Australian universities bristle at student loan ‘tax’

‘Cost recovery’ levy defies logic, institutions argue

November 18, 2018
tax charges piggy bank

Australian universities appear set to lose their battle against a new government “tax”.

Under legislation introduced in September, the education department intends to impose a levy on universities to recover some of the costs that it incurs in administering student loans.

The department says that the proposal will incentivise universities to improve their compliance with loan-related guidelines and keep their students better informed. Education minister Dan Tehan said that the measure was consistent with the government’s “charging framework” that “links the cost of services to those who benefit from them”.

“Higher education providers will be required to meet the cost for the regulatory arrangements from revenues they raise from students,” he said. “Currently these costs are borne by the general public.”

Higher education analysts oppose the measure on principle, arguing that students – not universities – are the recipients of student loans.

“Rather than the department providing a service to higher education providers, the providers are providing a service to the department in managing a substantial part of the process,” said Andrew Norton, higher education programme director of the Grattan Institute. “The department says it receives about 6,000 direct enquiries a year, which is many less than it would receive if it had to directly handle the 969,000 borrowers.”

As proposed, the levy would cost each Australian university a relatively modest sum of around A$100,000 (£57,000) a year. But university groups fear that the amount could rise, with the annual charge specified not in legislation but in the accompanying regulations.

Under the current proposal, providers would be levied for the department’s expenses in handling enquiries, engaging with stakeholders and managing providers. They would not be billed for the costs of compliance, handling loan payments or general administration, but these “partial cost recovery” arrangements could change.

Universities have also protested about the tight time frame for the levy that is set to apply from January and the lack of “meaningful” consultation about the new charge.

Consultations opened on 31 October, with the release of a draft “cost recovery implementation statement” that required responses by 23 November.

A Senate inquiry into the legislation is also due to report on 23 November, with 14 of the 17 submissions to the inquiry urging rejection of the levy. The Innovative Research Universities said that the charge would “divert resources away from students’ education at a time when the government is already reducing resourcing through the Commonwealth Grants Scheme funding freeze”.

The Labor opposition referred the legislation to the Senate committee and has declined to say whether it will support or oppose the levy before the committee releases its report. Shadow science minister Kim Carr said the new charge was symptomatic of the government’s “intense dislike” of the university system.

“The intent of this is to provide a regime where the government can charge for cost recovery on a whole range of regulatory measures which the government itself imposes on universities,” he said.

However, sources expect Labor to support the legislation. They reason that the opposition has vowed to reinstate the demand-driven system – delivering the tertiary education sector a A$10 billion windfall, according to Labor’s claims – and that the university system will be able to afford to pay a few million dollars.

The legislation is expected to return before parliament in the last week of November or the first week of December.

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