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EDUCATION SERVICES FOR OVERSEAS STUDENTS (REGISTRATION CHARGES) AMENDMENT BILL 2003

2002-2003




THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




HOUSE OF REPRESENTATIVES






EDUCATION SERVICES FOR OVERSEAS STUDENTS (REGISTRATION CHARGES) AMENDMENT BILL 2003






EXPLANATORY MEMORANDUM















(Circulated by authority of the Minister for Education, Science and Training the Hon Dr Brendan Nelson MP)


EDUCATION SERVICES FOR OVERSEAS STUDENTS (REGISTRATION CHARGES) AMENDMENT BILL 2003

OUTLINE

The Education Services for Overseas Students (Registration Charges) Act 1997 (the ESOS Charges Act) operates in conjunction with the Education Services for Overseas Students Act 2000 (the ESOS Act) with the aim of:
- ensuring only courses and providers of those courses registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) may offer or provide courses to students on student visas;
- ensuring that international students in Australia receive the education and training for which they have paid;
- ensuring taxpayers’ funds are not required to recompense overseas students let down by individual education and training providers;
- protecting the reputation and integrity of Australia’s education and training export industry; and
- strengthening public confidence in the integrity of the student visa program.

The ESOS Act and its complementary legislation, established key national elements for the regulation of the international education and training services industry. It addressed problems facing the industry; the uncertain financial protections for students’ pre-paid course fees; the emergence of a small minority of unscrupulous providers; and inconsistent quality assurance. The development of the legislation involved consultation with industry, State and Territory authorities and Commonwealth agencies, particularly the Department of Immigration and Multicultural and Indigenous Affairs.

This Bill creates a new fee structure to replace the current inequitable tiered charges structure for the compulsory annual registration charge payable by all providers registered on CRICOS. The base fee and charge per student enrolment will replace the existing scale of fees which places a greater burden on providers with small numbers of overseas students.

Currently, costs of administering the ESOS Act are partially recovered through compulsory registration fees, raised in accordance with the ESOS Charges Act, and charged to all providers registered on CRICOS. Additional revenue from the new charging structure will enable the Government to support and expand Australia’s international education industry.

Protection and enhancement of Australia’s reputation for providing reliable and high quality education is crucial to achieving sustainable growth of this important export industry. This Bill continues the Government’s support for a strengthened regulatory framework for Australia’s education and training export industry and will ensure its integrity and long-term viability.

FINANCIAL IMPACT

The Bill will be Budget neutral and will not increase costs to the Commonwealth. The Department will receive $5.1 million over 4 years on an ongoing basis for increased compliance and enforcement activity.

EDUCATION SERVICES FOR OVERSEAS STUDENTS (REGISTRATION CHARGES) AMENDMENT BILL 2003

NOTES ON CLAUSES

Clause 1 - Short title

Provides for the Act to be cited as the Education Services for Overseas Students (Registration Charges) Amendment Act 2003.


Clause 2 - Commencement

Provides for the Act to commence on the day on which it receives the Royal Assent.


Clause 3 - Schedule(s)

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.


Clause 4 - Application

Provides that the amendments made by Schedule 1 apply to the annual registration charge for the first calendar year after the calendar year in which this Act commences and all later calendar years and apply to the initial registration charge for registrations on or after 1 January in the first calendar year after the calendar year in which this Act commences.

REGULATION IMPACT STATEMENT

INTRODUCTION

The international education and training export industry earns Australia over $5 billion per annum. Over 1100 education and training providers and 25,000 courses are registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). The industry creates jobs and yields tax revenue from businesses both within and outside the education sector. It also strengthens our relations with the student source countries and regions. The internationalisation of education enriches the life of educational institutions and benefits domestic students by promoting cross-fertilisation of ideas and cultures. An added benefit of our competition in the international market place is the stimulus to quality and innovation it creates, which is in the interests of all students.

