Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)OUTLINE
The Higher Education Funding Act 1988 (HEFA) makes provision for grants of financial assistance to higher education institutions and other bodies for higher education purposes, establishes the Higher Education Contribution Scheme (HECS), the Post-graduate Education Loans Scheme (PELS), the Open Learning Deferred Payment Scheme (OLDPS) and the Bridging for Overseas-Trained Professional Loan Scheme (contingent on the enactment of the Higher Education Legislation Amendment Bill (No. 1) 2002) and makes provision for the repayment of monies lent by the Commonwealth to students under those schemes.
The Australian Research Council Act 2001 (ARCA) establishes the Australian Research Council (ARC) as an independent body to administer the Commonwealth research programs for which it has responsibility, make recommendations to the Minister on the allocation of funds within research programs and to provide advice to the Minister on research matters as requested by the Minister. Funding is appropriated under section 49 of the Act.
The Higher Education Legislation Amendment Bill (No. 2) 2002 (the Bill) will amend the HEFA to:
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- legislate the maximum funding levels in section 17, subsections 20(3), 22A(5), 23C(2), 24(3), 27A(6) and 27D(2) for the 2004 funding year, including additional funding provided in the Backing Australia's Ability policy;
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- vary the maximum funding levels in section 17, subsections 20(3), 23C(2), 24(3) and 27A(6) for the 2002 and 2003 funding years consistent with indexation arrangements;
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- vary the maximum funding levels in Part 2.2 to reflect revised estimates of Higher Education Contribution Scheme (HECS) receipts for the 2001, 2002 and 2003 funding years and the Commonwealth's superannuation liability for the 2002 and 2003 funding years;
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- vary the maximum funding levels in section 17 and subsection 23C(2) for the 2002 and 2003 funding years to reflect a transfer of funds to enable the Institute of Advanced Studies of the Australian National University to access block research grants and the Charles Sturt University to convert places to the Research Training Scheme;
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- vary the maximum funding levels in section 17 for the 2002, 2003 and 2004 funding years to provide for an advance of operating grant to the University of Adelaide and repayment of the advance;
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- amend various sections of the Act to provide for a single, consistent accountability requirement in relation to grants under the Act;
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- amend section 54 so that institutions are not required to send a 'notice of liability' to overseas fee-paying students;
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- amend Schedule 1 of the Act to change the name 'Batchelor College' to the 'Batchelor Institute of Indigenous Tertiary Education'.
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- amend subsections 106U(2) and 112(3) to reflect changes in taxation legislation; and
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- amend paragraph 98E(f) to remedy a drafting oversight in relation to the Post-graduate Education Loan Scheme.
The Bill will amend the ARCA to:
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- legislate the funding caps in section 49 of ARCA for the funding years 2004 and 2005, including additional funding provided in the Backing Australia's Ability policy;
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- enable the Minister to approve research projects for a period of four years (when an additional funding cap for 2006 is added after the 2002-2003 Budget);
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- amend section 48 as a consequential amendment to the above;
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- vary the funding caps in section 49 for the funding years 2002 and 2003 consistent with indexation arrangements;
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- vary the funding cap in section 49 for the funding year 2002 to reflect a re-phasing of ARC programme funds from 2001 to 2002; and
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- enable the ARC Board to establish committees other than those making funding recommendations without Ministerial approval.
FINANCIAL IMPACT
In relation to the Higher Education Funding Act 1988, the Bill:
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- provides base funding of $4,109,230,000 in 2004;
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- decreases funding by $14,193,000 in 2002; and
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- increases funding by $24,295,000 in 2003.
In relation to the Australian Research Council Act 2001, the Bill provides:
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- base funding of $386.151 million in 2004 and $442.380 million in 2005.
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- increases funding by $2.047 million in 2002 and $0.434 million in 2003.
NOTES ON CLAUSES
Provides for the Act to be cited as the Higher Education Legislation Amendment Act (No .2) 2002.
Provides for this Act to commence on the day on which it receives the Royal Assent.
Provides that each Act that is specified in a Schedule is amended or repealed as set out in the applicable items in the Schedule and that any other item in a Schedule has effect according to its terms.
Schedule 1 - Amendment of the Higher Education Funding Act 1988
Part 1 - Variation of financial assistance
Since the introduction of the Higher Education Contribution Scheme (HECS), funding for the operating purposes and limited operating purposes of higher education institutions has come from a combination of HECS liabilities and grants approved under sections 15 and 16 of the Act. Section 17 sets the maximum aggregate funding levels for operating grants that may be paid to institutions under sections 15 and 16 while Part 4.3 of the Act established the Higher Education (HECS) Reserve and provides for the application of money in the Account.
Each year the operating needs of institutions are estimated and funded by a combination of estimated HECS liabilities during the year and aggregate grants funded within the maximum amount provided for in section 17 for that year. Actual HECS liabilities for a year are not available until early in the subsequent year after which an adjustment is made to the section 17 funding amount for the previous year to correctly reflect the relative contribution of HECS liabilities to the funding needs of institutions.
