1988-89 cabinet paper 5925

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1/33

CABINET CONFIDENCE

Copy No _ _8

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

Canberra

4

August

1988

No. 11733

Submission No. 5922

Estab l i sh ing a

Higher

d u c a ~ o n

Cont r ibu t ion

Scheme

Memorandum No. 5923

and Minute

No.

11582 ER)

Estab l i sh ing a

Higher Educat ion

Contr ibut ion Scheme

Fur ther

to

Minute No. 11731 o f 4 August

1988 the

Cabinet

noted the requirement t h a t

the

Commonwealth

make an

e x p l i c i t payment d i r ec t ly to higher educat ion i n s t i t u t i o n s

under its benef i t s

to

s tuden ts

power in

d ischarge o f

s tudents '

l i a b i l i t i e s under

the

Higher Educat ion Contr ibut ion

Scheme

HECS).

2.

The Cabinet agreed

t h a t

-

a )

in

order

to

s a t i s fy the

requi rement

under

paragraph

1 above, from

1989,

Commonwealth funds

for higher educa t ion would be

pa id

as fol lows

: -

( i ) approximately twenty percen t d i r ec t ly

to higher educa t ion i n s t i t u t i o n s v i

the

mechanism o f a Higher Educat ion

Trus t Fund; and

/2

This docum ent is t he

property

of

the

Australian overnm

ent

and is not t o be

copi

ed or reproduced

CABINET IN CONFIDENCE

[1]

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CABINET I N CO N F DEN CE

2.

No.

11733

Cont d)

ii approximate ly e igh ty p e rc e n t ~ ~ the

Sta t e s

as

per

cur ren t

t a ~ e s

Grants

l e g i s l a t i v e arrangements;

b)

it

was

disposed a t t h i s

s tage

to

i n t ro d u c t i o n

in

the 1988

Budget

S i t t i n g s

o f

a

s i n g l e

l eg i s l a t i ve

package encompassing the funding arrangements

o u t l i n e d

in sub-paragraph 2(a)

above,

the

proposed

a bo l i t i on

of the

Higher

Educa t ion

Admin i s t ra t ion Charge and

the

i n t roduc t ion o f

HE S but t h a t

a

f ina l dec i s ion be t aken a f t e r

fu r the r

co n s id e r a t i o n

of the

i s sues ;

and

(c)

use

o f

the upgraded t ax

f i l e

number sys tem to

f a c i l i t a t e a l loc a t ion

of

s t u d e n t c o n t r i b u t i o n s

under HE S shou ld be inc luded in t he Tre a su re r s

t ax

f i l e

number

l eg i s l a t i on , wi th

t h i s

fu r the r

use o f the

sys tem

to be cond i t iona l on passage

o f

the

HECS l eg i s l a t i on .

(This

endorses

Minute No.

11582 ER)

o f 3 August 1988 . )

S e c re t a ry to

Cabinet

This do ument is the property of the ustralian Government and is not to be copied or reproduced

CABIN ET 1 N CON

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DENCE

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CABINET CONFIDENCE

Copy No

C A B I N E T

M I N U T E

Canberra , 4 August

1988

No. 11731

Submiss ion No. 5922

Es tab l i sh ing a

Higher

d u c a ~ i o n

Cont r ibu t ion

Scheme

Memorandum

No.

5925

and

Minute

Es tab l i sh ing a

Higher

d u c a ~ i o n

Cont r ibu t ion Scheme

No. 11533 ER)

The

Cabinet

noted the outcome

o f

consu l t a t ions

with var ious p a r t i e s

as

requ i red by Cabine t Minute No.

11302

o f 16 June

1988.

2.

The Cabinet

agreed

t h a t

: -

a )

a Higher Educat ion Cont r ibu t ion

Scheme

HECS) be

implemented from 1 January

1989,

as s e t out in

d e t a i l a t

Attachment A

to Submiss ion No. 5922,

but with the removal o f t he exemption proposed

a t paragraph 8,

page

10, fo r s t u d e n t s who have

undertaken

year 12 o r ts eq u iv a l en t )

on

f u l l

AUSTUDY o r ABSTUDY be ne f i t s ;

. . . /2

This

do

cumen t is t he

property

of

the

Australian ove rnmen t and is not to be copied or reprodu

ced

CABINETIN CONFIDENCE

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2 .

No. 11731

Cont d)

(b)

the Higher

Educat ion

Adminis t ra t ion

Charge be

abol ished

from

1

January

1989;

c ) the Minis ter

for

Employment,

d u c a ~ i o n and

Training

would examine

the app l icab i l i ty to

HE S

of the

soc ia l secu r i t y arrangements app

l ying

to

New Zealand

c i t i z ens res ident

in

Aust ra l i a ;

(d)

the

HE S

be implemented under the Commonwealth s

bene f i t s to s tudent s

head

of

power

(S.

51

(xxi i iA)) of

the

Cons t i tu t ion ,

on

the

understandings t h a t : -

( i ) the

enabl ing l eg i s la t ion (a Higher

Educat ion

Cont r ibut ion

Scheme

Act)

be

in t roduced for passage

in the 1988

Budget s i t t i ngs , with addi t iona l

l e g i s l a t i v e dra f t i ng resources engaged

as

necessary

for t h i s purpose;

( i i ) the

l eg i s la t ion

would

incorpora te

~ p p r o p r i a t e provis ions to fu l ly

ass imi la te the

co l l ec t ion

o f HE S

( i i i )

payments

with

normal

income

t ax

assessment and

co l l ec t ion

procedures;

the l eg i s la t ion implementing the

Government s

decis ions

on an upgraded

t ax

f i l e number system

would

proceed

as

or ig ina l ly planned,

subjec t

to an

amendment a t

t ime

of

passage

of the

/3

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

CABIN ET 1 N CON

Fl

DENCE

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3.

No.