The Government supports the industry through bilateral and multilateral activities and targeted program assistance. It regulates the industry through the Education Services for Overseas Students (ESOS) Act 2000 and imposes charges on providers of education and training to overseas students through the ESOS Registration Charges Act 1997 (the ESOS Charges Act). The ESOS Act also assists the Commonwealth’s migration policies through its close relationship and compliance input to the student visa program. The ESOS Acts complement State and Territory regulation that is intended to assure the quality of education and training. The ESOS Acts are administered by the Department of Education, Science and Training.

The ESOS Act tightened the regulation of education and training services for overseas students studying in Australia on student visas following difficulties encountered in enforcing the previous legislation. It focuses on the protection and enhancement of Australia’s international reputation and the need to ensure that overseas students receive the tuition for which they have paid. The ESOS Act does this by regulating providers and providing financial and tuition protection for overseas students’ pre-paid course fees. At the same time, the ESOS Charges Act was amended to increase charges on all providers to contribute towards cost recovery.

The ESOS Act aims to ensure that:

• only courses and providers of those courses registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) may offer or provide courses to students on student visas;

• overseas students receive the education and training for which they have paid; and

• taxpayers’ funds are not required to recompense overseas students let down by individual education and training providers.
Details of the origins of the ESOS Act are at Attachment A.

This Regulation Impact Statement (the RIS) details the new charges structure and its impact on industry. The new charges structure will:

1) enable the Government to achieve greater regulatory compliance to reduce the risks posed to our education and training export industry and our overseas reputation by mismanaged and/or disreputable providers and non-bona fide students; and

2) create a more equitable payment system for providers.

The Commonwealth recovers the costs of administering the ESOS Act through compulsory registration fees charged to all providers wishing to be registered on CRICOS to allow them to offer courses to overseas students. These charges are contained in the ESOS Charges Act. A provider is required to pay an initial registration charge on registration and an annual registration charge each calendar year thereafter.

The annual registration charge for any particular year is based on total enrolments of overseas students in the previous year. The amount of the charge for the year is calculated using the table in the Charges Act with an annual CPI increase. Table 1 shows the current charges applicable for 2003.

TABLE 1: ARC RATES FOR 2003

Revenue from registration charges in 2003 is estimated to be $1.8m. This revenue is returned to the Department of Education, Science and Training to administer the ESOS Act. It contributes to, but does not fully reimburse the Department for all those costs incurred in administering the ESOS Act.

B PROBLEMS

Protection and enhancement of Australia’s reputation for providing reliable and high quality education is crucial to achieving sustainable growth of this important export industry. A small number of providers are not operating in the best interests of the industry and are damaging Australia’s reputation.

There is concern amongst Commonwealth and State and Territory agencies, as well as within the industry, that the strengthened provisions of the ESOS Act are not being sufficiently enforced to protect and enhance the reputation of the industry. The Department of Education, Science and Training has been questioned by the Senate Committee on Employment, Workplace Relations and Education during Senate estimates hearings as to the extent of its enforcement activities. The industry, through the Australian Education Industry Peak Body (representing key industry organisations) has criticised the lack of action against providers of concern.

Criticisms have been raised that too little action has been taken against rogue providers who, for example, offer courses at below cost to students whose primary purpose is to gain entry to Australia, which calls into question the integrity of the industry as a whole.

Since the implementation of the ESOS Act from 4 June 2001, significant administrative resources have been consumed in educating providers about their obligations, on establishing the Assurance Fund introduced by the new ESOS Act and further developing the database applications which support administration of the ESOS Act. Enforcement actions that have been undertaken to date have demonstrated that each case will be time consuming, require intensive investigation and usually be unique in the issues that must be addressed. This means that the Department is limited to acting reactively.

While the ESOS Act provides substantial powers to the Department of Education, Science and Training to meet the government’s regulatory objectives, the ESOS Charges Act returns insufficient funds to the Department to undertake the necessary level of proactive enforcement action.

C OBJECTIVES

The objective of this proposal is to ensure the legislative intent of the ESOS Act is carried out by the removal from CRICOS of providers who do not comply with their obligations.

