.2 million in 1989-90,

$210.0 million in 1990-91 and $319.1 million in

1991-92;

... /2

This document is the property of t he A ustralian Governm ent and is not to be cop ied or reproduced


[6]

CABINE -IN-CONFIDENCE 2.

No. 11730 ( Cont'd)

(c) additional operating grants for equity

initiatives of $1.1 million in 1988-89, S2.2

million in 1989-90, $2.2 million in 1989-90,


1991-92;

(d) additional grants for major capital works of

$9.0 million in 1988-89, $50.0 million in

1989-90, $90.0 million in 1990-91 and $80

million in 1991-92;

(e) renovations grants in 1988-89 totalling $20.0

million;

(f) additional Second Tier funding of $9.9 million

in 1988-89, $22.7 million in 1989-90, $25.9

million in 1990-91 and $26.7 million in 1991-92;

(g) additional funding, to recompense higher

education institutions for their administrative

costs in implementing the Higher Education

Contribution Scheme, of $10.5 million in 1988-

89, $10.8 million in 1989-90, $11.1 million in

1990-91 and $11.5 million in 1991-92;

(h) modified payment arrangements for higher

education institutions operating grants, saving

$105.0 million in 1988-89, $4.4 million in 1989-

90, $7.0 million in 1990-91 and $2.6 million in

1991-92;

... / 3


CABINE -IN-CONFIDENCE

[7]

CABINET -IN-CONFIDENCE

3.

No. 11730 ( Cont'd)

2.

(i) the additional resources for the Australian

Taxation Office for implementation of t~e Higher

Education Contribution Scheme being settled with

the Minister for Finance (Submission No. 5922,

Attachment H refers);

(j) the Minister for Employment, Education and

Training announcing a plan for the expansion of

higher education in the 1989-91 triennium in the

Budget context, consistent with this Minute;

and

(k) the Minister for Employment, Education and

(a)

Training and the Minister for Finance settling

the additional resource requirements for the

Department of Employment, Education and

Training.

The Cabinet noted that

the additional AUSTUDY program costs associated

with the enrolment growth in sub-paragraph l(a)

above would total $5.2 million in 1988-89, $19.7

million in 1989-90, $42.3 million in 1990-91 and

$64.1 million in 1991-92; and

... I 4



[8]


No. 11730 ( Cont'd)

(b) the reduction in unemployment benefit pa:ments

associated with the measures outlined i~ ~his

Minute would total $7.7 million in 1988-39,

$29.7 million in 1989-90, $62.3 million ~n 1990-

91 and $95.4 million in 1991-92.

(This varies Minute No.ll532(ER) of 28 and 29 July l 988.)

fl.~ Secretary to Cabinet



[9]

)

)

)

CABINET -IN -CON Fl DEN CE

Copy No . ......... .12_

C A B I N E T :1 I :-I U T E

Expenditure RevieH Committee

Canberra, 3 August 19~~

No. 11582 ( ER)

Submission No. 5922 Establishing a Higher Education Contribution Scheme -

Memorandum No. 5925 Establishing a Higher Education Contribution Scheme

Further to Minute No. 11533 (ER) ~f 28 July

19~~ the Committee noted the requirement that the

Commonwealth make an explicit payment directly to higher

education institutions under its "benefits to students" power

in discharge of students' liabilities under the Higher

Education Contribution Scheme (HECS).

The Committee agreed that :-

(a) in order to satisfy the requirement under

paragraph 1 above, from 19'a 9, Commonwealth funds

for higher education would be paid as follows :-

(i) approximately twenty percent directly

to higher education institutions via

the mechanism of a Higher Education

Trust Fund; and

... /2



[10]

.. CABINET -IN-CONFIDENCE

2 .

~e . : 1582 ( ER)(Cont'd)

( ii) ' approximately eighty percent ~~ ~he

States as per current States ~=ants

legislative arrangements;

( b) it was disposed at this stage to introduc~ion in

the 1988 Budget Sittings of a single :eg~slative

package encompassing the funding arrangements

outlined in sub-paragraph 2(a) above, ~he

proposed abolition of the Higher Education

Administration Charge and the introduction of

HECS but that a final decision be taken after

further consideration of the issues; and

(c) use of the upgraded tax file number system to

facilitate allocation of student contributions

under HECS should be included in the Treasurer's

tax file number legislation, with this further

use of the system to be conditional on passage

of the HECS legislation.

Committee Secretary



[11]


Copy No. 4 4


Expenditure Review Committee


No. 11552 (ER)

Submission No. 5922 Establishing a Higher Education Contribution Scheme

Memorandum No. 5925 Establishing a Higher Education Contribution Scheme

Further to Minute No. 11533 (ER) of 28 July

1988, the Committee noted an oral report from the Minister

for Employment, Education and Training on the progress of

officials' discussions on the issue of Budget and National

Accounts classification of student contributions under the

proposed Higher Education Contributions Scheme (HECS).

2. The Committee agreed that issues relating to the

classification of student contributions under HECS as either

a revenue item or as an offset to outlays, and issues

relating to the use of the tax file number in the HECS, be

settled between the Treasurer and Minister for Employment,

Education and Training in consultation as necessary with the

Minister for Finance.

Committee Secretary



[12]


Copy No.


Expenditure Review Committee

Submission No. 5922

Memorandum No. 5925

Canberra. 2 $ July 1988

No. 11533 (ER)

Establishing a Higher Educa~~on Contribution Scheme


44

The Committee noted the outcome ®;f consultations

with various parti~s as required by Cabinet Minute No. 11302

of 16 June 19fM3,;'

2.

(a)

The Committee agreed that :-

a Higher Education Contribution Scheme (HECS) be

implemented from 1 January 19(91~) , as set out in

detail at Attachment A to Submission No. 5922,

but with the removal of the exemption proposed

Q.t paragraph $ , page 1~! , for students who have

undertaken year 12 (or its equivalent) :@f,l, full

AUSTUDY or ABSTUDY benefits;

( ~ ) the Minister for Employment, Education and

Training, in consultation with the Minister for

Finance and the Treasurer, would propose an

appropriate form of words for announcement at

Budget time on enhancements to AUSTUDY and

ABSTUDY, (Attachment C to the Submission

refers);

... / 2



[13]

( !

CABINET -IN-CONFIDENCE 2.

No. 11533 (ER)(Cont'd)

(c) the Higher Education Administration Charge be

abolished from 1 January 198~;

(d) the Minister for Employment, Education end

Training would examine the applicabilit7 ~o HECS

of the social security arrangements appl7ing to

New Zealand citizens resident in Australia.

(e) the HECS be implemented under the Commonwealth's

'benefits to students' head of power (S. 51

{xxiiiA)) of the Constitution, on the

understandings that :

(i) the enabling legislation (a Higher

Education Contribution Scheme Act) be

introduced for passage in the 1988

Budget sittings, with additional

legislative drafting resources engaged

as necessary for this purpose;

(ii) the legislation would incorporate

appropriate provisions to fully

assimilate the collection of HECS

payments with normal inceme tax

assessment and collection procedures;

(iii) the legislation implementing the

Government's decisions on an upgraded

tax file number system would proceed as

originally planned, subject to an

amendment at time of passage of the

... / 3



[14]

•

CABINET -IN-CONFIDENCE 3.

No. 11533 (ER)(Cont'd)

3.

HECS legislation to facilitate ~se of

the tax file number for tax

administration purposes related to the

collection of HECS payments; and

(iv) the le~islation governing highe~

education grants to the States =or the

1989-91 triennium would be drafted to

include the current provisions relating

to the Higher Education Administration

Charge, fo~ repeal on passage of the

HECS legislation; and

(f) in developing the HECS legislation, the Hinister

for Employment, Education and Training would

examine the feasibility of waiving indexation of

HECS debts for persons out of the workforce for

long periods due to, for example, unemployment

or invalidity;

The Committee also agreed that officials from

the Australian Bureau of Statistics, the Department of

Finance and the Department of Employment, Education and

Training should meet urgently to clarify the classification

of HECS payments as either a revenue item or as an offset to

outlays, and report on the outcome of those discussions as

soon as possible.

Committee Secretary



[15]

)

)

)


Copy No . ..... . 1..2 .. _

C ;... 3 I N E T >1INUTE

~xoenciture Review Committee

Canber~a, 28 and 29 July 19 ffi 8

~o. 11532 (ER)

Submission No. 5923 Higher Education Resources for 1 • 8~-91 Triennium

Submission No. 5922 - Attachment H


The Committee agreed to

(a) higher education intake increases on 19~t levels

of 6, SUi,@ in 19 :~T'91 , 12, 300 in 199'6> and 17 .: 3 :~@! in

1991:

,( :fu,). additional operating grants for new intakes,

costed at $8 , 1Q'l§)~@: per equivalent full-time

student unit (in December 1987 prices), of $27~4

million in 19~BtB1-H9, $102.2 million in 19139-9®', ,

$21 ®. 1 million in 199~-91 and $319.1 million in

... /2



[16]

CABINET-IN-CONFIDENCE 2.

~o. :1532 ( ER)(Cont'd)

( c) additional operating grants for equity

initiatives of Sl.l million in 1988-89, : 2.2

million in 1989-90, S2.2 million in 198S-~O,

S2.2 million in 1990-91 and $2.3 millio~ ~n

1991-92;

( d ) additional grants for major capital worKs of

$9.0 million in 1988-89, $50.0 million .::-:.::.

1989-90, $90.0 million in 1990-91 and $80

million in 1991-92;

{ e) renovations grants in 1988-89 totalling 520.0

million;

(f) additional Second Tier funding of $9.9 mJ.llion

in 1988-89, $22.7 million in 1989-90, $25.9

million in 1990-91 and $26.7 million in 1991-92;

(g) additional funding, to recompense higher

education institutions for their administrative

costs in implementing the Higher Education

Contribution Scheme, of $10.5 million in 1988-

89, $10.8 millien in 1989-90, $11.1 million in

1990-91 and $11.5 million in 1991-92;

(h) modified payment arrangements for higher

education institutions operating grants, saving

$105.0 million in 1988-89, $4.4 million in 1989-

90, $7.0 million in 1990-91 and $2.6 million in

1991-92;

... /'3:



[17]

CABINET -IN -CON Fl DEN C E

3 .

. o. 11532 ( SR)(Cont'd)

2.

( i) additional resources for the Australian ~~~ation

Office for implemen~ation of the Higher

Education Contribution Scheme, costing s 5.6

million in 1988-89, $8.8 million in 1989-98 ,


1991-92 (Submission No. 5922, Attachmen~ H

refers);

(j) the Minister for Employment, Education and

Training announcing a plan for the expansion of

higher education in the 1989-91 triennium in the

Budget context, consistent with this Minute;

and

(k) the Minister for Employment, Education and

Training and the Minister for Finance settling

the additional resource requirements for the

Department of Employment, Education and

Training.

(a)

The Committee noted that :-

the additional AUSTUDY program costs associated

with the enrolment growth in sub-paragraph l(a)

above would total $5.2 million in 1988-89, $19.7

million in 1989-90, $42.3 million in 1990-91 and

$64.1 million in 1991-92;

... .' 4



[18]

• CABINET -IN-CONFIDENCE

4.

::o. .::.1532 ( ER) ( Cont' d)

( b) the reduction in unemployment benefit paymen~s

associated with the measures outlined i~ ~his

>1inute '.lOuld total $7. 7 million in 1988-a9,

$29.7 million in 1989-90, $62.3 million ~n 1990-

91 and $95.4 million in 1991-92.

Committee Secretary


CABINET-IN-CONFJDENCE

[19]

CABINET -IN-CON Fl D ENCE Corrigendum to

Submiss•on No. 5922

FOR CABINET Copy No. ~

Title ESTABLISHING A HIGHER EDUCATION CONTRIBUTION SCHEME

M inister The Hon J S Dawkins MP, and Training

Education

Purpose/Issues

Relation to existing policy

Sensitivity /Criticism

Legislation involved

']ency: ,/ical/significant

dates

""'[[sultation: 'I Ministers/Depts

consulted

• Is there agreement?

Timing/handling of announcement

Cost

27 July 1988

Please replace the existing cover page and pages 15 and 17 with the replacement pages and add the new Attachment I, pages 62 to 73.

Fin Yr ( Fin Yr ( Fin Yr (



I

I

[20]

CABINET -IN-CONFIDENCE Subm1Ss1on No.

5'tot;t

FOR CABINET ,,-;--Copy No. ~

Title

Minister

Purpose/Issues

Relation to existing policy

Sensitivity I Criticism


}Ieney: l.ritical/sig nifica nt dates

r sultation: • Ministers/Depts

consulted



Cost

TABLISHING A HIGHER EDUCATION CONTRIBUTION SCHEME

The Hon J S Dawkins MP, Minister for Employment, Education and TI.'aining

To report on the results of consultations with relevant parties over the detail of proposals for student contributions to the cost of higher education, as required by CD 11302 of 16 June 1988. To seek Cabinet agreement to a Higher Education Contribution Scheme (HECS) involving direct contributions towards higher education costs from individual beneficiaries with the capacity to pay.

Consistent with CD 11302 of 16 June 1988 and with the principles established by the June 1988 National Conference of the Australian Labor Party.

Substantial community support for the principle of direct contributions. Overall response mixed (Attachment D). User pays schemes opposed by students (Attachment E) and the ACTU (Attachment F). Other aspects supported by students and the ACTU. Mixed views in the working group of the Caucus Employment, Education anq Training Committee (Attachment G).