11731 (Cont d)

HE S l eg i s la t ion

to f a c i l i t a t e

use

of

the tax

f i l e

number

for

t ax

adminis t ra t ion

purposes re la ted

to

the

co l l ec t ion of

HE S

payments;

~ d

iv) the l eg i s la t ion governing h i g ~ e r

educat ion grants

to

the

Sta tes

for the

1989-91

t r iennium

would be dra f ted to

inc lude the

cur ren t

provis ions

re la t ing

to the

Higher

Education

Adminis t ra t ion

Charge,

for

repeal

on passage

of

the

HE S

l eg i s la t ion ;

and

e )

in

developing

the HE S

l eg i s l a t ion , the Minis t e r

for Employment,

Educat ion and

Train ing

would

examine the f ea s i b i l i t y

of

waiving indexat ion

of

HE S debts for persons out of the workforce

for

long

periods due to , for example,

unemployment

or

i nva l id i ty .

(This endorses Minute No. 11533 (ER) of

28 Ju ly 1988.)

Secre tary

to

Cabine t

This document is the property of

the

ustralian Government and is not to be copied or reproduced

CABIN ET 1

N CON

Fl DENCE

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CABINET IN ON

Fl

DEN E

Copy o. __

C A B I E T : I

: I

U T E

Expendi ture Review Committee

Submission No. 5922

Memorandum No.

5925

-

Canberra, 3 August

19

WB

No.

11582 ER)

Establ i sh ing

a

Higher

Educat ion

Contr ibut ion Scheme

Establ i sh ing a

Higher

Educat ion

Contr ibut ion

Scheme

Further to Minute No. 11533 ER) .e:f

28 Ju ly

1 9

the

Committee

noted the requirement tha t t he

Commonwealth

make

an e x p l i c i t

payment

d i r e c t l y t o higher

____

educat ion

i n s t i t u t i o n s under i t s benef i ts to s tuden t s power

in

discharge o f

s tudent s '

l i a b i l i t i e s under

the Higher

Educat ion

Contr ibut ion

Scheme

HECS).

2.

The Committee agreed t ha t

a )

in

orde r to s a t i s f y the requi rement

under

paragraph

1 above, from 1 9 8 Commonwealth funds

for higher educa t ion would

be

pa id

as

fo l lows : -

( i ) approximately twenty

percent

d i r e c t l y

to

higher educa t ion i n s t i t u t i ons

v i a

the

mechanism

o f a Higher Educat ion

Trust

Fund;

and

. . . /2

This document

is

the property

of

the Australian Government and

is

not to be copied or reproduced


[6]

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C BINET IN CONFIDENCE

2.

_r

o. 11582 ER)(Cont d)

( i i ) approximate ly

e igh ty

p e rc e n t

~ ~ t h

Sta t e s

as

per

c u r re n t

S t a t e s

Grants

l e g i s l a t i v e

ar rangements ;

b) t was

disposed

a t t h i s s t age to i n t r o d u c ~ i o n in

the 1988

Budget Si t t i ngs

o f

a s i n g l e l e g ~ s l t i v e

package encompassing the funding a r rangements

ou t l ined in sub-paragraph 2(a )

above,

the

proposed

a b o l i t i o n

o f the

Higher

Educat ion

Adminis t ra t ion Charge and t he i n t roduc t ion o f

HE S but

t h a t

a

f i na l d ec i s io n be t aken a f t e r

fur the r

co n s id e r a t i o n

o f the

i s sues ;

and

(c)

use

of the

upgraded t ax

f i l e number

sys tem

to

f a c i l i t a t e a l loc a t ion

o f

s tuden t

c on t r ibu t ions

under

HE S

shou ld

be

i nc luded

in

t he

Tre a su re r s

t ax

f i l e number l e g i s l a t i o n , with t h i s fu r the r

use o f the sys tem

to be c ond i t i ona l

on

passage

o f

the

HE S l e g i s l a t i o n .

~ ~

Committee

Secre ta ry

This document is

the property

of

the

ustralian

Government and

is not to e copied

or

reproduced


[7]

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CABINET CONFIDENCE

Copy No 6:

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

Expenditure Review

Committee

Canberra,

1

August 1988

No. 11552 ER)

Submission No. 5922

Establ i sh ing

a Higher Educat ion

Contr ibut ion

Scheme

Memorandum No.

5925

Estab l i sh ing a Higher Educat ion

Contr ibut ion

Scheme

Fur ther

to

Minute No. 11533

ER)

o f 28 Ju ly

1988,

the

Committee noted an ora l

repor t

from

the

Minis t e r

f o r Employment, Education and

Tra in ing on

the progress

o f

o f f i c i a l s discuss ions on

the i s sue o f

Budget and Nat iona l

Accounts c l a s s i f i c a t i o n of s tuden t c on t r ibu t ions under

the

proposed

Higher

Education Contr ibut ions

Scheme HECS).

2 .

The

Committee agreed

t h a t i s sues r e l a t i n g t o

the

c l a s s i f i c a t i on

of s tudent cont r ibut ions under

HE S

as e i t h e r

a

revenue i tem o r as an o f f s e t

to

out lays , and i s sues

r e l a t i n g

to

the

use

of the

tax

f i l e

number

in

the

HECS,

be

s e t t l e d

between

the Treasurer and Minis t e r

for

Employment,

Educat ion and Tra ining in c ons u l t a t i on

as necessary

with the

Minis te r for

Finance.

Committee Secre ta ry

Th is doc ument is the prope

rty of

t he ustralian Government and is

no

t to be co p ied or rep

ro

d

uce

d


[8]

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Copy No

C A B I N E T

M I N U T E

Expendi ture

Review Committee

Submiss ion No. 5922

Memorandum

No.

5925

Canberra ,

~ Ju ly

19

8

No. 11533

ER)

Estab l i sh ing a Higher

d u c a ~ ~ o n

Cont r ibu t ion Scheme

Estab l i sh ing

a Higher

d u c a t ~ o n

Cont r ibu t ion

Scheme

2

The Committee noted the outcome o f consu l t a t ions

with va r ious p a r t i e s as

r eq u i r ed

by Cabinet Minute No.

11302

o f

16 June 9

2.

The

Committee

agreed t h a t : -

a )

a Higher

Educat ion

Cont r ibu t ion Scheme HECS) be

implemented

from 1

January 1989, as

s e t out

in

d e t a i l a t Attachment A to

Submiss ion

No. 5922,

but

with t h e

removal

o f t h e exemption proposed

a t paragraph 8, page 1 @ fo r s t u d e n t s who have

undertaken y ea r

12

o r its equ iva len t )

on f u l l

AUSTUDY

o r ABSTUDY be ne f i t s ;

b )

the Min is te r fo r Employment, Educat ion and

Tra ining, in

c o n su l t a t i o n

wi th

the Min is te r

fo r

Finance

and

t h e

Treasure r , would

propose an

appropr ia te form o f

words

fo r announcement a t

Budget t ime on enhancements to AUSTUDY

and

ABSTUDY Attachment C to t h e Submiss ion

r e f e r s ) ;

/ 2

This document is the

property

of the Australian Government nd is not

to

be

copied

or reproduced


[9]

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2 .