D OPTIONS

Two alternative regulatory and non-regulatory measures were considered as part of a Budget process in relation to achieving the objective stated above. These options were:

1) Retaining the Status Quo
2) Restructuring the charges payable by industry to be registered on CRICOS

E IMPACT ANALYSIS

E1 RETAINING THE STATUS QUO

No change meant static costs for industry.

However, as explained under the Problems section, existing resourcing of monitoring, compliance and enforcement activities is too low to impose the Parliament’s intent expressed by the current legislative and regulatory framework. Keeping the status quo would impact on the prospects for the industry in the longer term and place at risk domestic acceptance of the industry, the experience of education for domestic students and the long term benefits in trade and foreign relations.

E2 RESTRUCTURING THE CHARGES PAYABLE BY INDUSTRY TO BE REGISTERED ON CRICOS

In the 2003 Federal Budget, the Government announced an international education package of $113 million, which includes an additional $5.1 million over four years, on an ongoing basis, for increased compliance and enforcement action by the Department. The Government also announced that registration charges would be restructured to strike a more equitable balance between large and small providers as the current charging structure imposes a relatively greater burden on registered providers with small numbers of students.

This option continued the existing policy of seeking cost recovery from providers for the costs of administering the ESOS Act. This intention that the cost of administering the regulation of the industry be borne by registered providers, to the greatest extent possible was contained in the Bills which gave effect to the substantial reforms in 2000.

The details of the changed charges structure are in the following table.

TABLE 2: EXAMPLES OF NEW CHARGES COMPARED WITH EXISTING CHARGES

The new charging structure announced in the 2003 Budget comprised of $300 for each provider per annum, plus $25 per student enrolment each year. For approximately half of the providers registered on CRICOS, there will be little or no change to the amount paid.
The charge would apply equally to all providers of the same size category, regardless of sector or whether the provider was a public or private provider. The base fee and set dollar amount per student enrolment also means that no provider will pay more or less than any other provider on a per capita basis.

While the new scale of charges presents an additional cost to some providers, it is highly likely that registered providers will pass this increased charge directly to their overseas students. The amount passed onto students would be insignificant in terms of the course fees charged. Importantly for students, this charge protects the quality and reputation of their qualification for their long term benefit.

The definition of enrolment will also remain the same with students enrolled for less than 26 weeks equivalent to 0.5 and student enrolled for more than 26 weeks equivalent to 1.0.

The small business impact is considered negligible as for many small providers with low numbers of overseas students, their total ARC will decrease.

A Regional Impact Statement is not necessary in this instance. The effect of the proposed restructure will be nationwide and there will be no differential impact between regional and urban areas. The proposed restructure does not concern, and will not result in, a withdrawal of services from regional areas.

G CONSULTATION

Comprehensive consultation was undertaken with stakeholders in the context of the ESOS Reforms during 2000. Additional consultations have not been conducted for this RIS as there is no proposed change to the regulatory framework. There has been no change in the environment since the introduction of the ESOS Act that would indicate that industry or State and Territory government views would be significantly different than those expressed in 2000.

H RECOMMENDATION

It was concluded by Cabinet that the best option available was to restructure the registration charges legislated through the existing ESOS Charges Act as the additional revenue raised will be used on a cost recovery basis to ensure the legislative intent of the ESOS Act can be carried out by the removal from CRICOS of providers who do not comply with their obligations.

This is important because the actions of just a few providers operating without integrity or quality, or by students seeking student visas for purposes other than study, have the ability to:

• damage the image of Australia as a desired education destination;

• decrease student numbers;

• spark international relations issues with source countries of students affected; and

• place further community pressure on government to more tightly control inflows and the movements of overseas students to Australia.

I IMPLEMENTATION AND REVIEW

As a result of the Government’s Budget announcement, the Department has now begun the process of amending the ESOS Charges Act. Passage and enactment of the amendments to the ESOS Charges Act will result in the new charging structure applying to all registered providers from 1 January 2004.

The ESOS Act provides for an evaluation to commence by December 2003. It is anticipated that this evaluation will provide the opportunity to consider the costs and effectiveness of administration, and alternatives such as greater industry self-regulation.