Attorney-General's Dept. confirms need for legislation. Subject to decision on appropriate head of power: if taxation power, a HECS Tax Assessment Act and a HECS Act: if benefits to students power, a Higher Education (Benefits to Students) Act. Under either option, amendments to

I

the existing Income Tax Assessment Act, the Fringe Benefits Assessment Act, and the current provisions of States I Grants {Tertiary Education Assistance) legislation.

Urgent. Legislation for passage in the 1988 Budget session. The scheme is to apply'from 1 January 1989.

Finance: Prime Minister and Cabinet: Treasury: Australian Taxation Office: Attorney-General's: Office of Parliamentary Counsel: Arts, Sport, the Environment, Tourism and Territories: Defence: Administrative Services.

No. While comments support the objectives of the proposed scheme, some Departments question aspects such as the legislative timetable, the course charge and repayment rates, the range of exemptions and the proposed AUSTUDY reforms. See Attachment I, page 62.

To be announced in the 1988-89 Budget context in conjunction with announcement of the Higher Education Development Plan for 1989-91.

$m Fin Yr (

{current prices) 88- 89

$9.9

Fin Yr ( 8g- 90 $8.5

Fin Yr (

(Administration costs - see Attachment H)

9l) ~ $8.8

Unless otherwise indicated, all figures in this Submission are in aver 1989 rices.


CABINET-I -C.ONFIDENCE

[21]

CABINET-I N-CONFIDENCE

ATTACHMENT A

15.

23. The effective date for establishing the HECS liability of a

student will be related to the census date applying to the

regular collection of higher education statistics, administered

by the Department of Employment, Education and Training (DEET).

To facilitate the implementation of the scheme, the census date

for this collection will be brought forward by one month in each

semester to 31 March and 31 August from 1989. Students who do

not withdraw before those dates will incur a HECS liability for the relevant semester.

Notification to Students and Appeal Provisions

24. It is proposed that higher education institutions notify all

students of their liability under HECS for each semester of

study. Those students who agree to pay up front will be

notified of their liability for the semester as soon as possible

after their final enrolment status (as at the census date) is

known. Other students will also be notified by institutions and

the information passed to the ATO so that the amount owed for the semester can be recorded on their accumulated tax debit. These arrangements will impose additional administrative costs

-on institutions, which I am proposing that the Government should

recognise and reimburse. Resources for this purpose are sought

in the Submission on Higher Education Resources for 1989-91

Triennium.

25. Under these arrangements higher education institutions will

be responsible for calculating the amount owed for each semester for all students. Any appeals relating to these amounts will

need to be resolved by the institutions. I intend to develop, Change in consultation with the Attorney-General, appropriate

arrangements to handle appeals based on special circumstances.

CABIN ET-I N-CON FIDENC E

[22]

CABI NET-I N-CONF IDENCE

ATTACHMENT A

17.

Tax Deductibility

28. Under s.51 of the Income Tax Assessment Act self-education

expenses in excess of $250 are deductible if there is sufficient connection between the studies being undertaken and the

derivation of assessable income. While most students would not be able to claim under this provision, those who are in

full-time employment with incomes over the threshold and who are

studying in a field relevant to their employment may be able to

claim a deduction for their HECS liability. By this means up to 15 per cent of students could be able to reduce their HECS liability by the order of 35 to 49 per cent, depending on

taxable income. I therefore propose that the Income Tax Assessment Act be amended to exclude HECS payments as allowable

tax deductions, including payments made by an employer or third

party on behalf of a student.

29. A principle of fringe benefits tax is that, to avoid double

taxation, the taxable value of a benefit is reduced to the

*insertion extent to which a *taxable employer is denied a deduction for the cost of the benefit. Consistent with that principle, I propose

' ) that the Fringe Benefits Assessment Act be ame~ded to reduce the

*insertion value of non-deductible HECS payments made by taxable employers. Where the employer is tax exempt (i.e, not subject

Insertion to company tax), HECS payments on behalf of an employee would continue to be subject to fringe benefits tax.

CABI NET-IN-CONFIDENCE

[23]

CABINET-I N-CON Fl DENCE

ATTACHMENT I

62.

CONSULTATION

Attorney-General's Department

Recommendation (c) in paragraph 13 notes that 'a decision is

required on the appropriate heads of constitutional power for

implementation of the scheme' (Attachment A, page 13).

Attachment A refers to two alternatives - one involving the

taxation power, but both involving States grants. There is a

further possibility of a scheme based solely upon the 'benefits

to students' power in s.Sl(xxiiiA) and the appropriations power

in s.81 of the Constitution - i.e. without any involvement of

the s.96 grants. Such a scheme could legally be blocked by

State laws prohibiting institutions from accepting the payments

under such a scheme, though it should be noted that a State

could (as a matter of law) refuse to accept conditional s.96

grants.

2. Attorney-General's Department considers that each of the

schemes referred to on page ,l3 of Attachment A would be constitutionally sound. The Department notes that, at this stage, it would seem that alternative (b) would be somewhat more

complex, and may therefore require more complex drafting, than the taxation alternative.

3. Attorney-General's Department also considers that there

would be constitutional difficulties for the Commonwealth in

seeking to provide directly for review of decisions of State

institutions on the levels of contributions by individual

students. There may be some scope by way of conditions on

Commonwealth grants to the States or direct payments to the

institutions (see Attachment A, page 15). Attorney-General's

Department notes that further consideration is to be given to all aspects of review procedures.


[24]

CABINET-IN-CON FIDENCE

ATTACHMENT I

63.

Office of Parliamentary Counsel

4. The remarks of OPC are confined to the question of timing.

The legislation will be a large drafting task. Without seeing the drafting instructions, it is impossible to give an accurate

assessment of the time needed. On the basis of the outline in

the Submission, it could take 2 to 3 months to draft (assuming

the legislation is to be a tax). If the legislation is not to

be a tax, the structure would be more complicated and it would be likely to take much longer to draft. In addition, many

matters of detail are not covered in the outline, and it is

possible that they could add to the size of the task. Whether or not it is to be a tax, consideration should be given to

reducing the size of the task as much as possible by leaving matters of detail to be prescribed by regulations (e.g. the

courses to be subject to, or exempt from, the charge).

s. The Parliamentary Liaison Officers have estimated that Bills

for passage in the 1988 Budget Sittings must be introduced in the first week in November., To meet this deadline, full

instructions would have to be received in OPC by mid-August at

the latest.

6. The legislation would have to be given top priority by OPC

and the instructing Departments. This could jeopardise other

important legislation, and in such a case the Government would

have to choose which legislation to defer.


[25]

CABI NET-IN-CON FIDENCE

ATTACHMENT I

64.

7. Because of these considerations, it may not be possible for

the legislation to be passed in the 1988 Budget Sittings.

However, it should be pointed out that, as a matter of law, the legislation could be introduced late in the Budget Sittings and passed in the Autumn Sittings, or even introduced and passed in the Autumn Sittings, and it would still be possible to make the first collections of "up-front" payments on 30 April 1989, which

OPC understands to be the estimated start-up date.

Department of Finance

a. Finance supports the objective of the proposed Higher Education Contribution Scheme to ensure that the beneficiaries

of higher education should contribute directly to the cost of higher education, if they have the capacity to pay.

9. Finance considers there would be merit in a scheme which also addressed broader efficiency goals in the higher education sector and in this context believes that use of the "benefits to students" head of power (to .. be decided under recommendation (c)) offers greater scope in the future to link contributions to

institutions and to specific courses etc.

10. On the contribution scheme itself Finance considers that a

suitable real interest rate applied to outstanding debts would obviate the need for any discount on up-front payments and avoid the inevitable inequities involved. Finance supports the change to a progressive repayment schedule but suggests that the first rate to apply from $22,000 be at two percent of taxable income. Finance would also strongly prefer that the fee structure have

more than one tier to allow some price signal to differentiate between courses.

CAB INET-I N-CON FI DENCE

[26]


ATTACHMENT I

65.

11. Finance rejects the need for a "definitive statement of intent" in relation to enhancing entitlements under AUSTUDY.

AUSTUDY outlays have risen substantially in recent years and are

expected to exceed $1 billion by 1991-92. Coverage is also

expected to continue to increase as a result of increasing school retention rates and the Minister's higher education

growth strategy. Further extensions to cover an arbitrary proportion of the student body, irrespective of the level of

welfare of that body, appear inconsistent with the requirement for some form of contribution to higher education. Finance also

notes that

the proposal to align AUSTUDY with the adult UB rate for those turning 21 years would provide a costly windfall gain to students turning 21 during a course of study;

the combined effect of the proposal to reduce benefits

for higher income families and to increase the level of payments to students 21 and over could, within the

existing independence criteria, provide a strong incentive to defer studies:

increasing the income test threshold for AUSTUDY could add to pressure to relax income tests for related Social Security Programs <particularly FAS).

12. Finance is not convinced that the level of resources sought

by ATO are necessary to implement the scheme. In particular, we question the need for immediate equipment in the light of the

ATO's redevelopment strategy, and suggest that these issues be settled with the Minister for Finance.


[27]

CABIN ET-IN-CON Fl DENCE

ATTACHMENT I

66.

Department of Defence

13. Tertiary Education is provided to cadets at the Australian

Defence Force Academy as a necessary preparation for a professional military career.

14. A return of service obligation of one year more than the

length of the course, applies. If an Academy graduate resigns

before entering into the full-time military service obligation

period, a repayment of the order of $30,000 - $40,000 may be

imposed.

15. During military service, career advancement is governed by

the requirements of the Defence Force.

16. In view of the return of service obligation of Academy graduates and the special military/academic regime under which

education is undertaken at the Academy, Defence is of the view that Academy graduates should be exempt from HECS. If this

preferred position is not acceptable, Defence considers that the

application of HECS should be delayed until severance of the

Academy graduate from the Defence Force. This would be

consistent with the principle that the contribution should apply from when a private benefit accrues.

17. In the event that Academy graduates are subject to HECS,

Defence points out that the Australian Defence Force Academy is

fully funded from the Defence Budget, and considers that

receipts from HECS paid by graduates should be a credit to

Defence Outlays. A similar approach should apply to Defence

Force personnel undergoing tertiary studies at other

institutions, the costs of which are met by Defence.

CABINET-I N-CONF IDENCE

[28]


ATTACHMENT I

67.

Department of the Prime Minis t er and Cabinet

18. The Department of the Prime Minister and Cabinet generally

supports the proposed Higher Education Contribution Scheme but has reservations about a number of specific aspects of the proposal. The scheme to exempt those on full AUSTUDY/ABSTUDY from the first year of HEC could be attractive to the target

groups and help participation rates of under-participating groups but we consider the scheme as it stands is too open-ended and its purpose open to misunderstanding leading to demands by other groups such as those on pensions/benefits for similar treatment. We are also concerned such a measure could undermine the Government's position that removal of up-front charges

together with AUSTUDY should be sufficient to satisfy equitable access concerns. We suggest instead that the impact of HECS on

participation be monitored in the same way as for HEAC and that remedial action be considered only when it is clear that some

groups have been disproportionately adversely affected.

19. In relation to the treatment of nurse education and TAFE

higher education courses we would like to see arrangements reviewed prior to the next triennium.

20. On the repayments side, we generally support the proposed regime but, subject to administrative feasibility, would prefer

a broader range of repayment options including optional higher PAYE repayment rates and the opportunity for students to make a discounted lump sum payment within a reasonable period of

completing their courses. We also suggest that consideration be given to pro rata repayments by people who have completed their studies and have elected to work part-time but who earn hourly

rates commensurate with those required in the Minister's proposals to make repayments.


[29]

CABI NET-I N-CONFI DENCE

ATTACHMENT I

68.

21. The Department recognises that the Wran Report has generated

expectations about improvements in AUSTUDY to provide greater access to higher education for people from financially and other disadvantaged backgrounds. However, the Department does not support an objective of increasing the coverage of AUSTUDY to 50

per cent of the student population, noting that without the associated measures to change the socio-economic mix of the

student population, such an objective bears no relation to need. We note that it is highly questionable whether the measures proposed to give effect to that objective will produce

increased participation in education of currently

under-represented groups. Noting that AUSTUDY expenditures will be growing rapidly in the foreseeable period, in line with the Government's education policies, the Department considers that

highest priority should be given to relaxing the personal income test and to improving the maximum rates of AUSTUDY for disadvantaged groups - particularly sole parents and the

long-term unemployed - where the existing rate structure is most likely to affect incentives to study.

22. The Social Justice Secretariat supports the view that, upon

introduction of a HEC, additional measures will be required to encourage greater access to higher education for people from

financially and other disadvantaged backgrounds. While noting that each of the measures proposed in the Submission (including the waiving of the HEC during the first year of study for

students who have undertaken Year 12 on full AUSTUDY or ABSTUDY) could contribute to this to varying degrees, the Secretariat also considers that highest priority should be given to

improving the maximum rates of AUSTUDY for disadvantaged groups - those groups identified above plus independent students.


[30]


ATTACHMENT I

69.

Department of Administrative Services

23. The estimates provided for site modifications for upgrading the computer capability relating to the Taxation resource

requirements (Attachment H of the Submission) are the Tax Office's estimates only and are subject to confirmation. It is

doubtful that the site modifications can be completed by 1 October 1988.

Australian Taxation Office

24. The comments of the Australian Taxation Office are covered

by a separate Cabinet Memorandum, No. 5925.