No. 11533 (ER)(Cont d)

c)

the

Higher

Educat ion

Adminis t ra t ion Cha=;e be

abol ished

from

1 January 1989;

(d)

the Minis ter for Employment, Educat ion = d

Train ing

would

examine

the

a p p l i c a b i l i ~ 7 o

HECS

of

the

soc ia l

secu r i ty

arrangements

app:7ing

to

New

Zealand c i t i z ens res iden t in A u s t r a : ~ a .

(e ) the HECS be implemented under the C o m m o ~ ~ e a l t h s

bene f i t s t o s t uden t s

head

of

power (S.

51

(xxi i iA))

of

the

Cons t i tu t ion , on

the

understandings t h a t :

( i )

the enabl ing l e g i s l a t i o n (a Higher

Education

Contr ibut ion Scheme Act) be

in troduced for passage in the 1988

Budget s i t t i ngs ,

with

addi t iona l

l eg i s la t ive dra f t ing resources engaged

as necessary for t h i s

purpose;

( i i )

the

l eg i s l a t ion would

incorpora te

appropr ia te

provis ions to fu l ly

ass imi la te the

co l l ec t ion

of HECS

( i i i )

payments

with

normal

income

t ax

assessment and

co l l ec t ion procedures;

the l eg i s l a t ion implementing the

Government s

decis ions on

an upgraded

tax f i l e number system would

proceed as

or ig ina l ly

planned, subjec t to an

amendment

a t t ime of passage

of the

. . .

/ 3

This document s the

property of the

ustralian

Government and

s not

to be copied

or

reproduced


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3.

No. 11533

(ER)(Cont d)

3.

HE S

l eg i s l a t ion

to

f a c i l i t a t e

~ s of

the t ax

f i l e

number for

t ax

adminis t ra t ion purposes

r e l a t e d

to the

col l ec t ion

of

HE S

payments; and

iv ) the

l eg i s l a t ion

governing h i g h ~

educat ion

grants

to

the

Sta t e s =or the

1989-91 t r iennium would be dra f ted to

include

the

curren t provis ions

r e l a t ing

to

the Higher Educat ion Adminis t ra t ion

Charge,

for

repea l

on

passage of

the

HE S

l eg i s l a t ion ; and

f ) in developing the

HE S

l e g i s l a t i o n , the Hin is te r

for Employment, Educat ion and

Tra in ing

would

examine

the

f ea s i b i l i t y

o f

waiving

indexat ion

of

HE S

debts

for persons out of the workforce for

long periods

due

to , fo r

example, unemployment

o r

i nva l id i ty ;

The Committee a l so agreed t ha t o f f i c i a l s from

the Aus t ra l ian Bureau of S t a t i s t i c s , the

Depar tment of

Finance

and

the

Department

of

Employment,

Educat ion

and

Train ing should meet

urgent ly to c l a r i f y the

c l a s s i f i c a t i o n

o f

HE S

payments as

e i t h e r

revenue i t em o r as an of f se t

to

out lays , and

r epor t

on

the

outcome o f those

discuss ions as

soon

as poss ib le .

Committee Secre tary

This

document

is the property of the ustralian Government and is not

to

be copied or reproduced


[11]

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Title

Date

Originating

Department s)

Cabinet -

Ministerial

uthority for

Memorandum

Purpose of

Memorandum

Legislation

Consultation:

.

Departments

consulted

. ls-tnere

- g r e ~ m e r u ?

--=cost:

firs fiscal year

. year 2

. .year 3

CAB.NET-IN-CONFID,ENCE

- CORRIGENDUM TO MEMOAANDUM ~ ~

OR

C B I N ~ T

_ -

COPY No.____

_

.-

ESTABLISHING A HIGHER

EDUC TION

CONTRIBUTION=

SCHEME

28

Ju ly 1988

Aust ra l i an

Taxat ion

Off ice

To br ing to Mini s t e r s a t t en t i on consul ta t ion

comments r e l a t i ng

to Cabinet Memorandum

No. 5925 ~ Y

r ep l ac ing page 1

with

new

page

1

8/10/2019 1988-89 cabinet paper 5925

13/33

Title

Date

Originating

=-------=-

Department(s)

Cabinet or

Ministerial

~ u t h o r i t y for

------o-==

Memorandum

Purpose

of

Memorandum

Legislation

Consultation:

Departments

consulted

Is

there

agreement?

Cost:

. Th_js_ji_

c pl y ~ a r

year2

year 3

== CABINET-IN-CONFIDENCE

OR C BINET_

M E ~ l l A N I 1 U M

N

2

_ _=4

- COPY- No

________

_

-


E D U C A T I O N

~

C O N T R I B U T I O N

SCHEME

25

_

Ju ly 1988

Aust ra l i an Taxat ion

Off ice

P.J .

Keating, Treasure r

- To

brinq

to Ministers '

at tent ion

cer ta in

issues

h i ~ h r e l a t e to co l l ec t ion arrangements

_

fo r_ the

higher

educat ion cont r ibu t ion scheme proposed- in

t he a t t ached Cabinet Suomissio

n

No. 5922,

sponsored by the Hen, J .S .9 . Dawkins

- MP,

Minis te r

fo r Employment,

Eaucat ion and

Tra in ing .

The

more

- impor tant

i s sues

- r e l a t e

t o : -

-

Leg i s l a t ive

t imetab le and draf ing

resources

Col lec t ion

arrangements

Student

i den t i f i c a t i on

Accounting aspec t s

The Attorney-General ' s

Department

_

advises

t ha t _

~

sepa ra t e laws

deal ing

with

Ci

> imposi t ion

_ of a -

=

high_er educat ion

-

con t r

_

bu t ion and

_ J

t

- .

a s s e s s ~ e n t and

co l lec t ion w i l l

be

r ~ u i r e a .