Item 1 amends section 17 to vary the maximum aggregate funding level for 2001, 2002 and 2003 to reflect revised Higher Education Contribution Scheme (HECS) liabilities and estimated liabilities, supplementation consistent with indexation arrangements, marginal funding adjustments for over-enrolments, transfers of funding to section 23C and an advance of 2003 and 2004 funding to the University of Adelaide for 2002. Item 1 also inserts the maximum aggregate funding level for the year 2004.
Section 20 provides for grants to higher education institutions for superannuation expenses for staff whose salaries are funded from grants provided under the Act. Item 2 amends subsection 20(3) to vary the maximum aggregate grant amount for 2002 and 2003 to reflect supplementation consistent with indexation arrangements, to vary the maximum aggregate grant amount for 2003 to reflect revised estimates of the Commonwealth's superannuation liability and to insert the maximum aggregate grant amount for the year 2004.
Subsection 22A(5) provides for the total amounts which may be approved as expenditure by way of grants to open learning organisations. Items 3 and 4 amend subsection 22A(5) to insert the maximum aggregate grant amount for the year 2004.
Subsection 23C(2) of the Act limits the total funds available for grants that may be approved under sections 21, 21B, 22, 23, 23A and 23B of the Act for specified years. Item 5 amends subsection 23C(2) to vary the funding limits for 2002 and 2003 to reflect a transfer of operating grant funds from section 17 and to reflect supplementation consistent with indexation arrangements. Item 5 also inserts the funding limit for the year 2004.
Section 24 of the Act provides grants in respect of teaching hospitals. Item 6 amends subsection 24(3) to increase the maximum aggregate grant amount for 2002 and 2003 to reflect supplementation consistent with indexation arrangements and to insert the maximum aggregate grant amount for the year 2004.
Section 27A of the Act provides for grants to institutions for special capital projects. Item 7 amends subsection 27A(6) to increase the maximum aggregate grant amount for 2002 and 2003 to reflect supplementation consistent with indexation arrangements and to insert the maximum aggregate grant amount for the year 2004.
Section 27D of the Act allows the Minister to determine an amount to be available for expenditure by the Commonwealth on the international marketing and promotion of Australian education and training services. Item 8 amends subsection 27D(2) to increase the maximum aggregate funding level for 2002 and 2003 to reflect supplementation consistent with indexation arrangements and to insert the maximum aggregate funding level for the year 2004.
Part 2 - Acquittal of financial assistance
The amendments proposed by this Part are intended to streamline accountability requirements for acquittal of financial assistance to institutions under Part 2.2 of the Act by removing the requirements for institutions to annually submit special audited financial statements under paragraph 18(1)(f), subsections 21A(4) and (5), paragraph 23(5)(c), subsections 23B(5) and (6), paragraph 24(4)(c), paragraph 25(3)(c) and paragraph 27C(e) and inserting a single condition requiring an institution to submit an annual audited financial statement to the Minister under proposed paragraph 108(d). The new acquittal arrangements are intended to apply in respect of financial assistance granted from 1 January 2002.
The amendments in this Part also make it clear that the conditions for financial assistance specified in subsection 18(1) and section 108 must all be met by an institution.
Amend paragraphs 18(1)(b), (c) and (d) and paragraph 108(a) by adding the word and at the end of each paragraph to make it clear that the conditions for financial assistance specified in subsection 18(1) and section 108 must all be met by an institution.
Item 10 repeals paragraph 18(1)(f) to remove the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of grants received by the institution for operating purposes and special operating purposes. Item 11 consequentially removes the reference to paragraph 18(1)(f) from subsection 18(4).
Item 13 repeals subsections 21A(4) and (5) to remove the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of grants received by the institution under section 21. Item 12 makes a consequential amendment to subsection 21A(1).
Repeals subsection 23(5) and inserts a new subsection 23(5) which has the effect of removing the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of special research assistance expended by the institution, formerly required by paragraph 23(5)(c).
Item 16 repeals subsections 23B(5) and (6) to remove the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of expenditure in connection with grants received by the institution for advanced engineering centres. Item 15 makes a consequential amendment to subsection 23B(1).
Repeals subsection 24(4) and inserts a new subsection 24(4) which has the effect of removing the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of grants received by the institution for teaching hospitals, formerly required by paragraph 24(4)(c).
Item 18 repeals subsection 25(3) and inserts a new subsection 25(3) which has the effect of removing the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of grants received by the institution for drug and alcohol education in teaching hospitals, formerly required by paragraph 25(3)(c).
Item 20 repeals paragraph 27C(e) to remove the requirement for an institution to submit to the Minister a special annual audited financial statement in respect of special capital grants received by the institution. Item 19 makes a consequential amendment to paragraph 27C(d).