The Treasury

25. Treasury supports the objective of ensuring that students make a greater contribution to the cost of their higher

education in view of the significant private benefits that they

derive. For this reason it . supports the introduction of the

proposed Higher Education Contribution Scheme (HECS), although it does have reservations about particular aspects of the scheme

and related proposals.

The annual course charge proposed is a flat amount which does not take into account differences in the

costs of providing different courses, and will not

encourage students to differentiate on the basis of the

different costs of providing them.


[31]

CAB I NET-I N-CON Fl DENCE

ATTACHMENT I

70.

It is assumed that 15 per cent of students will opt to pay 'up front' and take advantage of the 15 per cent discount for early payment. To the extent that this

does not occur, the revenue clawback will be lower than

anticipated in the early years of HECS operation. This

could be reduced, and the net cost of the proposed

expansion in higher education funding lowered, by continuing the Higher Education Administration Charge (HEAC), at least in the first years of the new arrangements, and for HEAC to be treated as an instalment on HECS payments.

The hypothecation of HECS revenues into a Higher Education Trust Fund will further limit budgetary flexibility and for this reason is not supported.

The proposals to enrich student assistance payments -in addition to those advanced in the omnibus Submission

for the Employment, Education and Training portfolio -will add to the al~eady rapid growth in these payments in prospect resulting from, inter alia, increasing

school retention rates and the growth in higher education intakes.

The proposed long-term commitments to reach particular coverage targets for AUSTUDY are not supported as they will 'lock-in' future expenditure irrespective of

emerging expenditure priorities and the comparative future level of student welfare.

CABINET-I N-CON FIDENCE

[32]


ATTACHMENT I

71.

Finally, the proposed alignment of AUSTUDY rates with

adult UB rates for students aged 21 and over is not

supported on the grounds that the existing differential

reflects the substantial benefits, including higher income, which flow from participation in higher

education and which are not available as a result of time spent on unemployment benefits.

Department of the Arts. Sport. the Environment, Tourism and

Territories

26. The Department of the Arts, Sport, the Environment, Tourism

and Territories supports the recommendations of the submission,

subject to the following comments.

ACT ADMINISTRATION

27. Given the ACT TAPE has already introduced a new structure of

fees and charges, the proposal that higher education students

enrolled in TAPE institutioas be exempt from the scheme is

supported. The proposal that the Commonwealth enter into negotiations with each State/Territory government to develop appropriate future funding arrangements for TAPE generally,

including higher education places in TAPE, is also supported.

28. It is assumed that the proposal to maintain higher education grants from the Budget via States Grants legislation in real terms will also apply to institutions in the ACT on the same

basis although these are not funded through States Grants legislation. It is also assumed that the inclusion of Commonwealth-funded courses at the Canberra Institute of the

Arts in the coverage of the scheme applies to higher education

courses only at this institution.


[33]

CABI NET- IN-CONFI DENC E

ATTACHMENT I

72.

ARTS FILM AND CULTURAL HERITAGE DIVISION

29. The proposal appears to contain an anomaly affecting

students at the Australian Film, Television and Radio School.

30. The majority of the School's students undertake shorter term, intensive courses designed to upgrade existing skills.

The School operates such courses on a cost-recovery basis. As students in the courses are not undertaking formal

'post-graduate' training and the Minister (for Employment, Education and Training) does not approve the fee levels, the

exemption in paragraph 7{a) of Attachment A of the submission does not extend to them. Similarly, students in shorter courses

receive a certificate on completion. They are therefore not covered by the exemption on non-award courses in paragraph 7{b). They could therefore be subject to a double charge through fees and again through the levy. An exemption should be granted for students in courses where the institution charges fees on a cost-recovery basis.

31. The School has applied through the Minister for the Arts and

Territories to the Minister for Employment, Education and Training for status as a TAFE institution for the purposes of the Income Tax Assessment Act 1936. Students at TAFE are granted exemption under paragraph 11 of Attachment A.


[34]

CABI NET- IN-CONFIDENCE

ATTACHMENT I

73.

32. Attention is drawn to the Government•s recent decision on

income averaging for artists under the Income Tax Assessment Act

and possible implications for the application of the

income-based levy. In many cases, even where income averaging

applies, the incomes of artists (including actors) may fluctuate

over years above and below the threshold at which the levy

becomes payable. Any former student whose income moves above

and below the threshold over a period of years will be disadvantaged as their accumulated debt is increased by indexation at times when they lack the capacity to pay.

Indexation of a particular student•s accumulated debt should not

occur in a year or years in which there is no assessed capacity to pay.


[35]

CABINET -IN-CONFIDENCE Submission No . . S~l'lt

FOR CABINET Copy No. 45

Title

Minister

Purpose/Issues

Sensitivity /Criticism


rgency: Critical/significant dates

~onsultation : • Ministers/Depts

consulted



Cost

ESTABLISHING A HIGHER EDUCATION CONTRIBUTION SCHEME

The Hon J S Dawkins MP, Minister for Employment, Education and Training

To report on the results of consultations with relevant parties over the detail of proposals for student contributions to the cost of higher education, as required by CD 11302 of 16 June 1988. To seek Cabinet agreement to a Higher Education Contribution Scheme (HECS) involving direct contributions towards higher

ucation costs from individual beneficiaries with the ty to pay.

with CD 11302 of 16 June 1988 and with the established by the June 1988 National of the Australian Labor Party.

Substantial community support for the principle of direct contributions. Overall response mixed (Attachment D). User pays schemes opposed by students (Attachment E) and the ACTU (Attachment F). Other aspects supported by students and the ACTU. Mixed views in the working group of the Caucus Employment, Education and Training Committee (Attachment G).

Subject to decision on appropriate head of power: if taxation power, a HECS Tax Assessment Act and a HECS Act; if benefits to students power, a Higher Education (Benefits to Students) Act. Under either option, amendments to the existing Income Tax Assessment Act, the Fringe Benefits Assessment Act, and the current provisions of States Grants (Tertiary Education Assistance) legislation.

Urgent. Legislation for passage in the 1988 Budget session. The scheme is to apply~from 1 January 1989.

Finance; Prime Minister and Cabinet; Treasury; Australian Taxation Office; Attorney-General's; Office of Parliamentary Counsel; Arts, Sport, the Environment, Tourism and Territories; Defence; Administrative Services.

Submission lodged prior to receipt of consultation comments, which will be incorporated as a Co!rig~ndurn.

To be announced in the 1988-89 Budget context in conjunction with announcement of the Higher Education Development Plan for 1989-91.

Fin Yr ( 8 ~ 9 ~ sa.s Fin Yr (

(Administration costs - see Attachment H)

90 91 -s-8.8 )

Unless otherwise indicated, all figures in this Submission are in average 1989 prices.


CABINET-IN-CONFIDENCE •

[36]


2.

BACKGROUND

The Report of the Committee on Higher Education Funding,

chaired by the Hon Neville Wran AC, QC, was presented in

April 1988. The Committee recommended that the direct

beneficiaries of higher education (graduates. students and

employers) should contribute directly to the cost of higher

education. subject to their capacity to pay. It proposed an

integrated reform package including a contribution scheme

whereby students and graduates pay back some of their course

costs, through the tax system, if and when they have the

capacity to pay: better income support arrangements under

AUSTUDY: education and training levies for industry: and the

abolition of the Higher Education Administration Charge (HEAC).

2. In June 1988 the National Conference of the Australian

Labor Party called upon the Government to examine the most

effective way to establish new sources of funds for higher

education consistent with the principles of capacity to pay:

equality of access: greater needs-based income support:

increased industry contribution; and administrative simplicity.

3. In CD 11302 of 16 June 1988 Cabinet agreed that:

(a) proposals to raise additional funds for higher

education by a tax levy on high income earners were

more properly a matter for the Treasurer's

consideration in the context of his review of taxation;

(b) the issue of contri~utions by industry to higher

education would be addressed in the context of

measures announced in conjunction with the May

Economic Statement for tripartite negotiations over

industry contributions to education and training

generally; and

(c) the concept of student contributions to the cost of

their higher education be endorsed, consistent with

the principles established by the National Conference.

4. Cabinet agreed that I consult with relevant parties and

bring forward recommendations for funding the necessary growth

in higher education places .

• CABI NET-IN-CON FIDENCE

[37]


3 •

ISSUES FOR CONSIDERATION

5. Related submissions. the Higher Education Policy Statement

(No. 5890) and Higher Education Resources for 1989-91

Triennium. outline the Government's objectives for growth and

equity in higher education and the resources needed to begin

their implementation. Achievement of the Government's

objectives will require new sources of funding for higher

education to complement growth in budget expenditures.

6. A Higher Education Contribution Scheme (HECS) is proposed.

based on the framework recommended by the Wran Committee. but

incorporating modifications following consultations with

students (Attachment E. page 34) and the Australian council of

Trade Unions (Attachment F. page 39). and taking into account

the considerations of the Caucus Committee on Employment.

Education and Training (Attachment G. page 44).

7. The proposed HECS (Attachment A. page 7) contains the

following elements:

(a) an annual course charge of $1.800 for each year of

equivalent full-time study undertaken from 1 January

1989. with pro rata arrangements for part-time study;

(b) no requirement for payment until personal taxable

income reaches $22.000;

(C)

(d)

repayment of accumulated liability at a rate of 1 per

cent of personal taxable income for incomes of $22.000

to $24.999. 2 per cent for incomes of $25.000 to

$34.999 and 3 per cent for incomes of $35,000 or more;

a discount of 15 per cent if students choose to pay

their current course charge by a prescribed date after

notification of their liability;

(e) indexation arrangements to ensure fairness to those

affected and to maintain revenue in real terms;

(f) coverage to include all students enrolled in

Commonwealth-funded courses at higher education

institutions (including the Australian Defence Force

Academy. the National Institute of Dramatic Art. the

Australian Film. Television and Radio School and the

Canberra Institute of the Arts) from 1 January 1989

except for the categories of student listed at


[38]

CABINET-I N-CONFI DENCE

4.

Attachment A (page 9). I propose to provide for:

(i) exemptions for the first year of higher

education study for students who have

undertaken Year 12 or its equivalent on full

AUSTUDY or ABSTUDY benefits within the previous

two years;

(ii) a system of postgraduate scholarships (up to

15.000 in 1989. subject to annual review)

providing exemption from HECS liability and

incorporating an allocation of awards to assist

in the professional development of teachers;

(iii) a deferral of the scheme for students in basic

nurse education courses until the Commonwealth

fully funds such courses in 1993. or an earlier

date if requested by State governments; and

(iv) exclusion from the scheme of students

undertaking higher education courses in TAFE

institutions. with negotiations to be held with

State/Territory governments over future funding

arrangements for TAFE generally.

a. The scheme will ~e implemented jointly by the Department of

Employment. Education and Training (DEET) and the Australian

Taxation Office (ATO). Information collected from institutions

will be compatible with the regular statistical information

collected by DEET. ATO will _process all personal information

supplied by students. and arrange for collection of

contributions through the taxation system (including. where

appropriate. by PAYE arrangements). Students who choose to pay

up front will not need to have personal information supplied to

ATO. or to make payments through taxation.

9. It is essential that HECS revenues are seen to be used for

higher education purposes alone. I propose that a Higher

Education Trust Fund be established into which HECS revenue

will be appropriated. to be used specifically for meeting the

Government's growth and equity objectives in higher education

(Attachment A. page 12). Budget funding for additional places

would also be channelled by this fund.


[39]


5 .

10. The Government's equity strategy for higher education

requires that additional opportunities be made available to

students from disadvantaged backgrounds. Proposals for

enhancement of AUSTUDY and ABSTUDY arrangements in 1989 are put

forward in my portfolio new policy Submission. There is also a

need for a broad commitment to further expansion of AUSTUDY and

ABSTUDY as revenue becomes available. Details are at

Attachment C (page 23).

11. A uniform annual charge of $1.800 under HECS would mean an

increase of $300 over the Wran Committee's recommendation for

about 75 per cent of students. To retain HEAC as well

(currently $263) would draw intense opposition from students.

who already strongly oppose the charge. I propose that HEAC be

abolished from 1 January 1989.

FINANCIAL CONSIDERATIONS

12. The scheme will raise an estimated $40.3 million in

1988-89. $90.1 million in 1989-90 and $110.0 million in

1990-91. rising to $489.3 million in 2000-01 (Attachment B.

page 18). The abolition of HEAC would result in a net loss in

revenue to the Commonwealth of $73.7 million in 1988-89.

However. the adjustment to payment arrangements for higher

education operating grants. outlined in my Submission on Higher

Education Resources for 1989-91 Triennium. will more than

compensate for this loss of revenue. Net HEAC revenue loss is

estimated at $77.1 million i~ 1989-90 and $80.4 million in

1990-91. HECS will involve additional administrative costs to

ATO (at current prices) of $9.9 million in 1988-89. $8.5

million in 1989-90 and $8.8 million in 1990-91 (Attachment H.

page 56). Administrative costs to DEET are incorporated into

my Submission on Higher Education Resources for 1989-91

Triennium. which also seeks additional funds to recompense

institutions for their administrative costs in implementing

HECS.


[40]


6.