Employment,

_

Education

and

~ r a i n i n g ; F i n a n c e ;

Treasury ; Prime M i n i s t ~ r _ a n d C a b i n e t ;

Attorney-Gene_ "a-ls

L

Off ice of -Par l iamenta ry

CQunsel;

A r ~ s Spor t the_

Environment;

Tourism

and T e r r i ~ o r i e s ;

Defence; and

Adminis t ra t ive

Serv ices .

No. DEET,

Finance and

PM C are of the view t ha t

to

delay

passage of the HECS l eg i s l a t i on would

~ p l a c e a t r i s k a 1989 commencement

fo r

the

scl

i

eme

--

Finance

chal lenges

ATO

re source

es t imate .

See Attachment D.

NA

~ ~ ~ ~

~

h l s

docum ent

is

the property of

the Australian Government

and is

not to be

copted

orreproduced

CABINET-IN-CONFIDENCE

I Z ~ -

:/

z ..

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ATTACHMENT D

17.

CONSULTATIONS

The

Department

of

Em

p lo ymen t , Education and

Train in

g provided

t he fo l lowing comments :

The

Department

of Employment, Education and

Tra in ing

DEET>

notes the concerns expressed

by

t he Aus t ra l i an Taxat ion

Off ice

ATO>

t ha t the l eg i s l a t i on

requi red

to implement a

Higher

Education Cont r ibut ion

Scheme HECS>

would be

very

d i f f i c u l t

to

prepare in t ime fo r passage

dur ing the 1988

Budget s i t t i ngs

of Par l iament . t

acknowledges

the

other

pressures

on

the

dra f t ing

re sources

on

the

Off ice of

Par l iamentary Counsel , espec ia l ly i n r e l a t i on to urgent

t axa t ion

l eg i s l a t i on and

agrees

t ha t t h i s

may

neces s i t a te a

review

of

ove ra l l

l e g i s l a t i ve

p r i o r i t i e s

and/or the

engagement of

add i t iona l

dra f t ing resources .

However, DEET

does not bel i eve t h a t

it

i s a fea s ib le

a l t e r na t i ve to de lay

passage

of the

HECS

l eg i s l a t i on to the

Autumn

1989

sess ion

of Par l iament .

Such

a

delay

would

pose

major pr ac t i c a l and presen ta t iona l

problems.

Students and

i n s t i t u t i ons

would not be under any s t a t u t o r y obl iga t ion to

comply

with the new

enrolment procedures which

w i l l

be

necessa ry

to

implement the

scheme from

the

beginning of

1989.

The l ack of a l e g i s l a t i ve base

would a l so

serve to

exacerba te any oppos i t ion to the

scheme,

which wi l l

neces s i t a te changes in the adm ini s t ra t ion of s tudent

records

in

higher

educat ion

i n s t i t u t i ons .

Moreover,

it w i l l

be

impor tant

t ha t

a s imi la r

t imetab le

be fol lowed for both

the

HECS l eg i s l a t i on and the Sta tes Grants l eg i s l a t i on cover ing

higher

educat ion funding for 1989-91, to ensure

t ha t

r e l evan t provis ions a re compat ible

and complementary.

The

pr ac t i c a l e f f ec t of a

d e fe r r a l

of

passage

to the Autumn

1989

sess i on would probably be to de lay the in t roduc t ion

of

HECS

to the

beginning

of the

1990

academic

yea r

r e s u l t i n g

in a loss of

revenue

of

up

to $400 mil l ion over the long

term. Commencement in mid

1989

would not be a

prac t i cab le


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TT CHMENT D

18.

a

l t e r na t i ve given

the

enrolment procedures

applying

in many

i n s t i t u t i ons .

Accordingly ,

DEET

urges

t ha t

high

p r i o r i t y be

given

to ensur ing t ha t resources

a re ava i l ab le fo r

dra f t ing

of

the

necessa ry

l eg i s l a t i on

for

passage

in

the

1988

Budget

sess ion .

The Department suppor ts the

comments

made

by

the Aust ra l i an

Taxat ion Off ice rega rd ing s tudent i den t i f i c a t i on procedures

and HECS co l lec t ion

arrangements .

t agrees t ha t there

should be the c lose s t poss i b l e al ignment to HECS

assessment

and co l lec t ion procedures with e x i s t i n g

income

t ax

processes ,

and

suppor ts

the

arrangements proposed

by

the

TO

cons i s ten t with

t h i s

objec t ive .

The Department

recognises

t ha t some HECS accounts w i l l need

to

be kept open

for cons ide rable pe r iods

of t ime,

but sees

no

case

a t t h i s poin t to determine a f ixed

per iod

for

c lose -o f f

of

dormant accounts . Decisions on t h i s

mat te r

should

be defe r red

un t i l t he payment behaviour of

s tudent s

and

graduates

can be

fu l l y assessed . A

premature

deci s ion

could l ead

to

unnecessary

revenue

loss and adverse

equ i t y

e f f e c t s .

2.

The Attorney-Genera l ' s Department reques ted

t h a t

the

words

appear ing

a longs ide

the

heading Legis la t ion on

page 1

of

Cabinet Memorandum No.

5925

be

amended

to read :

The

Attorney-Genera l ' s Department

advises

t ha t , if based on

the

t axa t ion power,

separa te

laws

deal ing with ( i )

impos i t ion of a higher educat ion cont r ibu t ion and ( i i> t s

assessment and co l lec t ion wi l l be requi red .


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CABINET IN CONFIDENCE TT CHMENT D

19.

3.

The Department

of Prime

Minis te r

and

Cabinet provided the

fol lowing comments :

The

Department of the Prime

Minis te r

and Cabinet

i s

concerned

t ha t to de lay

passage

of the HECS

l eg i s l a t i on

un t i l ea r l y

in

the Autumn 1989 s i t t i ngs

would

place

a t

r i s k

the commencement of the scheme

in

1989, with i n s t i t u t i ons

and s tudent s being under no l ega l ob l iga t ion to co-opera te

with processes necessary to implement the HECS. The

Department cons ide rs t ha t

passage

of the HECS l eg i s l a t i on

should be

l inked

with repea l of HEAC providing a fu r the r

urgency to passage in the Budget 1988

s i t t i n g s .