Item 23 inserts a new paragraph 108(d) which adds a new condition for the grant of financial assistance to an institution under the Act, which has the effect of requiring each such institution to submit an annual audited financial statement to the Minister in an approved form. Item 22 makes a consequential amendment to paragraph 108(c).
Provides that the amendments made by this Part apply in relation to financial assistance granted in respect of the year that began on 1 January 2002 or a later year.
Part 3 - Notices to fee-paying overseas students
Inserts a new subsection 54(1A) which has the effect of clarifying that an institution is not required to give an overseas fee-paying student a notice of liability under subsection 54(1).
Part 4 - Batchelor Institute of Indigenous Tertiary Education
Amends the table in Schedule 1 to the Act to omit reference to 'Batchelor College' and substitute 'Batchelor Institute of Indigenous Tertiary Education'. Schedule 1 lists institutions and bodies eligible for special research assistance under section 23.
Part 5 - Tax file numbers of post-graduate students
Amends paragraph 98E(f) (dealing with the tax file numbers of post-graduate students) to omit an incorrect reference to paragraphs 52(1)(a) and 53(1)(d) and substitute a reference to paragraph 52(1A)(a) and subsection 53(1A). This amendment will remedy a drafting oversight in relation to the Post-graduate Education Loan Scheme.
Part 6 - Application of tax legislation
Repeals subsection 106U(2) and substitutes new subsections 106U(2A) and (2B) to replace the current references to sections 222A to 222F, 222 and 226G to 226ZB of the Income Tax Assessment Act 1936 with a reference to Part 4-25 in Schedule 1 to the Taxation Administration Act 1953, to reflect recent changes to the taxation laws which replaced some provisions in Division 1 of Part VI of the Income Tax Assessment Act 1936 on and from 1 July 2000. Proposed subsection 106U(2B) ensures a person is not liable to a penalty for any act or omission that happened before commencement of subsection 106U(2B).
Item 29 is a savings provision. For greater certainty this item preserves the operation of subsection 106U(2) in relation to the 1999-2000 and earlier years of income, as if the subsection had not been repealed.
Item 30 repeals subsection 112(3) and item 31 inserts a new subsection 112A to clarify that Chapters 4A, 4B (proposed to be inserted in the Act by the Higher Education Legislation Amendment Bill (No. 1) 2002 which establishes the bridging for overseas-trained professionals loan scheme), 5, 5A and 5B of the Act have always been taken to be taxation laws for the purposes of the Taxation Administration Act 1953, in the same way that Chapter 4 is currently taken to be a taxation law under the subsection. Proposed subsection 112A(2) ensures a person is not liable to a penalty for any act or omission that happened before commencement of subsection 112A.
Schedule 2 - Amendment of the Australian Research Council Act 2001
Part 1 - Variation of financial assistance
Have the effect of adding 2004 and 2005 to the years to which Division 1 of Part 7 of the Act applies. Division 1 deals with financial assistance for approved research programs.
Repeals paragraphs 49(b) and (c) and inserts new paragraphs (b)-(e) to vary the level of financial assistance for approved research programs for the year 2002 to reflect a re-phasing of ARC programme funds from 2001 to 2002 and supplementation consistent with indexation arrangements, to vary the level of financial assistance for approved research programs for the year 2003 to reflect supplementation consistent with indexation arrangements and to provide financial assistance for approved research programs for the years 2004 and 2005, including additional funding provided in the Backing Australia's Ability policy.
Part 2 - Committees
The purpose of this Part is to enable the Australian Research Council Board to establish committees (other than those making funding recommendations under section 52) without Ministerial approval.
Inserts a new definition of designated committee in section 4.
Omit the words with the approval of the Minister from subsections 30(1), 30(2), 32(1), 32(5), 33(1), 33(2) and 33(4) of the Act which has the effect of giving the Board the power to establish or dissolve a committee under section 30, decide on the membership and Chair of the committee in accordance with section 32 and determine the terms and conditions of a committee member's appointment and terminate the appointment of a committee member under section 33, without the approval of the Minister. However, item 6 inserts new subsections 30(3) and (4) which have the effect of providing that the Minister must still approve the establishment or dissolution of a designated committee (i.e. a committee established under section 30 to assist in making funding recommendations under section 52).
Makes consequential amendments to subsections 32(1) and 32 (5) to reflect the addition of proposed subsection 32(7) by item 11.
Inserts a new subsection 32(7) which provides that the Board must not appoint a person as a member of a designated committee or designate a member of a designated committee as the Chair of the committee unless the Board has obtained the approval of the Minister.
Inserts a new subsection 33(5) which provides that the Board must not make a determination under subsection 33(1) or (2) in relation to a member of a designated committee or terminate the appointment of a member of a designated committee, unless the Board has obtained the approval of the Minister.