RECOMMENDATIONS

13. I recommend that Cabinet:

(a) note the outcome of consultations with various parties as

required by Cabinet Decision No.ll302 of 16 June 1988;

(b) agree that implementation of the Higher Education

Contribution Scheme proceed in 1989, as revised following

consultations and as set out in detail in Attachment A

(page 7);

(c) note that a decision is required on the appropriate heads

of power for implementation of the scheme (Attachment A,

page 13):

(d) agree that I make a statement at Budget time on further

enhancements to AUSTUDY and ABSTUDY, as proposed in

Attachment c (page 23):

(e) agree that the Higher Education Administration Charge be

abolished from 1 January 1989;

(f) agree to the additional resource requirements and

associated administration arrangements proposed in

Attachment H (page 56); and

(g) note that savings of approximately $3 million can be

achieved if the Control Data Australia offer described in

Attachment H is accepted.

22 July 1988 J S Dawkins


[41]

CABIN ET-I N-CONFIDENCE

ATTACHMENT A

7.

FEATURES OF THE PROPOSED HIGHER EDUCATION CONTRIBUTION SCHEME


The Committee on Higher Education Funding, chaired by Neville Wran, recommended that the individual beneficiaries and users of higher education should to be required to make a contribution towards the cost of their higher education if and when they have the capacity to do so. The Wran Committee argued that the current system relying mainly on public funding is inequitable because all taxpayers are required to meet most of the costs, irrespective of whether or not they directly benefit from higher education.

2. I propose that the rationale put forward by the Wran Committee be accepted, and that a Higher Education Contribution Scheme be established to apply to higher education study undertaken from 1 January 1989.

The Level of the Annual Course Charge

3. I propose that an annua~ course charge of $1,800 apply for each year of equivalent full-time study undertaken from 1 January 1989, with pro rata arrangements applying to part-time students according to the actual proportion of equivalent full-time load being undertaken.

The Level of the Income Threshold and the Rate of Repayment

4. I propose that:

(a) students and graduates be able to defer any payment of their annual course charge until such time as they have the personal capacity to pay (as measured by personal taxable income);

CABI NET-I N-CONFIDENCE

[42]


ATTACHMENT A

8.

(b) annual course charges accumulate as a tax debit until personal taxable incomes reach around the level of

average earnings of all workers (about $22,000); and

(c) payment of the accumulated tax debit commence at the

rate of one per cent of annual taxable income for

incomes of $22,000 to $24,999, rising to two per cent

for incomes of $25,000 to $34,999 and three per cent for incomes of $35,000 and above, with a pro rata

adjustment to the amounts payable for the half year ending 30 June 1989.

5. Repayment requirements at different levels of taxable income

are shown below.

Taxable income Proportion for Annual Weekly repayment payment equivalent

($) (%) ($) ($)

22,000 1 220 4.23 23,000 1 230 4.42 24,000 1 240 4.62 25,000 2 ~ 500 9.62 26,000 2 520 10.00 27,000 2 540 10.39 28,000 2 560 10.77 29,000 2 580 11.15 30,000 2 600 11.54 31,000 2 620 11.92 32,000 2 640 12.31 33,000 2 660 12.69 34,000 2 680 13.08 35,000 3 1050 20.19 36,000 3 1080 20.77 37,000 3 1110 21.35 38,000 3 1140 21.92 39,000 3 1170 22.50 40,000 3 1200 23.08


[43]


ATTACHMENT A

9.

A Discount for Voluntary Up Front Payment

6. It is proposed that HECS include a discount of 15 per cent off the course charge if people elect to pay the full charge by a prescribed date after they have been notified of the charge. A discount will not apply to people who pay through the tax system.

Coverage of the Higher Education Contribution Scheme

7. It is proposed that HECS cover all higher education students and study undertaken from 1 January 1989, except for:

(a) fee-paying students enrolled in postgraduate courses for which fees of at least 20 per cent of course costs have been approved by the Minister for Employment, Education and Training;

(b) adult education and continuing education students and students in non-award courses;

(c) all students in approved bridging and supplementary courses that are additional to award course load;

(d) overseas students subject to payment of the Overseas Student Charge, full fees or who are subsidised under a foreign aid program;

(e) students undertaking industrial experience courses, in respect of that proportion of their course spent in industry; and

(f) other students as identified in paragraphs 8 - 11 below.

CABI NET-I N-CONFI DENCE

[44]

CABINET- IN-CONFIDENCE

ATTACHMENT A

10.

8. In order to encourage an increased transfer of disadvantaged students from school to higher education, I propose that those students who have undertaken Year 12 (or its equivalent) on full

AUSTUDY or ABSTUDY benefits within the two previous years be exempted from HECS for the first year of their higher education

study (whether full-time or part-time).

9. To encourage participation in postgraduate courses, especially those relevant to the national research effort, I am proposing to establish a system of postgraduate scholarships providing exemption from HECS liability for a given year of study. Subject to availability, students could be on such scholarships for more than one year. These scholarships (up to 15,000 in 1989, subject to annual review) will be allocated mainly by institutions in accordance with Government guidelines. I propose to incorporate under this arrangement a special allocation of awards to assist in the professional development of teachers.

10. The Commonwealth will not assume full responsibility for the funding of basic nurse education until 1993. Therefore, it is proposed that students in basic nurse education courses be exempt from HECS until 1993, unless State and Territory

governments request that the Commonwealth collect the contribution on their behalf at an earlier date. In the latter case there would be appropriate reimbursements to the States and Territories in recognition of their contribution to the funding of these courses.


[45]


ATTACHMENT A

11.

11. I propose that higher education students enrolled in TAFE

institutions be exempt from the scheme, and that the Commonwealth enter into negotiations with each State/Territory government to develop appropriate future funding arrangements for TAFE generally, including higher education places in TAFE.

12. With the above exceptions, HECS will apply to all students

enrolled in Commonwealth-funded courses in higher education institutions (including the Australian Defence Force Academy, the National Institute of Dramatic Art, the Australian Film, Television and Radio School and the Canberra Institute of the Arts) from 1 January 1989.

13. I note that under the proposed arrangements it will be possible for students from New Zealand who study at an Australian higher education institution to avoid payment of a liability under HECS if they subsequently leave Australia. Of course, some New Zealanders already benefit from the availability of free higher education in this country. I propose to keep this situation under review.

~

Indexation to Maintain the Real Value of the Annual Course Charge. the Accumulated Debit and the Income Thresholds

14. The $1,800 course charge per equivalent full-time student load is to apply for study undertaken in 1989. I propose that this amount be indexed annually on 1 January each year from 1990

according to movements in the combined index used to supplement higher education operating grants for the 12 month period ending on 30 September of the previous year.

CA BINET-IN-CONFIDENCE

[46]

CABINET-IN-CON FI DENCE

ATTACHMENT A

12.

15. I propose that the amount owed as the accumulated debit be indexed annually with effect from 1 July of each year from 1990 according to movements in the Consumer Price Index (CPI) for the 12 month period ending 31 March of the same year. The amount of the accumulated debit outstanding to be indexed each year will be the balance as at 1 January of that year.

16. The income thresholds of $22,000, $25,000 and $35,000 relate to the 1988-89 financial year. I propose that these thresholds be indexed annually on 1 July of each year, commencing on 1 July 1989, according to movements in the CPI for the 12 month period ending 31 March of that year.

A Higher Education Trust Fund

17. I propose· that a Higher Education Trust Fund be established on 1 January 1989 as part of the Consolidated Revenue Fund, and that HECS revenue be appropriated to this trust fund for the purpose of expanding Australia's higher education system. The Government has made a commitment to at least maintain the current level of Commonweal~h expenditure on higher education in real terms, and it is essential that HECS revenue is (and is

seen to be) spent on expanding higher education. I propose that the higher education grants from the Budget that are provided to higher education institutions via States Grants legislation be maintained in real terms, and that additional places be funded from the trust fund, whether financed by HECS revenue or further budget subvention.


[47]


ATTACHMENT A

13.

The Constitutional Basis for the Higher Education Contribution

Scheme

18. There are two possible constitutional bases for implementation of the scheme. I propose that implementation oe effected either:

{a) under the Commonwealth's 'taxation' head of power (s.Sl(ii) of the Constitution), requiring a taxation law or laws in conjunction with appropriate prov1s1ons under States Grants (Tertiary Education Assistance) legislation authorised by s.96 of the Constitution; or

(b) under the 'benefits to students' head of power (s.Sl(xxiiiA) of the Constitution), requiring a Higher Education (Benefits to Students) Act together with appropriate provisions of the relevant States Grants legislation.

Administration and Collection of Payment Arrangements

' 19. I propose that students have two choices when enrolling or re-enrolling in a higher education course from 1 January 1989. These are that:

{a) they can op~ to defer any payment of HECS and to allow the Australian Taxation Office (ATO) to commence

collection of their liability if and when their taxable income exceeds the income threshold. Under this option students would be required to provide all relevant information necessary to enable the ATO to collect their contributions; or


[48]


ATTACHMENT A

14.

(b) they can choose instead to pay up front for any semester, with a discount of 15 per cent, and undertake to pay the lump sum by a prescribed date after

notification of the amount of their course charge for that semester.

20. Students who choose to pay up front by the prescribed date will not need to provide information for the ATO. However, it is also proposed that any such students who fail to pay by the prescribed date will then be required to provide the information necessary for the ATO to collect their contribution. Appropriate sanctions will apply in cases of refusal.

21. Where students agree to make repayments via the ATO, higher

education institutions will be required to collect and provide such personal information as is needed for the processing of payments by the ATO. The ATO will be the only Government agency that will have access to any personal information, and normal taxation confidentiality and secrecy provisions will apply.

22. For payments made through the taxation system, it is proposed that an appropriate augmentation of the income tax PAYE system be implemented from 1 July 1989, if practicable, and that PAYE taxation payments be applied first against HECS liabilities

(see Attachment B of the ATO Cabinet Memorandum "Establishing a Higher Education Contribution Scheme").


[49]


ATTACHMENT A

15.

23. The effective date for establishing the HECS liability of a student will be related to the census date applying to the

regular collection of higher education statistics, administered by the Department of Employment, Education and Training (DEET). To facilitate the implementation of the scheme, the census date for this collection will be brought forward by one month in each semester to 31 March and 31 August from 1989. Students who do not withdraw before those dates will incur a HECS liability for the relevant semester.

Notification to Students and Appeal Provisions

24. It is proposed that higher education institutions notify all students of their liability under HECS for each semester of study. Those students who agree to pay up front will be notified of their liability for the semester as soon as possible after their final enrolment status (as at the census date) is known. Other students will also be notified by institutions and the information passed to the ATO so that the amount owed for the semester can be recorded on their accumulated tax debit. These arrangements will impose additional administrative costs

~

on institutions, which I am proposing that the Government should recognise and reimburse. Resources for this purpose are sought in the Submission on Higher Education Resources for 1989-91 Triennium.

25. Under these arrangements higher education institutions will be responsible for calculating the amount owed for each semester for all students. Any appeals relating to these amounts will need to be resolved by the institutions. I intend to appoint an ombudsman to handle appeals based on special circumstances. .- --


[50]


ATTACHMENT A

16.

26. The ATO will be responsible for subsequent notifications to those students who have chosen to make their payments through the tax system. These notifications would include advice of the

amounts paid and outstanding, and of relevant indexation

adjustments. People would be entitled to object against the

recorded amounts of their accumulated tax debits and payment liabilities within 60 days of notification by the Commissioner of Taxation. Disallowance or partial disallowance of the objection would give rise to the right of appeal to the Administrative Appeals Tribunal (AAT).

Debt Management

27. I propose that:

(a) the accumulated debit be fully waived upon death;

(b) persons leaving the country retain their debit liabilities for further repayment on return;

(c) special hardship provisions apply, at the discretion of the Commissioner of Taxation, but relate to the deferment of payment only; and

(d) appropriate penalties apply for late payment of HECS.


[51]


ATTACHMENT A

17.

Tax Deductibility

28. Under s.51 of the Income Tax Assessment Act self-education expenses in excess of $250 are deductible if there is suff~cient connection between the studies being undertaken and the derivation of assessable income. While most students would not be able to claim under this provision, those who are in

full-time employment with incomes over the threshold and who are studying in a field relevant to their employment may be able to claim a deduction for their HECS liability •. By this means up to 15 per cent of students could be able to reduce their HECS liability by the order of 35 to 49 per cent, depending on taxable income. I therefore propose that the Income Tax Assessment Act be amended to exclude HECS payments as allowable tax deductions, including payments made by an employer or third party on behalf of a student.

29. A principle of fringe benefits tax is that, to avoid double taxation, the taxable value of a benefit is reduced to the extent to which the employer is denied a deduction for the cost of the benefit. Consistent with that principle, I propose that

~

the Fringe Benefits Assessment Act be amended to reduce the value of non-deductible HECS payments made by employers.


[52]


ATTACHMENT B

18.