We r e a l i s e t ha t

to achieve

t h i s end

dra f t ing pr i o r i t y would

need to

be given to t h i s l eg i s l a t i on

a t the

expense of o t he r

l e g i s l a t i on .

Minis te r s may need

to

cons ide r

reques t ing

Par l iamentary

Business Committee

to change the present

p r i o r i t y given

to d ra f t ing cer t a in

l e s s

urgent

t axa t ion and

o the r l eg i s l a t i on .

The Department notes the d e s i r a b i l i t y of keeping the HECS

as

s imple

as poss ib le to a id adminis t ra t ive e f f i c iency .

In

t h i s

r e spec t ,

the Department i s not opposed to the

propos i t ion

t ha t

long dormant accounts

be

c losed

and

the accumulated HEC debt wri t t en-of f .

4.

The

Department of Finance

provided

the fo l lowing comments

:

Finance

notes

the

concern

of

the

Tax

Off ice

in

r e l a t i on

to

having s u f f i c i en t t ime to achieve

passage of the l eg i s l a t i on

in the

Budget s i t t i n g s , and

the r i s k t ha t f a i l u r e

to

accommodate t h i s t imetab le would convey

fo r

compliance with

HECS procedures in the f i r s t pa r t of 1989. Accordingly,

Finance considers

t ha t

the HECS l eg i s l a t i on

should

have

pr i o r i t y in

any

review of

the

l eg i s l a t i on program for

the

forthcoming

Par l iamentary sess ion .


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TT CHMENT D

20.

Finance

notes

a l so t he

arguments

presented

a t

Attachment

and acknowledges

the admini s t ra t ive

burden

posed

by

r e t a in ing inac t ive

accounts over a long pe r iod

Finance

cons ide rs t h i s s t rengthens the

argument

fo r in t roduc ing a

f a s t e r

repayment

schedule than t ha t proposed , and fo r

imposing a more

r e a l i s t i c

i n t e r e s t r a t e on outs tanding debt

to in t roduce

appropr ia te incent ives

fo r

repayment . Finance

does not

support

the waiving of debt

a f t e r

a per iod of t en

years

on

the grounds

t h a t t h i s

would cons t i tu te

an

incent ive

to

de lay r e t u rn i ng

to

the workforce.

Finance a l s o

no tes

t h a t no j u s t i f i c a t i on has

been

provided

in t he Memorandum fo r the

resources

t he TO i s seeking

Finance i s

no t

s a t i s f i e d

t ha t

the

re sources TO i s seeking

over t he per iod

1988-89 to 1990-91 w i l l

be

necessa ry

to

implement

the

scheme.


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Title

Date

Originating

_BeQartment s)

- -

- Cabj n-et or

Ministerial

Authority=for

Memorandum

Purpose

of

_

Memorandum

Legislation

Consultation:

. DeR.artments

consolted

:::=J

sJ:here

~ g ~ m e n t ?

=Cost:

=- This-fiscal year

.

year

2

-

=o;

year 3

CABINET -IN-CONFIDENCE

./.

5925

MEMORANDUM

N o ~ = : : : : :

. _

- 'AI =

FR C BINET

COP Y

No. _____________ _ _ _ _ _ =


EDUCATION

CONTRIBUTION

SCHEME

25 July

1988

Aust ra l ian Taxat ion Off ice

P e a t i n g Treasure r

To

br ing t o M i n i s te r s

a t t en t ion ce r ta in

i s sues

which

r e l a t e

to co l l ec t ion

arrangements

fo r

the

higher

educat ion

cont r ibu t ion

scheme proposed

in

t he a t tached

Cabine t Submission

No.

5922

~

sponsored by the Hon J .S .D. Dawkins

MP __

Mini s t e r

for Employment Educat ion

ana

Tra in ing . The

more

impor tant

i s sues r e l a t e t ~ ~ ~ ~

Legis la t ive t ime table and dra f i ng

resources

Col l ec t ion

arrangements

-

s tudent i d e n t i f i c a t i o n

Accounting

aspec ts

The At to rney-Genera l s Department

adv.ises

t h a t

sepa ra t e

laws dea l ing

with

imposi t ion

of

a

higher educat ion

cont r ibu t ion

and ( i i> ts ~ ~

assessment and

co l l ec t ion wi l l

be requi red .

Employment

Educat ion

and

Train ing; F ~ n a n c e ;

Treasury;

Prime

Mini s t e r

and

Cabinet ;

At torney-Generals ;

Off ice of

Par l iamentary

Counsel ;

Arts , Spor t , the Environment; Tourism

and

Ter r i to r ie s ; Defence; and Admin i s t ra t ive

Services .

- - Memorandum lodged p r io r t o r ece ip t

of

c

onsul t a t ion comments

which

w i l l

be

i ncorpora ted as a corr igendum.

~

This IJocum.=;nt tS

fhe

p r Q ~ t y of

the ustralian Government and

ts

noLto be copied

or

reproduced

CABINET IN.: CONFIDENCE

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2.

BACKGROUND

This memorandum accompanies a

submission

by the Minister for

Employment Education and Training which seeks

agreement

to

es tabl ish

a

Higher

Education Contribution

Scheme

designed

to

secure contr ibut ions towards the cos t of higher

educat ion

from

individual

benefic iar ies of

higher

educat ion

under

a

capaci ty- to-pay t e s t based

on

taxable income.

2.

I t brings

to a t tent ion

issues of

note

re la t ing

to

t ha t

part

of

the proposal to col lec t higher educat ion contr ibut ion

HEC>

through

the

taxat ion system in par t icular

:

The

Legislat ive

Timetable

Student

Ident i f ica t ion

Collection Arrangements

Accounting

Aspects

THE

ISSUES

3.

The

i ssues

mentioned

in

paragraph

2

are

deal t

with

in

summary

hereunder. Attachments

A B and C

explain

a t

length the

i ssues re la t ing

to

the Legis la t ive Timetable Collect ion

Arrangements

and

Accounting

Aspects.

Legis la t ive

t imetable

and

draft ing

resources

4.

