Purpose of the Bills

The Tertiary Education Quality and Standards Agency Amendment (Cost Recovery) Bill 2021 (Cost Recovery Bill) and the Tertiary Education Quality and Standards Agency (Charges) Bill 2021 (Charges Bill) together propose to create a framework for the Tertiary Education Quality and Standards Agency (TEQSA), Australia’s independent national higher education regulator, to begin phasing-in cost recovery arrangements from 1 January 2022.

The timing of this transition was confirmed in April 2021, as part of a support package for international education providers detailed in the 2021–22 Budget.[1]

The Government had previously announced in the 2018–19 Budget that TEQSA would transition to full cost recovery from 2021–22.[2] However, this was delayed as part of a suite of regulatory fee waivers announced in April 2020 in response to the impact of COVID-19 on the sector.[3]

Background

The Tertiary Education Quality and Standards Agency

Under the Tertiary Education Quality and Standards Agency Act 2011 (TEQSA Act), TEQSA is responsible for registering all institutions providing higher education in Australia and, in the case of providers that are not registered to self-accredit their own courses, registering higher education courses.[4]

In addition, TEQSA also:

• conducts compliance, quality, and accreditation assessments to determine whether providers are complying with the TEQSA Act
• advises and make recommendations to the Minister on matters relating to the quality or regulation of higher education providers
• undertakes various research and information gathering and sharing activities to protect and enhance academic integrity
• collects, analyses, interprets and disseminates other information relevant to higher education
• advises and makes recommendations to higher education providers on matters relating to the Threshold Standards (which providers must meet as a condition of registration)
• conducts training to improve the quality of higher education
• supports the Higher Education Standards Panel in performing its functions (which are chiefly concerned with providing independent advice about the Threshold Standards and related matters)
• assesses information about higher education providers for the Secretary (currently of the Department of Education, Skills and Employment, DESE)
• cooperates with its counterparts in other countries
• develops service standards to support its functions and
• can perform other functions related to higher education that the Minister may determine by legislative instrument.[5]

Fees are currently charged for some of TEQSA’s functions through legislative instruments made under section 158 of the TEQSA Act. For example, fees currently include those for:

• an assessment of an application to be a higher education provider ($25,000 for a proposed university or $5,500 for other providers for a preliminary assessment, and $60,000 for a proposed university and $16,500 for other providers for a substantive assessment) and
• an application to self-accredit one or more courses of study ($10,000 if the provider already has authority to accredit other courses, or $22,000 if they have no existing authority).[6]

TEQSA’s current partial cost recovery model has been in place for seven years, and recovers around 15 per cent of its regulatory costs (as of 2019).[7]

Under the Education Services for Overseas Students Act 2000 (ESOS Act), TEQSA is also responsible for registering higher education providers to provide education to overseas students studying in Australia on a student visa (this is additional to registration under the TEQSA Act).[8] To recover the cost of some of TEQSA’s work under the ESOS Act, DESE charges these providers an annual registration charge (ARC), and new providers (that is, those not already registered under the ESOS Act) also pay an entry to market charge (EMC) over their first three years of registration.[9] The ARC is calculated based on student numbers and registered courses, and in 2020 comprised a $1,505 base fee, plus $10 per enrolment, and $115 per course.[10] The EMC is paid in three instalments, totalling $17,342 in 2020.[11]

Australian Government cost recovery policy

The Australian Government Cost Recovery Guidelines (the CRGs) set out Australian Government cost recovery policy. Under this policy, ‘where appropriate, non-government recipients of specific government activities should be charged some or all of the costs of those activities’.[12]

The appropriateness of cost recovery is considered based on:

• the nature of the government activity (e.g. will government be the only provider?)
• who might be charged (e.g. is there an identifiable individual, organisation or group that receives the activity or creates the need for it?)
• the impact of cost recovery on competition, innovation or the financial viability of those who may need to pay charges and the cumulative effect of other government activities
• whether it is efficient to cost recover the activity (e.g. are the costs of administering cost recovery appropriate to proposed charges for and revenue from the activity?)
• how cost recovery might affect:
• the policy outcomes for the activity
• other government policies and legislation (e.g. policies relating to access to essential community services)
• Australia’s obligations under international treaties (e.g. free trade agreements).[13]

A cost recovery implementation statement (CRIS) is required before new cost recovery charges commence.[14] The Explanatory Memoranda to both Bills indicate that a CRIS will be made available prior to the implementation of the cost recovery arrangements.[15]

TEQSA’s proposed cost recovery approach

To inform the development of the CRIS, TEQSA is undertaking consultation with the higher education sector—a proposed cost recovery approach has been put forward as part of these consultations, and is outlined in the Consultation Paper: Fees and Charges Proposal (the Consultation Paper) released in April 2021.[16]

The Consultation Paper outlines a fee structure based on three components, which would recover an average of 90 per cent of the cost of TEQSA’s regulatory activities:

• application-based charges—for provider and course registration applications, with a sliding scale of up to 70 per cent reduction applied to course accreditation charges to allow for fee reductions for smaller providers
• single provider charges—for investigations, compliance assessments and conditions monitoring, to be calculated on a per hour basis and charged to the relevant provider
• an annual levy—to cover activities that are not attributable to a particular provider, such as the development and delivery of advice, and profiling and managing risk in the sector.[17]

The Consultation Paper notes full implementation of cost recovery is intended to be completed by 1 January 2024, with application-based and single provider charges in place from 1 January 2022, and the new levy phased in with a cost recovery target of 20 per cent from 1 January 2022, 50 per cent from 1 January 2023, and 100 per cent from 1 January 2024.[18] TEQSA has estimated that providers will be charged total fees and charges ranging from approximately $40,000 to $85,000 per year, with most paying $40,000 to $55,000.[19]