TABLE 1: PROJECTED REVENUE INTO THE CONSOLIDATED REVENUE FUND FROM THE HIGHER EDUCATION CONTRIBUTION SCHEME, 1988-89 TO 2000-01

Fiscal Higher Education Contribution Scheme HEAC Net Revenue Year Revenue to Consolidat

Gross Revenue Forgone Net Forgone Revenue Fun Revenue from Exemptions Revenue

(a) ($ million, average 1989 prices)

15\ PAY UP FRONT WITH DISCOUNT, 85\ PAY THROUGH THE TAX SYSTEM

1988-89 44.4 -4.1 ·40. 3 -73.7 -33.4 1989-90 99.5 -9.4 90.1 -77.1 13.0 1990-91 123.4 -13.4 110.0 -80.4 29.6 1991-92 165.9 -18.6 147.3 -83.2 64.1 1992-93 217.0 -23.1 193.9 -85.4 108.5 1993-94 264.9 -27.2 . 237.7 -87.1 150.6 1994-95 309.9 -31.2 278.7 -88.6 190.1 1995-96 357.5 -33.9 323.6 -90.0 233.6 1996-97 394.5 -35.2 359.3 -91.4 267.9 1997-98 432.4 -37.8 394.6 -93.0 301.6 1998-99 473.1 -41.3 431.8 -94.9 336.9 1999-00 504.2 -43.2 461.0 -97.0 364.0 2000-01 535.7 -46.4 489.3 -99.5 389.8

TOTAL 3922.4 -364.8 3557.6 -1141.3 2416.3


1988-89 55.3 -5.7 49.6 -73.7 -24.1 1989-90 121.4 -13.1 108.3 -77.1 31.2 1990-91 145.3 -17.1 128.2 -80.4 47.8 1991-92 186.7 -22.1 164.6 -83.2 81.4 1992-93 235.9 -25.5 210.4 -85.4 125.0 1993-94 281.8 -28.5 253.3 -87.1 166.2 1994-95 324.8 -32.2 292.6 -88.6 204.0 1995-96 370.4 -34.8 335.6 -90.0 245.6 1996-97 405.8 -36.0 369.8 -91.4 278.4 1997-98 442.2 -38.5 403.7 -93.0 310.7 1998-99 481.3 -41.7 439.6 -94.9 344.7 1999-00 511.5 -43.6 467.9 -97.0 370.9 2000-01 542.2 -46.6 4-95.6 -99.5 396.1

-TOTAL 4104.6 -385.4 3.719. 2 -1141.3 2577.9

(a) See Table 2.


[53]

CABI N ET-1 N-CON F I DENCE

ATTACHMENT B

19.

TABLE 2: REVENUE FORGONE FROM THE CONSOLIDATED REVENUE FUND BECAUSE OF EXEMPTIONS FROM THE -HIGHER EDUCATION CONTRIBUTION SCHEME 1988-89 TO 2000-01

Fiscal Undergraduate First Postgraduate Basic Nurse Total Year Year Free Places Scholarships Education Exemptions

(up to 1993) ($ million, average 1989 prices)


1988-89 -1.5 -1.3 -1.3 -4.1 1989-90 -2.9 -3.5 -3.0 -9.4 1990-91 -3.6 -5.2 -4.6 -13.4 1991-92 -5.6 -6.4 -6.6 -18.6 1992-93 -7.3 -8.5 -7.3 -23.1 1993-94 -8.9 -10.3 -8.0 -27.2 1994-95 -10.1 -12.0 -9.1 -31.2 1995-96 -11.0 -13.6 -9.3 -33.9 1996-97 -12.1 -14.7 -8.4 -35.2 1997-98 -13.9 -16.0 -7.9 -37.8 1998-99 -16.4 -17.3 -7.6 -41.3 1999-00 -18.5 -18.2 -6.5 -43.2 2000-01 -21.4 -19.5 -5.5 -46.4

TOTAL -133.2 -146.5 -85.1 -364.8


1988-89 -2.1 -1.8 -1.8 -5.7 1989-90 -4.3 -4.6 -4.2 -13.1 1990-91 -4.9 -6.2 -6.0 -17.1 1991-92 -6.8 -7.4 -7.9 -22.1 1992-93 -8.4 -9.3 -7.8 -25.5 1993-94 -9.9 -11.0 -7.6 -28.5 1994-95 -11.0 -12.6 -8.6 -32.2 1995-96 -11.9 -14.1 -8.8 -34.8 1996-97 -12.9 -15.2 -7.9 -36.0 1997-98 -14.6 -16.4 -7.5 -38.5 1998-99 -17.0 -17.6 -7.1 -41.7 1999-00 -19.0 -18.5 -6.1 -43.6 2000-01 -21.7 -19.7 -5.2 -46.6

TOTAL -144.5 -154.4 -86.5 -385.4


[54]

CABINET-I N-CONFIDENCE ATTACHMENT B

20.

PROJECTED REVENUE ESTIMATES: NOTES AND ASSUMPTIONS

In calculating the estimates of HECS gross revenue (Table 1) it

has been assumed that:

(a) HECS liability applies to all higher education

students other than:

(i) overseas students. whether full-fee paying or

subsidised;

(ii) non-award and bridging course students;

(iii) Commonwealth-funded higher education students

enrolled in TAFE institutions: and

(iv) students enrolled in fee-paying postgraduate

courses:

(b) the average annual growth in the number of higher

education students liable for HECS is 2.7 per cent.

broadly consistent with the growth objectives

proposed in the Government's Higher Education Policy

Statement:

(c) there will be relative stability in the current

proportions of full-time (60 per cent) and part-time

(40 per cent) students over the period to 2001:

(d) a uniform debit liability of $1.800 per year of

equivalent full-time study applies from 1989. with

first payments being made in 1988-89;

(e) an income threshold of $22,000 applies for the

1988-89 financial year (indexed thereafter):

(f) the repayment rates applying are 1 per cent of

taxable income for incomes of $22.000 to $24.999. 2

per cent for incomes of $25.000 to $34.999, and 3 per

cent for incomes of $35,000 and above:


[55]

CABINET- IN-CONF IDENCE

ATTACHMENT B

21.

(g) a discount of 15 per cent for up-front payment

applies;

(h) the income profile of graduates is consistent with

data from the ABS Income Survey for 1986 and various

population census data.

2. Students opting to pay up front are assumed to pay in the

semester in which they are studying. Two sets of projections

are shown. The first assumes that a total of 15 per cent of

students opt to pay up front with a discount. and the second

that 20 per cent choose this option. Included in this group

are those students with current incomes of $35.000 or more

(about 4 per cent of total students). all of whom are assumed

to pay up front.

3. The estimated net revenue loss from the abolition of the

Higher Education Administration Charge (HEAC) allows both for

projected growth in student numbers and offsets for HEAC

reimbursements to eligible students.

4. In estimating the revenue forgone as a result of

exemptions from HECS (Table ~) it has been assumed that:

(a) exemptions will apply for the first year of higher

education study for all students in receipt of full

AUSTUDY or ABSTUDY benefits in Year 12 (or

equivalent) who proceed to study in a higher

education institution within two years. For revenue

purposes it has been assumed that all such students

will be enrolled on a full-time basis;


[56]


ATTACHMENT B

22.

(b) an annual provision of 15,000 postgraduate

scholarships will be made, to be allocated by

institutions in accordance with Government

guidelines. These scholarships would provide

exemption from HECS liability for one year of

postgraduate study (with the possibility of continued

exemption, subject to the annual limit). All

scholarships are assumed to be for full-time

students. although when implemented some part-time

students may be eligible;

(c) all students undertaking basic nurse education

courses in higher education will be exempt from HECS

liability in the period 1989 to 1992. The estimated

numbers involved are 15,300 students in 1989, rising

to 21,100 in 1992. Students in basic nurse education

courses would become liable for HECS from 1 January

1993, when the Commonwealth assumes full funding

responsibility for these courses.


[57]

CABINET- IN-CONFIDENCE

ATTACHMENT C

23.

ENHANCING STUDENT INCOME SUPPORT

The Position of the Committee on Higher Education Funding

In recommending that the individual users and beneficiaries of

higher education should be required to make a contribution to

the cost of higher education in the interests of a fairer

system of higher education in Australia. the Committee also

recommended a package of reforms aimed at greater access to

higher education for people from financially and other

disadvantaged backgrounds.

2. In particular. the Committee recommended a package of

initiatives to enhance th~ AUSTUDY and ABSTUDY schemes that

focussed on:

(a) removing the disincentive to educational participation

by students from low income situations who are aged 21

years or more. arising from the fact that AUSTUDY and

ABSTUDY rates are currently less than the unemployment

benefit; and

(b) modifications to the income test and other changes to

increase the level of assistance available to those

students presently excluded from full allowances.

3. The Committee recommended that full implementation of

these initiatives should occur over the next decade or so to

ensure that the coverage of student income support is increased

from the current level of around 43 per cent to at least so per

cent of the full-time student body in higher education by the

turn of the century. The long time period for implementation

reflects the high cost of these proposals.


[58]

CABI NET-I N-CON FI DENCE

ATTACHMENT C

24.

Community Response

4. There is strong and widespread support for these aspects

of the Committee's proposals. In particular. student support

for improved equity arrangements. including enhanced student

income support. is strong. Moreover. any opposition to the

introduction of a graduate/student contribution scheme will be

considerably reduc~d if it is accompanied by enhanced support

for disadvantaged students. and people can clearly see that the

contributions from the relatively privileged are being used to

finance enhanced assistance for the less privileged.

The Government's Position

5. The Government's objectives for growth and equity in

higher education. as spelt out in the Higher Education Policy

Statement. necessitate the enhancement of the AUSTUDY and

ABSTUDY schemes. Furthermore. the community response to the

proposals of the Committee on Higher Education Funding has been

such that the introduction of the Higher Education Contribution

Scheme will need to be accompanied by improved student income

support arrangements.

6. AUSTUDY and ABSTUDY are both integrated schemes operating

to assist students across different sectors of education. Any

enhancement will. therefore. benefit students in schools and

TAFE as well as those in higher education.

7. Having considered the budgetary implications of fully

implementing proposals along the lines of those recommended by

the Wran Committee. I agree with their view that this

implementation must necessarily occur over a time frame of at

least 10 years. For the reasons just noted , however. I believe


[59]

CABINET- IN-CONFI DENCE

ATTACHMENT C

25.

that a definitive statement of intent by the Government

outlining the nature and broad timing of further planned

improvements to student income support should be an integral

component of any Government announcements of the introduction

of a Higher Education Contribution Scheme.

8. I propose to make such a statement in the 1988-89 Budget

context. if HECS is also announced at that time. which spells

out:

(a) the commencement in 1989 of enhanced support for

disadvantaged students aged 21 years and over and a

doubling of the personal income test free threshold

from $2.000 to $4.000 (subject to endorsement of these

proposals in the l9H8-89 Budget):

(b) the introduction in 1990 of changes to the rates at

which the level of allowance is reduced as income

increases above the cut-off point for eligibility for

full allowances. the marginal adjusted family income

(MAFI). which will tocus significant additional

assistance on students not on full allowances but from

families whose incomes are at or below average weekly

earnings: and

(c) an intention. subject to future budget considerations.

to progressively implement a further package of

AUSTUDY/ABSTUDY initiatives to be fully in place by

the year 2000 that is aimed at:


[60]


ATTACHMENT C

26.

(i) increasing AUSTUDY/ABSTUDY coveraga to at least

so per cent of the full-time higher education

student body, but in a way that targets

assistance to families at or under average

earnings, rather than to higher income families;

(ii) increasing the coverage of AUSTUDY so that the

proportion of all higher education students

receiving maximum allowances is raised from the

current level of around 22 per cent (or 56 per

cent of recipients) to at least 25 per cent; and

(iii) progressive extension of the new adult rates to

apply to all other AUSTUDY/ABSTUDY students

aged 21 years and over.

Immediate Action for 1989

9. In my portfolio 1988-89 new policy submission, I have

proposed that early action on improving AUSTUDY and ABSTUDY

should be directed at:

(a) the introduction from 1 January 1989 of an adult rate

of AUSTUDY/ABSTUDY allowances that is equivalent to

the adult unemployment benefit rate, for certain

disadvantaged students aged 21 years and over. The

groups are:

(i) single Aboriginal students with no dependants;

(ii) single migrants with no dependants who are

undertaking special English courses;

CAB I NET-I N-CON Fl DENCE

[61]

)

CABINET -I N-CONFI DENCE

ATTACHMENT C

27.

(iii) single long-term (that is, 6 out of the last

9 months) unemployment benefit recipients or

recipients of other Social Security pensions

and benefits who have no dependants:

(iv) married students with a dependent spouse and/or

dependent children: and

(v) single students with dependent children: and

(b) doubling, from 1 January 1989, the personal income

test free level from $2,000 to $4,000 under AUSTUDY

to enable low income students to increase their

personal earnings without loss of allowance.

10. The estimated program costs of these proposals are shown

below.

1988-89 1989-90 1990-91 1991-92

Adult rate of allowance for disadvantaged students aged 21 years and over

AUSTUDY ($ million) 3.75 8.25 8.58 9.05 ABSTUDY ($ million) 5.24 11.73 12.90 14.19

Sub-Total ($ million) 8.99 19.98 21.48 23.24

Increasing the Personal Income Test Free Level to ~41000

AUSTUDY ($ million) 5.55 13.65 14.48 15.36 ABSTUDY ($ million)

Sub-Total ($ million) 5.55 13.65 14.48 15.36

TOTAL ($ million) 14.54 33.63 35.96 38.60


[62]


ATTACHMENT C

28.

Increased Support for Families with Incomes at or below Average

Annual Earnings in 1990

11. I also propose to announce, in the 1988-89 Budget context,

a further package of assistance aimed at families with

dependent students aged 16 or more and in full-time study,

whose family income is below the level of average annual

earnings of all workers, which is currently $21,500. I propose

that this package commence on 1 January 1990.

12. This proposal involves the introduction of a progressive

abatement rate to replace the current 1 in 4 abatement rate.

At the moment those whose income exceeds the cut-off point (or

the MAFI) for eligibility for full allowances (which will be

$16,950 in 1989) have their allowances reduced by $2.50 for

every additional $10 of income.