Subject to the views of the

Office of

Parl iamentary Counsel

which i s

responsible for

draf t ing

the

Austral ian

Taxation

Office ATO> considers tha t based on recent

comparable

l eg i s l a t ive

programmes t

i s

not cer ta in tha t the l egis la t ion

necessary

to implement a higher educat ion

contr ibut ion

scheme

HECS>

could

be

prepared

in t ime

for passage in the

1988

Budget

s i t t ings .

To

achieve tha t resu l t the se t t l ing of re levant

pol icy i ssues the

preparation

of

draf t ing

ins t ruc t ions

the

draf t ing and sett lement

of

the l egis la t ion and the

preparation

of

necessary explanatory material would need to be completed

within

approximately 8 weeks. Given the

nature of

the

subject

matter

tha t t imetable would be very di f f i cu l t

to achieve unless

some

streamlining

can

be achieved

in the draf t ing

process.

CAB I

ET IN CONFIDENCE

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3.

5.

Consideration could instead

be

given

to

t iming

the

l egis la t ion for

introduction very l a te in the Budget s i t t ings

for

passage during

ear ly Autumn

1989

thereby

effec t ive ly

doubling

the

l egis la t ive

preparation period.

While

on tha t

t imetable HECS

debtors

and

educational i ns t i tu t ions

would not

be

under any s ta tu tory obligat ion

to

comply with necessary

revised

enrolment

and

re-enrolment procedures in

Semester

1

1989 the

l egis la t ion as introduced should

be

a suff ic ient guide

to enable those procedures

to

be

implemented.

6.

Over one-third

of the

draf t ing

resources

of

the Office

of

Parliamentary

Counsel

s

al located

to

and

deeply

occupied

on

high pr io r i ty taxat ion

legis la t ion

scheduled

for introduction

and passage

during

the

1988 Budget and 1989 Autumn s i t t ings .

The scheduled completion

of

important

taxat ion

legis la t ion would

be put a t r i sk unless

al te rna t ive

draf t ing resources are able

to

be al located to

preparation of the proposed

HECS.

That

may

impact on non-tax elements

of

the l egis la t ion programme.

7.

These

matters

are

discussed

in

deta i l

in

Attachment

A

Student

Ident i f ica t ion

8.

Having

regard

to

the

fact tha t

the proposal

cal ls for HEC

contr ibutions to be col lected via

the

annual income tax

assessment

programme students

who

would

be

making the i r

contr ibutions through

the

taxat ion system would

need

to

be

able

to

ident i fy

themselves in a way

tha t

was

sa t is fac tory

to

the

Commissioner

of

Taxation.

Collect ion

Arrangements

9.

For the ATO to have

a sa t is fac tory HEC

col lec t ion system

in

place under

the very res t r ic ted t imetable proposed for the

in t roduct ion

of

HEC col lect ion

arrangements

must

be

kept simple

and compatible with the

exist ing

tax col lec t ion system.


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4.

10.

This

can

be

achieved by

al igning

HEC assessment and

col lec t ion processes as closely as possible

to

exis t ing income

t ax processes

but

a t the same t ime keeping the HEC processes

simple

and

st ra ightforward.

lOA To

th i s end t i s

envisaged tha t a

l eg i s l a t ive

scheme

comparable

with tha t

for

the medicare levy

would

be adopted.

That

i s ,

a

student l i able

to

the HEC would be

levied

an

addi t ional income tax a t the

ra te

of 1 2 or 3 per

cent

as

se t

out in paragraph seven

of

Submission

No 5922.

The law

would

fur ther

provide

tha t the tax

so

levied

i s

not

to

exceed the

amount

of

the

charge as

indexed

to

date

less

amounts

of

HEC

t ax

previously paid. This

addit ional

amount

would

be

included

in

the

s tudent s income

tax

not ice of

assessment.

11. The bes t

way

of

col lect ing HEC

would be through the exis t ing

pay-as-you-earn

system on

e i the r a

compulsory

or

voluntary bas is . A

voluntary approach

to PAYE would mean tha t

more

payments

would need

to

be processed each year as there

would

be more

debi t balances

ar i s ing

on

assessment. On

the

other

hand

a compulsory

system would

be

more r ig id

and

subject

to fur ther evaluat ion

may

be l ess adminis t ra t ively e f f i c i en t

than a

voluntary

system.

12. These

matters

are

discussed

in

more de ta i l n Attachment

B

The system

discussed in

tha t

Attaphrnent

i s

aimed

a t avoiding the

need for separate i n i t i a l i d e n t i f i c ~ i o n

of , and accounting for ,

PAYE amounts re la ted to HEC l i ab i l i t i e s and ensuring tha t HEC

l i ab i l i t i e s are given pr io r i ty in applying monies received

to

outstanding l i ab i l i t i e s .

Accounting

Aspects

13.

A

feature of the proposed

HEC

scheme

wil l

be the need

to

re t a in

student data for many years unt i l

repayment

of the to ta l

HEC

debt. While for

the

most

par t re tent ion

periods

wil l

be

in

the

range

of

10

to

15

years

allowance

has been

made

for

a

30

year period

for

the

purposes

of est imating

re levant resource

cos ts , to

take in eventual i t ies such as students being out of

the

workforce for

periods a f t e r graduation.


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6.

20.

The col lect ion system summarised a t paragraphs 9-12 and

described in deta i l

in

Attachment B would el iminate

the

need for

a separate

ident i f ica t ion

of and

accounting

for

PAYE

amounts

re la ted to

HEC

and

ensure

tha t

almost a l l

HEC l i ab i l i t i e s were

col lec ted on assessment. The system

which

closely follows

exis t ing col lect ion

arrangements

would lend

i t s e l f

to e i ther

a

voluntary

or compulsory PAYE

arrangement. Either would be

sa t i s fac tory but more study needs

to

be

done

before deciding

which i s

administrat ively

more

eff ic ient .

21. The memorandum

also notes

some

other prac t ica l

issues

including

the

need

to

resolve

in

the

longer

term

the

undue

re tent ion

of

student

accounts for anything up to 40 years in

respect

of persons who unknown

to

the

ATO have died or

permanently

l e f t

the workforce

or

Austral ia . That

cost needs

to

be

minimised.


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CABINET

IN CONFIDENCE

ATTACHMENT A

7 .

LEGISLATIVE TIMETABLE AND

DRAFTING

RESOURCES

1.