Where TEQSA has received a specific budget allocation for work, such as academic integrity, admissions transparency, and student records management, this is not proposed for inclusion in the cost recovery model.[20] Allowances will also be made to ensure relevant providers are not charged twice for work undertaken under the ESOS Act.[21]

Other Australian Government higher education provider charges

In addition to existing fees and charges for registration under the TEQSA Act and ESOS Act discussed above, higher education providers can also be charged for other government activities, namely:

• levies to support the operations of the Tuition Protection Service (TPS), charged on the basis of enrolments of overseas students and domestic higher education students, including fee-paying students and those using HECS-HELP and FEE-HELP, although some providers are exempt from certain TPS charges[22]
• fees for access to higher education student loans, comprising an application fee for those seeking to offer FEE-HELP to their students, and an annual charge for providers who access HECS‑HELP and/or FEE-HELP[23] and
• in the case of dual sector providers (that is, those providers that offer both higher education and vocational education and training, or VET) fees associated with registration as a VET provider, access to VET Student Loans, and the TPS for overseas students studying VET courses and domestic students using VET Student Loans.[24]

Committee consideration

Senate Standing Committee for Selection of Bills

At its meeting of 12 May, the Senate Standing Committee for Selection of Bills deferred consideration of the Bills to its next meeting.[25]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not yet considered the Bills.[26]

Policy position of non-government parties/independents

The Australian Labor Party does not support the Bills, arguing that it represents a significant burden on higher education providers in an already difficult financial environment. In her second reading speech, the Shadow Minister for Education, Tanya Plibersek, noted:

Labor opposes this attempt to add another cost to Australian universities. After the year that our universities have just experienced with huge losses of revenue, thousands of jobs cut across the country and shamefully little support from the government, now is the very worst time to be adding greater costs to higher education, particularly through legislation like this, with all of the detail in regulations still to be released and with little transparency or legislative accountability.

…

Labor opposes this legislation because, frankly, universities have copped enough over the last 18 months.[27]

Independent MP Andrew Wilkie also did not support the Bills, noting:

… it will add significantly to the cost pressures already being faced by our tertiary institutions … Ultimately, as costs go up for our universities, the fees go up, so I don't support this legislation and I'll be voting against it.[28]

Position of major interest groups

At the time of writing, no major interest groups have commented on the Bills.

Financial implications

The Explanatory Memoranda to both Bills note that the cost of TEQSA’s activities is ‘around 5.7 million annually’.[29] In line with the proposal in the Consultation Paper discussed in the Background section above, the Explanatory Memoranda highlights the Government’s intention to phase in cost recovery of these activities over three years at the following proportions: 20 per cent from 1 January 2022, 50 per cent from 1 January 2023, and 100 per cent from 1 January 2024.[30] This means that the charges will increase over these initial three years. The Government notes that the actual charge amount will be determined each year based on the anticipated costs of TEQSA’s regulatory activities for that year.[31]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[32]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had not yet considered the bills.[33]

Key issues and provisions

The Cost Recovery Bill

Item 2 of the Cost Recovery Bill amends the TEQSA Act to insert proposed section 26C, which has the effect of requiring, as a condition of registration, a higher education provider to pay a registered higher education provider charge (the charge) and penalty in the case of late payment of that charge.

Registered Higher Education Provider Charge Guidelines (the Guidelines) will be made by TEQSA under section 204 of the TEQSA Act, which may deal with:

• notices setting out the amount of the charge payable by a provider
• when the charge is due and payable
• notices extending the time for payment of the charge
• penalties for late payment of the charge
• to whom the charge and any late penalties are payable
• the refund, remission or waiver of the charge or late penalties
• the review of decisions made under the Guidelines in relation to the collection or recovery of the charge and/or
• any other matters relating to the collection or recovery of the charge.[34]

The Guidelines are a legislative instrument, and so would be subject to Parliamentary scrutiny and disallowance under the Legislation Act 2003.[35]

The Charges Bill

The Charges Bill sets out a framework to allow for the imposition of the charge each year from 1 January 2022.[36]

However, the amount of the charge is not set out in the Bill and is not guaranteed to be as proposed in TEQSA’s Consultation Paper (as discussed in the Background section above). Instead, the amount (which can be nil) is to be prescribed by, or calculated according to a method prescribed by, Regulations made by the Governor-General.[37]

The Regulations may also provide for:

• the charge to be made up of components[38]
• indexation[39]
• exemptions from the charge (the drafting appears to provide only for exemptions from the charge as a whole, rather than some components of the charge but not others, in the event that the charge is made up of components)[40] and/or
• matters necessary or convenient to be prescribed for carrying out or giving effect to the Tertiary Education Quality and Standards Agency (Charges) Act 2021, once made.[41]

Before the Governor-General makes the Regulations, the Minister must be satisfied that the effect will only be to recover the Commonwealth’s likely costs for TEQSA to perform its functions, except those functions that are subject to fees under section 158 of the TEQSA Act, or under the Education Services for Overseas Students (Registration Charges) Act 1997.[42]

Concluding comments

The Cost Recovery Bill and Charges Bill together propose to create a framework to allow TEQSA to start transitioning to full cost recovery arrangements from 1 January 2022. The new charges, if implemented in line with TEQSA’s proposed arrangements, will cost each higher education provider approximately $40,000 to $85,000 per year, and will join a range of other charges for government activities already imposed on the sector under the Government’s cost recovery policy.

While the proposed approach is consistent with higher education cost recovery arrangements that have already been legislated,[43] the level of detail to be dealt with in delegated legislation is likely to pose a challenge to the Parliament’s oversight of the charges as part of consideration of these Bills.