13. The proposal involves a progressive abatement rate in the

parental income test of:

(a) 1 in 10 from the ~I to 1.25 times the MAFI:

(b) 1 in 3 from 1."25 times the MAFI to 3.5 times the

MAFI: and

(c) 1 in 2 beyond 3.5 times the MAFI.

14. In the case of families with one student aged 16 or more

and in full-time education this means that:

(a) full allowances are paid up to parental incomes of

$16,950:


[63]


ATTACHMENT C

29.

(b) the allowance would be reduced by $1 for each

additional $10 of parental income for incomes between

$16,950 and $21,200;

(c) the allowance would be reduced by $1 for each

additional $3 of parental income for incomes between

$21,200 and $59,350; and

(d) the allowance would be reduced by $1 for each

additional $2 of parental income for incomes in

excess of $59,350.

15. Examples of this progressive abatement rate are shown

below:

Family income Additional annual assistance because of the progressive abatement rate

($)

18,000 20,000 22,000 24.000 26,000 28,000 30,000

1 dependent AUSTUDY student. no other dependent children

($)

157 457-570 404 237

70 -96

1 dependent AUSTUDY student, 2 other dependent children

($)

On full Allowance On full Allowance

202 502 545 378 212

16. The increased assistance to lower income families is

largely financed by a redistribution away from higher income

families. The additional program costs are shown below.

Introduction of a 1988-89 1989-90 1990-91 1991-92 progressive abatement rate in 1990 ($ million) 1.5 3.1 3.3


[64]


ATTACHMENT C

30.

The Full Income support Enhancement Package to be Implemented

by 2000

17. The ability of the Government to progressively implement a

long-term package will require detailed examination in future

budget contexts, after monitoring the revenue that is generated

from the Higher Education Contribution Scheme. It is, however,

important that an "in principle" commitment is made to further

improvements in student income support at the time of the

announcement of HECS. I propose to keep any such announcement

for initiatives beyond 1989 and 1990 to a broad level, along

the lines indicated in paragraph 8.

18. For information, such a commitment would need to involve:

(a) progressive real increases in the MAFI to increase

the number who receive the maximum rates of

allowance; and

(b) progressive increases in the AUSTUDY and ABSTUDY

allowance rates for all those aged 21 or more and not

covered by the proposed 1989 reforms, to ensure that

all students aged 21 or more are on the new adult

rates by 2000.

19. such reforms could be implemented in four steps, as shown

below for illustrative purposes:

(a) Step 1 in 1991

(i) increase the MAFI by $500 in real terms over and

above indexation: and

(ii) close the gap between the most disadvantaged

students aged 21 years or more assisted in 1989

and other assisted students aged 21 years or

more by 25 per cent: .


[65]


ATTACHMENT C

31.

(b) Step 2 in 1994

(i) increase the MAFI by a further $500 in real

terms over and above indexation: and



and other assisted students aged 21 or more by a

further 25 per cent:

(c) Step 3 in 1997

(i) increase the MAFI by a further $550 in real

terms over and above indexation: and



and other assisted students aged 21 or more by a

further 25 per cent: and

(d) Step 4 in 1999

(i) increase the MAFI by a further $1,000 in real

terms over and above indexation; and

(ii) adopt the same rates for all assisted students

aged 21 years or more.

20. The additional program ~osts of these steps are shown

· below:

1991 1994 1997 1999

Increasing MAFI ($ million) 14.5 31.2 49.9 84.0

Alignment of AUSTUDY 21+ rates with UB 21+ rates ($ million) 13.0 28.0 44.4 65.1

TOTAL ($ million) 27.5 59.2 94.3 149.1

CA BINET-I N-CONFIDENCE

[66]

CABINET-IN-CONF IDENCE

ATTACHMENT D

32.

OVERALL COMMUNITY RESPONSES

There have been a variety of responses to the proposals contained in the Report of the Committee on Higher Education Funding (the Wran Committee), released in April 1988. Likewise,

there has been a mixed reaction to the changes to the Education Policy platform of the Australian Labor Party endorsed by the

Party's National Conference in June 1988. A brief summary of community responses is given below.

2. A number of public opinion polls have been conducted on the merits of the Wran Committee's proposals, with widely differing results according to the sample used, the questions asked and the sponsoring body. However, the most significant feature of the more reliable polls has been the clear view of most Australians that students, as major beneficiaries of higher education, should pay at least part of the cost of their courses. This principle - supported, it would seem, by about two in every three Australians - was at the heart of the

Committee's proposal that tQe major source of funding required to expand higher education should be the beneficiaries themselves rather than taxpayers generally.

3. Reactions from representatives of the Australian Vice-Chancellors' Committee (AVCC) and the Australian Committee

of Directors and Principals in Advanced Education (ACDP) have been generally constructive and supportive. While noting their preference for arrangements in which the Government would maintain its current spending on higher education as a proportion of GDP, the representatives have indicated that the Wran Committee proposals are both feasible and the least


[67]


ATTACHMENT D

33.

inequitable of proposals for supplementary sources of funds. They have also advised their view that institutions would be willing to co-operate in implementing the proposals. Their primary concerns are to ensure that public funding of higher education is at least maintained at existing levels in real terms, and that revenue from the contribution scheme is used solely for the purpose of funding higher education.

4. There has also been strong support from employer representatives for the principle of a student contribution towards the cost of higher education. Some groups have suggested that up-front fees would be an appropriate arrangement. In general, employers have net supported the alternative of providing supplementary higher education funding through increases in the general taxation rate. While recognising the need for increased business contributions to

education and training generally, employer representatives have expressed reservations about compulsory industry levies.

5. Opposition to proposals ~for direct contributions by graduates and students has been expressed by the National Union of Students (NUS) and other student organisations (Attachment E. page 34), by the Australian Council of Trade Unions (ACTU) and education unions (Attachment F, page 39), and by some sections of the Australian Labor Party (Attachment G, page 44).


[68]

CABINET-I N-CON FI DENCE

ATTACHMENT E

34.

STUDENT CONSULTATIONS ON HIGHER EDUCATION FUNDING

The Consultation Process

In accordance with the ALP National Conference resolution on

higher education funding, consultations with student

organisations took place in the period 20 June to 12 July 1988.

2. Mr Mark Burford was appointed to · represent the Minister

for Employment, Education and Training. He met with the

National Union of Students (NUS), the Council of Australian

Postgraduate Associations (CAPA), and elected campus student

representatives from all States. City and regional campuses

were represented. In addition, di~cussions with campus student

financial advisers were held. Student opinion was sought on

the proposals of the Committee on Higher Education Funding (the

Wran Committee) for a Higher Education Contribution Scheme

(HECS), and on alternatives and modifications to the

Committee's proposals.

3. In general, while

the Government remains

continue to be stated

tensiQn and concern at the motives of

and firm opposition to HECS will

by students, the meetings brought forward

genuine, constructive criticisms and contributions.

Overall Student Views

4. Student organisations oppose HECS as they oppose all "user

pays" schemes. They see it as equivalent to a system of up

front fees and loans, setting up a financial disincentive to

participation in higher education, particularly for those from

disadvantaged backgrounds. They believe as a matter of

principle that higher education should be provided by

Government without direct charge to individuals . .


[69]


ATTACHMENT E

35.

s. In addition. many argue that employers are major

beneficiaries of higher education and should make a

contribution accordingly, especially if graduates/students are

expected to.

6. Beyond the formal position of student representatives

there are indications that the proposals of the Wran Committee

have support amongst some students. or that at least they will

not be strongly resisted by all students.

7. While there is widespread support for the Government's

higher education growth objectives, concern remains that, in

practice, they will not be adequately supported by Government

funding and that growth will be unbalanced toward technology

and business oriented courses.

a. The skewed social mix of higher education is acknowledged,

and measures to improve access for disadvantaged and marginal

groups are sought. The AUSTUDY reforms proposed by the

Committee are seen as being on the right track and necessary as

part of an equity strategy. ,However. they are viewed as

insufficient and too gradual. Detailed proposals for major

AUSTUDY reform were put forward.

9. In addition, many argue that student financial support is

only one element needed in a package to promote equity in

higher education - entry level reforms. on-campus student

support and school Tevel reforms are also required.

10. The adequacy of the Committee's assumptions and research

is questioned - hence. the students consistently argue for the

decision on HECS to be delayed for 12 months pending further

investigation and consultation.


[70]


ATTACHMENT E

36.

11. Alternatives to HECS were discussed, including the raising

of an industry levy, a tax surcharge on higher income earners

and the deferral of proposed tax cuts. Student representatives

support these alternatives. However, little in the way of

concrete proposals has come forward.

Detailed Views on the Committee on Higher Education Funding

Proposals

12. HECS is generally regarded as the 11 least worst .. of the

graduate/student contribution options, although some support

for a true 11 tax" on higher income earning graduates has shown

up.

13. Detailed criticisms of the Committee's proposals were made

during the consultations. Many of these can be addressed

within the framework of HECS. While modification of the

Committee's proposals will not end student opposition to HECS,

some of the major doubts may be eased.

14. The views put forward mQst frequently by students are

summarised below:

(a) the 2 per cent debit pay back rate was considered too

high for those graduates earning just above the

threshold of $21,500:

(b) the threshold was thought to be too low, although

there was some recognition that this problem may be

partially eased by introducing a graded pay back rate:

(c) many argued that the special financial circumstances

of recent graduates should be taken into account when

setting the threshold and payment rate - eg newborn . dependants, housing loans and other costs commonly

faced by t¥AB'l~~T~ ~ - ~c! age group:

[71]


ATTACHMENT E

37.

(d) the setting of variable charges on the basis of

course costs was often criticised. A single average

yearly charge would probably be favoured:

(e) the varied total charge resulting from different

course lengths caused many to argue for an overall

maximum charge:

(f) discounted or enforced up front payments were opposed:

(g) the proposal to maintain the graduate debit in real

terms caused much concern. However. no consistent

modification was put forward. Some argued that the

debt should remain constant in nominal dollars. while

others proposed an indexation factor tied to earnings

growth rather than the CPI:

(h) the recommendation to exempt postgraduate research

students from HECS was welcomed. However. it was

argued that similar reasoning should apply to

coursework postgraQuates. including those taking

postgraduate diplomas. The possible disincentive for

retraining and skills upgrading. especially for

teachers and other public sector workers. was often

raised:

(i) the proposed abolition of the Higher Education

Administration Charge (HEAC) was unanimously

applauded:

(j) widespread support exists for the continuation and

growth of the Special Assistance for Students (SAS)

program: and

. (k) the establishment of a higher education trust fund

was suppor CA% NET-I N-CONFI DENCE

[72]

CABIN ET-IN-CONFIDENCE

ATTACHMENT E

38.

A Reform Package for Growth, Access and Equity in Higher

Education

15. Some of the student concerns can be met within the

framework proposed by the Wran Committee by modifying HECS to

take into account problems raised and clearly linking the

graduate/student contribution to a package of reforms for

growth, access and equity in higher education. Such a package

would include:

(a) confirmation and further explanation of the

Government's growth objectives:

(b) substantial improvement to AUSTUDY:

(c) enhancement of entry level schemes for groups

traditionally under-represented in higher education.

along with the development of on-campus support ~or

these groups:

(d) linking of the Gov~rnment•s higher education.

training and school reforms: and

(e) commitment to an industry higher education and

training contribution alongside that of

graduates/students.

16. In addition. students stressed that the Government must

show its continued commitment to growth. access and equity

through evaluation and review of HECS and related reforms in

the years following their introduction.


[73]


ATTACHMENT F

39.

CONSULTATIONS WITH THE AUSTRALIAN COUNCIL OF TRADE UNIONS

overall ACTU Position on Higher Education Funding

Prior to the 1988 National Conference of the ALP. the ACTU

argued that individual contributions towards the cost of higher

education should be raised from a tax on all high income

earners. irrespective of whether or not those income earners

had benefited from higher education. The ACTU has accepted

that issues relating to tax surcharges should be taken up with

the Treasurer in the context of his overall review of taxation.

but to date the ACTU has not put forward any specific proposals

in that regard.

2. The ACTU's broad position concerning direct contributions

from the beneficiaries of higher education has been to reject

"in principle" schemes which require students or graduates to

make direct contributions towards the cost of their higher

education. The ACTU has also advocated the need for further

commitment by the Government to expand higher education funding

and the need for direct and compulsory contributions to all

forms of post-school educatiQn and training from employers. by

way of industry levies.

3. The ACTU. however. has accepted that amendments to the ALP

Policy Platform during the 1988 National Conference of the ALP

have sig~ificant1y changed the situation. and that these

changes pave the way for the introduction of a scheme to secure

contributions from individual users and beneficiaries of higher

education. While the ACTU has not supported the proposals of

the Committee on Higher Education Funding (the Wran Committee).

it acknowledges that such a scheme is clearly preferable to

alternatives such as fees. If such a scheme is to be

introduced the ACTU has indicated a preference for a proposal

based on a payment system more closely related to likely

benefits (ie income). The ACTU has not indicated how it

believes such a scheme mi ht work~ E CABI T-I N-CONI"'IDENC

[74]


ATTACHMENT F

40.

4. The ACTU's public position is most likely to be that a

student contribution scheme should be deferred pen~ing the

implementation of tax cuts. finalisation of industry levy

arrangements and resolution of all administrative aspects of

the scheme.

5. The ACTU has supported the direction announced in

conjunction with the Government's 1988 May Economic Statement

to encourage industry to make adequate contributions towards

the cost of post-school education and training. but expressed

the view that the timetable for establishing mechanisms to

ensure employer contributions should be brought forward to a

shorter time period than the 12 to 18 months indicated in the

Statement.