On

an

analysis

of

scheduled

Parliamentary

s i t t ing

days,

Bil l s for passage during the Budget

1988

s i t t ings would

ordinar i ly

need

to

be

introduced by

19 or 20 October. That

would

leave 4

s i t t ing

weeks n the House of Representatives

and

5 n the Senate. A 19 or 20 October introduction would allow

the customary'minimum of

one

week's consideration/one week's

debate

n both

chambers before the

end

of the

s i t t ings .

2. On

tha t bas is

a

t imetable

for

the preparation

of the

necessary l egis la t ion for

passage

th i s year would

be as follows:

07 October 1988 : se t t l e Bil l with Parl iamentary

Counsel

12 October

1988

:

explanatory material to

Legislat ion

Committee of

Cabinet

18 October 1988 : consideration

by

Legislat ion

Committee of

Cabinet

19/20

October

1988

: in troduct ion n House of Representat ives

3. I t can be seen tha t

the

time for

the

set t lement of policy

i s sues

preparat ion

of draft ing ins t ruc t ions the draft ing of

the

l egis la t ion the

settlement of

the

Bil l and the

preparation

of explanatory memoranda e tc . would be l imited

to

about 8

weeks.

4. Successful

preparation

of the

proposed

HEC legis la t ion

within such a t igh t t imetable would be di f f i cu l t to

achieve,

par t icular ly

given

the

degree

of

consultation

and

co-ordination

tha t wil l

be

necessary between the

Austral ian

Taxation

Office,

the

Department of Employment Education and Training

DEET>

and

t e r t i a ry

i ns t i tu t ions

n

bringing together the

technical

taxat ion col lec t ion rules

with

the educational

provisions

per taining to chargeable courses, l i able students , exemptions,

student

information

col lect ion e tc . At a minimum

draft ing

would

need to

be given every pr io r i ty policy

i ssues

se t t led

without delay,

and

relevant

off ic ia l s

l e f t

unimpeded by

matters

such

as

being required to consult with

in teres t groups.

CABINET IN

CO FIDENCE

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C BINET

N

CONFIDENCE

ATTACHMENT

A

8.

6 . Even a f t e r broad pol icy dec i s ions a re taken there w i l l

remain very

many

matters

of de t a i l to be determined dur ing the

l eg i s l a t i ve

pre pa ra t i on

phase.

J u s t some

of

which

have been

i d e n t i f i e d

a re :

a>

de f in i t i ons for chargeable courses , educa t iona l


and

l i ab l e

s tudents ;

b>

con ten t and process of

informat ion

f lows

from the

educa t iona l i n s t i t u t i ons

to ATO;

C )

es tab l i shment and opera t ion

of t he

Higher Educat ion

Trus t Fund;

d> demarcat ion

of adminis t ra t ive re spons ib i l i t i e s as

between ATO DEET and the educat ional

i n s t i t u t i ons ;

e>

if HECS i s not to be based so le ly on the

t axa t ion

power

of the Commonwealth, the dra f t ing process would be

more

d i f f i c u l t and t ime consuming; and

s tudent iden t i f i c a t ion

processes .

7 .

As

a fa l lback

in the

event

of

l e g i s l a t i o n

not being ready

fo r

passage in 1988, cons ide ra t io?

could

be

given

to having

l eg i s l a t i on

ready

fo r

i n t roduc t ion

in

the Par l iament very l a t e

in t he Budget 1988 s i t t i ngs ,

i.e.

about 30

November

o r

1

December

1988.

On

t h a t

t iming,

the

l eg i s la t ion

could

be

debated

and

passed through both Houses

ea r ly in

the

Autumn 1989

s i t t i n g s , in t ime to author i se r ece ip t of the f i r s t prepayments

o f HEC

t h a t can be

expected a f t e r

30 Apri l 1989.

8 . Compared with a t tempt ing

to

achieve passage t h i s year , an

i n t roduc t i on

only

approach

to the Budget s i t t i ngs

would

a l low

a)

the prepa ra t ion

t ime

for

the

novel

l e g i s l a t i v e

package

to be e f f e c t i v e ly doubled;

C BINET

N

CONFIDENCE

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ATTACHMENT

A

9 .

b>

add i t i ona l t ime befo re in t roduc t ion fo r b e t t e r dra f t i ng

and

reduce r i sks of t echnica l defec t s ; and

c>

a

more

orde r l y

approach to

be

t aken to the design and

implementat ion

of co l l ec t ion

systems,

processes for

in format ion

t r a n s f e r ,

the

t r a in ing

of ATO and

i n s t i t u t i o n s ' s t a f f , and the prepa ra t ion and

disseminat ion of

appropr ia te

pub l i c i ty and informat ion

mater ia l , inc luding

the

establ i shment

of

enqui ry

f a c i l i t i e s .

However,

t h i s

would be

a

second best

outcome. t

would

su f f e r

the disadvantage t h a t systems development and pr i n t i ng of t ax

r e tu rn

forms would

need to proceed without

ce r ta in ty

th a t

the

l e g i s l a t i o n

f i na l l y enac ted would not

have

changed. t

would

a l so be exposed to

charges

t h a t explanatory mate r ia l publ i shed

i n advance of enactment was usurp ing the

ro l e

of the Parl iament .

9 . While it

might be argued

t ha t ,

under

an

in t roduct ion

only

t imetab le , ne i the r

the

educat ional


nor

s tuden t s

would be under any l ega l

obl iga t ion

to

adhere

to

the

admini s t ra t ive processes t ha t would

be

necessary

to

get the HEC

scheme

under way in

the f i r s t

semester

for

1989, the

a v a i l a b i l i t y

of the dr a f t l eg i s la t ion

as

in t roduced may

be

s u f f i c i en t to enable those processes to be implemented.

10.

Attent ion

i s

a l so

drawn

to the

immense

quant i ty

of high

p r i o r i t y

t axa t i on l eg i s la t ion

much

of it emanat ing from the

Business

Tax

Review dec is ions announced

by

the Treasurer

in May

scheduled fo r i n t roduc t ion and passage

dur ing

the

for thcoming

Budget

s i t t i ngs

and

in the Autumn s i t t i ngs 1989. To deal with

t h a t workload, the Office of Par l iamentary Counsel has

a l loca ted

over one- th i rd of

i t s

dra f t ing resources

to

t axa t ion

l eg i s l a t i on . Those resources

are

heavi ly occupied on such

important dra f t ing mat te rs as the superannuation changes,


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TT CHMENT

A

10.

taxat ion of l i f e insurance companies depreciation changes e tc .

which have major revenue

implications

and for which there i s

a

public

expectat ion of

early

in troduct ion

of

l egis la t ion tha t

has

immediate appl icat ion.