6. The ACTU has also outlined a series of specific concerns

it wishes to see addressed.

The Level of the Contribution

7. The ACTU has opposed th~ three-tiered system of

contributions involving $3.000. $2.500 and $1.500 for each year

of full-time study. as proposed by the Wran Committee. A single

level of contribution was favoured.

The Level of the Income Threshold and the Rate of Repayment

8. The ACTU believes that the proposed threshold of $21.500

(the annual level of average weekly earnings of all workers ie

males and females. full and part-time. adult and junior wage

and salary earners) ·is too low. Its preference is to set the

threshold to at least the annual level of the average ordinary

time earnings of full-time workers. currently around $24.300

per annum. believing that this measure better reflects capacity

to pay and would be more widely understood and accepted in the

community. CABINET-IN-CONFIDENCE

[75]


ATTACHMENT F

41.

9. The ACTU has also expressed a strong preference for a more

progressive payment system and supported the adoption of a

repayment system based on l, 2 and 3 per cent of taxable

income, with the lowest income threshold being set at the

average earnings of full-time workers.

Encouraging Voluntary Up Front Payments

10. While the ACTU has opposed "in principle" any discount of

the contribution for those who choose to pay "up front", a

small discount of 10 to 15 per cent was seen to be a more

acceptable arrangement than the 40 per cent discount option

proposed by the Wran Committee or an interest payment on

outstanding debt.

TAFE Students

11. The ACTU believes that the scheme should apply only to

students studying in universities and other higher education

institutions, and that any higher education students studying

in TAFE colleges should be exempt. The ACTU does, however.

acknowledge that such an app{oach would create anomalies at the

associate diploma level between students in TAFE and those in

colleges of advanced education. The ACTU has also identified a

range of occupations in which individuals undertaking

retraining or skills upgrading courses. would be affected by

the Wran Committee's proposals without necessarily deriving any

direct financial benefit from their additional studies.

Postgraduate Courses

12. The ACTU does not believe that postgraduate students

generally should be exempted from contributions if other

students are to be liable, particularly where postgraduate

students are employed full-time. In cases where postgraduate

study is undertaken for restilling relevant to industry needs,

·c ABINET-IN-CON FIDENCE

[76]


ATTACHMENT F

42.

the ACTU believes that employers should be responsible for

meeting the individual's costs. and that scholarships should be

available for low income students undertaking long postgraduate

courses. particularly those contributing to the national

research effort.

Skills Upgrading and Professional Development

13. In the broader context of any higher education courses for

employed people undertaking professional development. skills

upgrading or reskilling. the ACTU believes that the Government

must provide strong support to encourage employers (public and

private) to make a contribution to costs through paid study

leave. enhanced salary packages or packages whereby employ~rs

would directly meet the cost of the scheme on behalf of their

employees. The ACTU has raised the specific issue of teacher

education. where there is an identified need for teachers to

undergo retraining eg. in mathematics and science. In this

case it supports an exemptions policy. with free places to be

allocated by employing authorities.

Equity Considerations

14. The ACTU strongly supports the proposals of the Wran

Committee to enhance AUSTUDY and ABSTUDY in order to encourage

greater participation by students from financially

disadvantaged backgrounds. However. it has expressed concern

that there may be a disincentive to study for potential

students from lower socio-economic backgrounds as a result of

the Committee's proposed contribution scheme. and sees the need

for · a definitive statement by the Government on enhancements to

AUSTUDY and ABSTUDY support. It has particularly emphasised

the need to encourage greater adult participation in higher

education. and to assist that cohort of young people who were

especially disadvantaged by'the recession of the early 1980's.


[77]


ATTACHMENT F

43.

15. The ACTU also believes that because of a higher incidence

of part-time work. lower incomes and disrupted labour force

participation amongst females. they may well be more adversely

affected by the introduction of schemes requiring individual

contributions than males. It supports a higher income

threshold for sole parents.

The Higher Education Administration Charge (HEAC)

16. The ACTU has strongly endorsed the proposal of the Wran

Committee that HEAC be abolished from 1 January 1989.

CABINET-IN-CONF IDENCE

[78]

CABINET-IN-CONFIDENCE ATTACHMENT G

44.

REPORT OF THE CAUCUS CONSULTATIVE GROUP ON WRAN RECOMMENDATIONS AND ALTERNATIVES

This report presents the findings of the cross-factional Caucus

Consultative Group on Wran Recommendations and Alternatives, as endorsed by the Caucus Employment, Education and Training

Committee at its meeting on 13 July 1988.

Introduction

2. The Consultative Group was appointed in May 1988 to examine the report of the Committee on Higher Education Funding (the Wran Committee), and to report to the caucus Employment, Education and Training Committee on appropriate arrangements for raising new sources of finance for higher education.

3. The Committee met on four occasions: 24 May, 3 June, 30 June and 8 July. It addressed its task in the context of the Government's objective of a major expansion of the higher education system and a significant increase in the opportunities available to those who have not traditionally participated in

~

higher education. It had regard also to the resolution passed at the ALP Conference in June 1988, which required that the most effective way to establish new sources of funds for higher and further education and training should be · determined on the principles of:

(a) capacity to pay;

(b) equality of access;

(c) greater needs-based income support;


[79]

CABINET-I N-CONFIDENC E

ATTACHMENT G

45.

(d) increased industry contribution; and

(e) administrative simplicity.

4. The committee identified four major options for raising the funds required to promote growth and greater equity in higher education:

(a} direct contributions from the student beneficiaries of higher education, under arrangements such as the Higher Education Contribution Scheme (HECS} recommendea by the

Wran Committee;

(b) additional industry contributions to higher education, by means of industry levies or other appropriate arrangements;

(c) a general taxation surcharge on higher income earners; and

(d) an increase in Government expenditures from the Budget. '

5. The Committee was divided on the merits of particular options and the appropriate balance between them. Members all agreed that additional funds should be raised from industry, but differed in their views on timing and the relative importance of this source of funding. Four members supported the basic framework recommended by the Wran Committee for a scheme of student contributions to the cost of their higher educat~on, while two opposed any such scheme in principle.


[80]


ATTACHMENT G

46.

Conversely, those opposed to student contributions favoured the · alternative of a general tax surcharge on higher income earners, whereas this option was rejected by other members.

6. Reflecting these differences, there were different views

also on the extent to which the Government itself should finance its growth and equity objectives for higher education. Consistent with the ALP Conference resolution, however, all members agreed that the Government should increase its contribution along with others as part of an expansion of the system.

7. Noting that the Wran Committee had recommended a partnership arrangement in which students, industry and governments would all contribute to the costs of growth in higher education, the Committee concentrated its attention on the details of the HECS as the framework for a system of - student contributions towards the cost of their higher education. Within that framework, and allowing for the in-principle opposition of two members, the Committee identified eleven major issues for detailed analysis:

{a) the level of the annual course charge under HECS;

{b) proportional rates of contribution for part-time students;

{c) the level of the income threshold; and rates of repayment;

{d) provision for students with dependent children;

{e) means of encouraging voluntary up-front contributions;

CABIN ET-I N-CONFI DENCE

[81]


ATTACHMENT G

47.

(f) the treatment of the Higher Education Administration

Charge (HEAC);

(g) contribution arrangements for postgraduate students;

(h) contribution arrangements for students undertaking higher education courses in TAPE;

(i) contribution arrangements for students undertaking teacher upgrading courses;

(j) contribution arrangements for students undertaking basic nurse education courses in higher education; and

(k) improvements in equity through enhancements to AUSTUDY

arrangements.

8. The Commit tee • s findings· on each of these issues are summarised below, with recommendations as appropriate.

Level of Annual Course Charge under HECS

9. The Committee considered a range of options for determining the level of the annual course charge under HECS, including the Wran Committee•s recommendation for a three-tiered charging structure according to major discipline group.

10. On balance, the Committee favoured an arrangement under which there would be a single annual rate of course charge per full-time year of study, without variation by cost of course undertaken. The Committee considered that this arrangement would help remove any disincentive to students to undertake relatively high-cost courses in areas of national priority (eg, science and engineering). It would also avoid the anomalies

CABIN ET-1 N-CON F I DENCE

[82]


ATTACHMENT G

48.

and complexities which could arise under a variable contribution scheme in relation to combined courses and multi-disciplinary courses, and be simpler to understand and administer.

11. The Committee noted that a course charge of $1,800 per full-time year would be necessary to achieve revenue neutrality with the Wran Committee's proposal.

12. The Committee recommends that a uniform annual rate of $1,800 per year of full-time study should apply under HECS.

Proportional Rates of Contribution for Part-Time Students

13. The Committee favoured an arrangement under which the HECS liabilities of part-time students would be determined on a strictly proportional basis, in accordance with the actual proportion of a full-time load undertaken in any given year. It saw this arrange~ent as preferable on equity grounds to any more arbitrary alternative.

14. The Committee recommends accordingly.

Level of the Income Threshold and Rates of Repayment

Provision for Students with Dependent Children

15. The Committee considered these issues jointly.


[83]


ATTACHMENT G

49.

16. There was some difference of op~n~on within the Committee on the appropriate level of the income threshold. Some members

considered a threshold of $21,500, as recommended by the Wran Committee, as too low under any circumstances, and believed that this level should be raised to at least $25,000. Others supported the $21,500 threshold as a reasonable measure of capacity to pay, but were prepared to see this figure raised to $25,000 as a concession to the circumstances of students with dependants.

17. The Committee supported a progressive system of repayment rates above the income threshold, such that the rate of repayment would rise as a percentage of total income the higher the level of income achieved. Subject to final decisions on the level of the threshold, it favoured a three-tiered schedule of repayment rates, beginning at 1 per cent and rising to 2 per cent and 3 per cent at higher income levels. This arrangement would require higher income earners to discharge their debit liabilities at a faster rate, thus advancing the stream of revenue from HECS.

18. The Committee noted the arrangements already in force which recognise the additional financial burden borne by persons with dependants, including general taxation rebates, Family Allowances and the Family Allowance Supplement. In light of these provisions, and on the assumption of an increase in the income threshold for HECS and/or the adoption of a progressive system of repayment rates, the Committee was inclined to the view that no special allowance for dependants should be incorporated into HECS arrangements.


[84]


ATTACHMENT G

so.

19. These issues were further considered at the meeting of the full Caucus Employment, Education and Training Committee on 13 July 1988, where estimates were supplied of the revenue effects of different combinations of income threshold levels and repayment rates. Of the seven options considered, the Committee expressed its preference for one of three:

(a) repayment rates of 1 per cent, 2 per cent and 3 per cent respectively at income levels of $22,000, $25,000

and $35,000;

(b) repayment rates of 1 per cent, 2 per cent and 3 per cent respectively at income levels of $22,000, $25,000 and $40,000; and

(c) repayment rates of 2 per cent and 3 per cent respectively at income levels of $25,000 and $35,000.

·20. In each case the Committee considered that a significant enhancement of AUSTUDY should be an essential accompaniment to the introduction of HECS.

Means of Encouraging voluntary Up-front Contributions

21. The Committee unanimously rejected the option canvassed by the Wran Committee that a 40 per cent discount be available to those students who choose to discharge their HECS liabilities •up front•. The level of this concession was considered to be unduly large, inequitable and presentationally difficult.


[85]


ATTACHMENT G

51.

22. The Committee generally favoured a more modest discount, in

the range of 10-15 per cent or perhaps tied to the Government

Bond rate. It considered that this would provide a useful incentive for students to pay their contributions quickly, and help increase the early revenue from the scheme. Any presentational difficulties in this arrangement could be offset by an emphasis on the proposed AUSTUDY enhancements and other measures designed to improve ·equity in higher education.

23. The Committee also considered the related option of imposing a real interest rate on outstanding debit liabilities under HECS as a means of encouraging early payments. Thi~ option was unanimously rejected, principally on the grounds that it would be seen to penalise those on relatively lower incomes who would take the longest time to repay their HECS contributions.

Treatment of the Higher Education Administration Charge <HEAC)

24. The Committee noted the strong opposition from students and their representatives to HEAC, and supported the Wran Committee's proposal that HEAC should be abolished from the

beginning of 1989, simultaneously with the introduction of HECS. It recommends accordingly.

Contribution Arrangements for Postgraduate Students

25. The Committee considered various options for encouragement and support of postgraduate students, especially in courses relevant to national research priorities. It noted the Wran Committee's recommendation for a system of research scholarships which would provide exemption from HECS for doctorate and masters by research students.


[86]

CABI N ET-1 N-CON F I D ENCE

ATTACHMENT G

52.

26. The committee agreed that some special provision should be made to provide encouragement and additional support in the postgraduate area, recognising both the importance of postgraduate education and the high levels of total debt which could be incurred by students unless some form of exemption

arrangements were to apply. It proposed that such assistance according to considerations of merit should be targeted on the basis of national priority and need, and that industry also should be encouraged to contribute in this area, under cost-sharing or similar arrangements.

27. Subject to these conditions, the Committee favoured an

annual quota of postgraduate scholarships for allocation by individual institutions in accordance with Commonwealth guidelines. These scholarships would apply to the full range of postgraduate courses, with a particular emphasis on research, and would provide exemption from HECS liability for the year in question. Complementary arrangements should also be developed on a joint funding basis between Government and industry.

28. The Committee recommends the introduction of postgraduate '

scholarship arrangements along these lines.