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C BINET

N CONFIDENCE

TT CHMENT B

11.

COLLECTION RR NGEMENTS

1 . The

most

e f f i c i e n t

and

cos t

e f f ec t ive

method of co l l ec t ing

HEC would be

by

means of a workable pay-as-you-earn PAYE>

system. Under the cur ren t income t ax P YE system

t h a t

appl ie s

t o sa l a ry

and

wage ea rne r s

in the grea t major i ty of cases

there

a re

s u f f i c i e n t t ax ins ta lment

deduct ions

to cover the

annual

tax

l i a b i l i t y

and. the re i s

no

need to make fur ther payments.

2. A

workable

P YE

system would be one

t h a t

simply inc reases

an

e x i s t i n g l eve l

of

t ax

ins ta lment

deduct ions

s u f f i c i e n t l y

to

cover

both t ax

and an

expec ted HEC l i a b i l i t y . A system

t h a t

requi red sepa ra te i n i t i a l iden t i f i c a t ion

o f and

account ing fo r

deduct ions made in

respec t of

HEC l i a b i l i t i e s by both employers

and

the Taxat ion

Off ice would

c rea t e very

heavy

adminis t ra t ive

d i f f i c u l t i e s and add i t i ona l workloads

for

a l l concerned.

3 .

A

workable system could be

e i t he r

compulsory

o r

vo lun ta ry .

In

e i t he r

case

it

would

r e ly

on

the s tudent

employee

advis ing

t he employer

t ha t addi t iona l P YE

deduct ions were to be made.

Natura l ly under a volunta ry system t he re would

be

many more

cases where because the P YE opt ion was no t taken up the

s tude n t employee would be

l e f t

with an

amount

to

pay a f t e r

r e c e ip t

of

the annual t ax

assessment.

4 .

At

t h i s s t age more work

needs

to

be

done to f ind out

whether

the complexi t ies and workloads of compulsory

P YE would

be

so grea t

as to outweigh

the

workload

of rece iv ing an

es t ima ted

400 000 to 500 000 smal l

payments

annual ly under a

volunta ry

system when

c l i en t popula t ion

reaches i t s peak some

years in the fu t u re . Neverthe less

it

can be sa id

with

conf idence t h a t a sa t i s fac to ry co l l ec t ion system would

r e s u l t

under e i t h e r opt ion .

Even

i a f a i r l y l a rge number of small

debts were c rea ted annual ly t h a t would not be l i k e ly to cause

inord ina te

debt management problems because having

regard

to

the

taxpayer

pr o f i l e

most

should

be

paid wi th in

the

t ime

al lowed for

payment.

C BINET N CONFIDENCE

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C BINET

IN

CONFIDE

CE

TT CHMENT

B

12.

5. I t

cannot

be emphasised

too strongly

tha t for

the

TO to

have

a

proper

system

in place

under

the very di f f i cu l t

t imetable proposed, assessment

and col lect ion

arrangements must

be kept as

simple

as

possible so

as to allow

for

in tegrat ion

with

an

exist ing very complex system without

the

need

for

fur ther

major changes tha t

could

put severe s t ra ins on tha t

system.

6. A system

approach

tha t

would go

a long way towards

sat isfying these requirements and

which

would optimise

HEC

col lect ions

i s

as

follows:

(a)

Students

paying HEC through the taxat ion

col lect ion

system would nominate the i r

to ta l

HEC

debt

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ATTACHMENT

13.

d>

After assessment checks would be made to

ensure

tha t

students who

had

a l i ab i l i t y

to

pay

HEC were in fact

doing

so;

t e s t checks

could

a lso

be

made

against

l i s t s supplied

by the

ins t i tu t ions

as

to

the accuracy

of the to ta l debt nominated.

e>

To help students

ver i fy the i r to ta l HEC debt

and

to

calcula te

the i r annual payment l i ab i l i t y the ATO

would

advise students annually of the

current

balance

in

the account

in

which the i r outstanding HEC debt

accumulates.

CABINET IN CO DENCE

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ATTACHMENT C

14.

ACCOUNTING

ASPECTS

1.

ATO

wishes

to

bring

to a t tent ion

some

aspects

of designing

and implementing a revenue col lec t ion system

suitable to

the

proposed

HEC scheme.

2.

The

system

would

require

the

maintenance of a

data

base

separate from but in tegrated

with

the

exis t ing

National

Taxpayer

System .

Integrat ion with the NTS

s

necessary

because l i ab i l i t y to

pay HEC

s to

be l inked

to

income tax

assessment calculat ions.

3.

n addit ional

cost element

of the System

t ha t

s pecul iar to

HEC

wil l

be

the need

to

re ta in student data

for

many

years

unt i l

the repayment of the to ta l debt.

4 . Some

analysis has been

done to ascer ta in how long

t might

take graduates n

various

occupations to repay

the HEC

debt.

The analysis

s

based on a model prepared by the

ATO

of income

prof i l e s

of

sa lar ied

professional

taxpayers

a t

year

in terva ls

over

the i r working l ives . The model shows a tendency for the

incomes of

graduates to

increase a t a

fas te r

ra te than average

weekly

earnings AWE> n

the immediate

years af te r

graduation

up

to about

age

35 and thereaf te r

to

general ly keep

pace

with AWE.

5. From tha t analysis

the

following

payback periods

are

ant ic ipa ted

for

persons whose

incomes are n

the mid-range of

the prof i le :


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. . .


Medical

Prac t i t i one r s

Lawyers

Dent i s t s

ve te r ina ry

Surgeons

Chemists

f

Phys i c i s t s

f

Biologi s t s

f

Agronomists

f

Geologis t s

Economists

Archi t ec t s

Engineers

Surveyors

Teachers

Accountants/Tax Consul tants

Graduate

n genera l

c l e r i c a l work

Graduate in Publ ic

Service

15.

5

f f )

( f

4

3

4

3

1988-89 cabinet paper 5925

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