Contribution Arrangements for Students Undertaking Higher Education Courses in TAFE

29. The Committee generally favoured the arrangement proposed by the Wran Committee whereby students undertaking higher education courses in TAFE institutions would be brought under HECS arrangements from the beginning of 1990, after appropriate consultations with the States. An alternative view was that

TAFE students should be excluded altogether from HECS, and that State governments be left free to make their own arrangements

CA B I NET-I N-CONFIDENCE

[87]

CABINET-IN-CON FI DENCE

ATTACHMENT G

53.

for these students. It was noted, however, that this approach

could lead to problems on equity grounds, and serve to distort the balance of higher education provision at Diploma and Associate Diploma levels.

30. The Committee considered that any introduction of HECS for higher education students in TAFE should be made conditional upon the abolition of any compulsory up-front tuition fees and charges for the courses in question, and that this should be taken up in the proposed negotiations with State governments.

Contribution Arrangements for Students Undertaking Teacher Upgrading Courses

31. The Committee considered a proposal that exemptions from HECS should apply to qualified teachers undertaking professional upgrading courses, on the grounds that such courses often conferred little in the way of direct financial benefits on the teachers concerned.

32. The Committee saw such exemptions as undesirable on equity grounds, and likely to lead to pressure for similar exemptions in a range of other courses within the ambit of HECS. It therefore recommends rejection of the proposal.

33. The Committee recognises the importance of teacher upgrading courses to the skills enhancement and professional development of teachers. Accordingly, it believes that the employers of teachers - primarily State governments - should provide both opportunities and incentives for teachers to undertake such courses. These incentives should include financial incentives of various kinds, including payment on teachers• behalf of their liability for HECS. The Committee recommends that these matters


[88]

CABI NET-IN-CONF IDENCE

ATTACHMENT G

54.

be taken up in the forthcoming discussions with State governments on the national strategy for schools.

Contribution Arrangements for Students Undertaking Basic Nurse Education Courses in Higher Education

34. The Committee considered a proposal that exemptions from

HECS should apply to students undertaking basic nurse education courses in higher education until 1993 (when the Commonwealth assumes full funding responsibility for these courses).

35. As in the case of teachers, the Committee saw little case on equity grounds to give preferential treatment to any one group of students by virtue of the particular course they were undertaking. On the other hand, the Committee acknowledged that basic nurse education courses were still predominantly funded by State governments, and that the Commonwealth would receive little in the way of additional revenue if HECS were to be applied to these courses over 1989-92.

36. The Committee judged that a decision on this matter should '

be tied to decisions taken on the income threshold and rates of repayment for HECS. If the original threshold of $21,500 (or

similar) were to apply, as recommended by the Wran Committee, it favoured a deferral of the imposition of HECS for basic nurse education students to the beginning of 1993. However, if more lenient payment provisions were determine~ with a higher

threshold and/or lower rates of repayment at the lower income levels, the Committee considered that basic nurse education courses should be treated identically to other higher education courses from the beginning of 1989.


[89]


ATTACHMENT G

55.

Improvements in Equity through Enhancements to AUSTUDY

Arrangements

37. The Committee saw enhancements to AUSTUDY as a vital element of a national equity strategy in higher education, and an essential complement to any introduction of a Higher Education Contribution Scheme. It recommends that the following enhancements should be given a high priority in Government consideration in the Budget context:

(a) an increase in the level of the personal income test under AUSTUDY, from the present $2,000 to a level of $4,000:

(b) increased support for low-income students aged 21 and over, by aligning the maximum rate of AUSTUDY with the corresponding maximum rate of unemployment benefit;

(i) with immediate priority to be given to students with dependants and other students who are Aborigines, migrants and long-term recipients of

~

Social Security pensions/benefits; and

(c) an increase of $1,000 in real terms in the marginal adjusted family income CMAFI) under AUSTUDY, as a means of increasing assistance to lower-income AUSTUDY recipients.

38. The Committee considered that further enhancements to AUSTUDY should be possible in the longer term, especially as revenue from HECS reached a substantial level. These would include a more comprehensive alignment of AUSTUDY rates with unemployment benefits for persons aged 21 and over, together with a general increase in the coverage of AUSTUDY along the lines recommended by the Wran Committee.


[90]

CABINET-IN-CON FI DENCE ATTACHMENT H

56.

AUSTRALIAN TAXATION OFFICE RESOURCE REQUIREMENTS

The Australian Taxation Office has supplied the following

estimates of its resource requirements for the collection of

higher education contributions should the scheme proposed in

this submission be approved.

ASL $M (current prices)

1988-89 70.15 9 : 9

1989-90 188.38 8.5

1990-91 213.16 8.8

2. A full breakdo~n of these requirements are set out in tables

1 and 2 of this attachment.

Manager of Implementation Team

3. The resource requirements set out in this Attachment would

allow for an SES officer Level 1 to be appointed to manage the

personnel who would be responsible for the implementation of the

HEC scheme in the Australian Taxation Office. A similar

strategy was adopted with success for the 1985 Tax Reform

program and the Child Support Scheme. If the level of resources

being sought is approved by Ministers, ATO would seek the

agreement of the Department o~ Finance to this additional SES

officer as Implementation Team Manager for a period of

approximately 12 mtnths.

Computer Hardware Requirements

4. To support the level of processing required in the matching

of students with existing taxpayer records, plus the extra daily

and weekly processing load, additional central processing unit

(CPU) power will be required. The HEC database is expected to

require an additional 6 Gigabytes <one Gigabyte = one thousand


[91]


ATTACHMENT H

57. million) of disk within 3-5 years. Currently the ability to

connect disks to the Cybers is restricted due to availability of

disk channels.

5. These constraints can be overcome by purchasing an

additional Cyber 860 mainframe and upgrading the existing Cyber

850 at the ATO's computer site at Deakin to a Cyber 860. This

will provide both extra channel capacity and additional CPU

power.

6. Before any additional hardware can be installed at the

Deakin site, however, considerable site work modifications need

to be carried out to upgrade the existing chilled water,

air-conditioning and power facilities. This work will involve

DAS and must be completed by 1 October 1988 if collection of HEC

is to commence from the first semester next year.

7. The total cost of the air-conditioning and extra computer

equipment is $5 . 9M, the breakdown is shown at Table 2.

Potential Economy of Scale

8. Recently the ATO submitted a request for $3.4 million ($0.5

million to cover air-conditio~ing and $2.9 million for

additional computer equipment) as part of the "Technical New

Policy Submission re May Economic Statement taxation

implications", referred to as BTR component in Table 3. This

was to cover air conditioning work at Deakin, a processor

upgrade at Deakin and additional disk storage. Since that time

Control Data Australia have offered the ATOa package of

computer equipment which would meet the needs of both the May

Statement initiatives and the greater part of the HEC project.

The cost of this package is $4 . 9 million.

9. Table 3 shows the breakdown of costs for the package deal.

If we take the package in preference to the two separate

projects this would lead to a saving of approximately $3

million. It should be noted that the offer from CDA is valid


[92]


until the end of August.

until 30 September 1988.

ATTACHMENT H

58.

The company will extend the offer

For each day from the 31 August to

30 September 1988 the cost increases by $2,600 per day.

Conclusion

10. Regardless of whether the acquisition proceeds as a package

or two separate prcjects it is essential that the request be

exempt from the new procedures for acquisition of Information

Technology Facilities detailed in Finance Circular 1988/6/88/643

which would require the ATO to establish an Acquisition Council.


[93]

TABLE 1

TOTAL AUSTRALIAN TAXATION OFFICE RESOURCE REQUIREMENTS

SET-UP RECURRING TOTAL

1988-89 1989-90 1990-91 1988-89 1989-90 1990-91 1988-89 1989 - 90 1990-91

ASL 28.62 9.90 0.00 41.53 178.48 213.16 70.15 188.38 213.16 (")

(") SALARY 977,433 358.090 0 1,154,808 4,571.176 5,414.217 2,132,241 4,929.266 5,414.217 )>

CD )>

ADMINISTRATIVE z CD m 2 EXPENSES 582,235 127.292 26,226 471,658 1,58~.995 2,065,395 1,053,893 1,717,287 2. 091. 621 -;-! m -;-! PLANT AND z

n z EQUIPMENT 5,867,355 0 0 0 0 0 5,867,355 0 0 U1 0 h \.0 z 0 RENT 0 0 0 353,541 949,410 1,074. 316 353,541 949,410 1,074.316 "T1 z .., 0

m 0 FITOUT 512,073 871,094 239,316 0 0 0 512,073 871.094 239,316 z m (")

2 TOTAL 7,939, .096 1,356,476 265,542 1,980,007 7 .110, 581 8,553.928 9,919,103 8,467,057 8,819,470 m (") m

'

[94]

7

.. CABINET-IN-CON FI DENCE

60.

ADDITia& RESCURCES

FY 1988/89 FY 1989/90 Capital Maintenance capital l"..aintenance

Iter. Qty

Cyber 860A 1 $2,012,835 $8,432 $11,243 32 K' b IllE!!rDry 1 $102,252 S995 $1,327 DMA I/0 Syst 1 $147,861 $187 $249 IPI/OOA Charmel 2 $15,960 $25 $33 NPU 2 $1,275,400 $2,741 $3,655 CLA 8 $12,672 $349 $466 Console 1 $33,587 S137 $183 System Console 0 so so so MG Set 1 S86,030 S79 S106 8 ton chiller 1 $62,898 S249 S332 Cyber 860 uwrade $1,221,122 $5,944 $7,925 Disk controller 6 $378,504 $2,031 $2,708 Disk unit 6 $454,764 $2,113 S2,817

OOS/BE Dual St. 1 $292,661 S32,400 $43,200 FORTRAN 1 $64,886 $7,182 $9,576 COOOL 1 S59,725 S1,647 $2,196 BASIC 1 $49,335 $5,454 $7,272 Multi -mainframe 1 $38,180 $4,104 $5,472 CCI 1 $5,864 $657 $876

Hardware $5,803,885 $23,282 $0 $31,043

I Software $510,651 $51,444 $0 $68,592

$6,314,536 $74,726 $0 $99,635

1 less discounts NIL NIL

$0 less 15% discount $947,180 $0

Total discount S947,180 so Maintenance savings $32,661 $4J,548

Net cost $5,367,355 $42,065 $0 $56,087

'lUl'AL COST FOR PRCmX:'I' Capital OUtlay Freight 3 years maintenance

Canputer £quip. Air coodi tic:cing

$5,367,355 $500,000

$5,867,355

S50,000 $164,203

$50,000 $164,203


ATTACHMENT H

Table 2

FY 1990/91 Capital Maintenance

S12,367 S1.459

$274 $36

$4,020 $512 $201

so $116 $365

$8,718 $2,979 S3,098

$47,520 $10,534 $2,416 $7,999 $6,019

$964

$0 S34,147 $0 $75,451

$0 $109,598

so

SCI $43,548

so $66,051

[95]

CABI NET-I N-CONFI DENCE ATTACHMENT H

61. ADDmctru. RESaJRCES USING CDA PACKAGE O:FFrn

Table 3

FY 1988/89 FY 1989/90 FY 1990/91 capital Maintenance Capital Maintenance Capital Maintenance

Item Qty

Cyber 860A 3 $6,038,505 $25,297 $33,729 $37,102 32 M' b merory 3 $306,756 $2,985 $3,980 $4,378 DMA I/0 Syst 3 $443,583 $560 $746 $821 IPI/DMA Channel 6 $47,880 $75 $99 $109 NPU 2 $1,275,400 $2,741 $3,655 $4.020 CIJ... 8 $12,672 $349 $466 $512 Console 1 $33,587 $137 $183 $201 System ~"1Sole 3 $12,648 $231 $308 $339 MG Set 1 $86,030 $79 $106 $116 8 ton chiller 3 $188,694 $746 $995 $1,094 Disk controller 12 $757,008 $4,063 $252,256 $7,223 $7,945 Disk unit 15 $1,136,910 $5,281 $454,764 $9,858 $10,844

005/BE Dual St. 3 $877,983 $97,200 $129,600 $142,560 iaiTRAN 3 $194,658 $21,546 $28,728 $31,601 COOOL 3 $179,175 $4,941 $6,588 $7,247 BASIC 3 $148,005 $16,362 $21,816 $23,998 Mu1 ti -mainfrane 3 $114,540 $12,312 $16,416 $18,058 CCI 3 $17,592 $1,971 $2,628 $2,891

Hardware $10,339,673 $42,544 $707,020 $61,348 so $67,483 Software $1,531,953 $154,332 $0 $205,776 $0 $226,354

$11, 871, 626 $196,876 $707,020 $267,124 $0 $293,836

less disCOlUlts Hardware 50% $5,169,837 Software 62.5% $957,471

--$6,127,307

less 15% discount $861,648 $106,053 so

Total discount $6,988,955 $106,053 so Maintenance savings $32,661 $43,548 $43,548

Net cost $4,882,671 $164,215 $600,967 $223,576 so $250,289

'lUI'AL COST FOR PR<mrl' capital ~tlay Freight 3 years Maintenance

CCinputer Fqui}IIlent $5,483,638 $150,000 $638,080 Air cooditiooing $500,000

$5,983,638 $150,000 $638,080 less BTR canpooent

CclnpJter Equip. $2,900,000 $175,000 Air-caldi tiooing $500,000 .

$3,400,000 $0 $175,000 -

mx:s cmpooent S~Stal!StJST- IN -CO~W,~E $463,080

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Documents

1988-89 cabinet paper 5922