ATTACHMENT A

ORIGINS OF THE ESOS ACT

The international student program was put under severe pressure in the late 1980s-early 1990s by the closure of a number of private institutions. The closures resulted from the inability of a number of private providers to refund prepaid course fees to students who were refused student visas under tightened entry measures applied by the then Department of Immigration and Multicultural Affairs in response to evidence of non-compliance with student visa conditions by students, predominantly from the People’s Republic of China. A backlog of student visa applications resulting from the evacuation of Commonwealth immigration and education department officers from the Australian Embassy in Beijing post-Tiananmen Square also had an impact on the cash flow of some colleges.

A special task force was established in July 1990 to implement a refund program for international students who had pre-paid fees but were not given visas, and to recover taxpayers’ money from those institutions on whose behalf the Commonwealth had made refunds to students. The Commonwealth has paid more than $70 million in the past ten years in refunds to overseas students and associated costs.

The Commonwealth was concerned at the potential damage to Australia’s reputation as a reliable provider of quality education and training services and responded by introducing the Education Services for Overseas Students Act 1991. In 1992 a Senate Standing Committee ^[2] summarised that:

“Australia’s reputation as a provider of educational services to overseas students was threatened in the late 1980’s by a combination of events. These included:

• the emergence of some unscrupulous providers in the private education sector;

• some evidence of unevenness in the quality of both services provided and the support structures for students;

• the financial collapse of several private institutions and the consequent adverse publicity in overseas countries about the problems of students who lost money as a result.
The ESOS Act was therefore designed to address the legitimate concerns that had been raised about some educational institutions that were dealing with overseas students. It was intended to protect provider and course quality through registration of institutions and to protect student funds held by providers.

It also signalled to education providers and potential overseas students that the Government was serious about remedying problems arising from the failure of institutions and the loss of funds by students and preventing any recurrence of such problems in the future.”

Following extensive consultations with industry, State and Territory authorities and Commonwealth agencies, new legislation was proposed.

On June 4 2001, the new ESOS Act 2000 came into effect. It extended the old ESOS Act by establishing key national elements for the regulation of the international education and training services industry including a new regime for the registration of education and training providers, the National Code of Practice for Registration Authorities and Providers of Education and Training for Overseas Students (the National Code) as a nationally consistent code to provide greater quality assurance for overseas students; and increased enforcement powers of the Commonwealth.

Schedule 1—Amendments

Education Services for Overseas Students (Registration Charges) Act 1997

Item 1 Subsection 5(2)

Repeals subsection 5(2) and inserts a new subsection to replace the existing tiered annual registration charge structure with a new fee structure composed of a base annual charge per provider of $300 plus $25 multiplied by the total enrolments for the provider in the previous year. For 2005 and later years the dollar amounts for calculating the annual registration charge are to be indexed under section 7. In addition, a dollar amount may be different if an instrument under section 5A is in force.

Items 2-3 Subsections 5A(1) and 5A(3)

Repeal subsections 5A(1) and 5A(3) and insert new subsections to reflect the amendments made by Item 1 in provisions dealing with the variation of an annual registration charge.

New subsection 5A(1) will give the Governor-General the discretion to make a written instrument providing that a dollar amount or amounts specified in paragraph 5(2)(a) or (b) is/are replaced by the dollar amount or amounts specified in the instrument.

New subsection 5A(3) provides that an instrument made under subsection 5A(1) may provide that a replacement dollar amount or amounts apply to one class of provider only, or may provide different replacement dollar amounts for different classes of provider.


Item 4 Subsection 5A(5)

Amends subsection 5A(5) to reflect the amendments made by Items 1-3 in relation to parliamentary approval of an instrument dealing with the variation of an annual registration charge.

Subsection 5A(5) will now provide that if each House of the Parliament passes a resolution approving the instrument, then, for each class of provider that the instrument relates to, the amount of annual registration charge payable for the relevant years is worked out using the replacement dollar amount or amounts specified in the instrument instead of the dollar amount or amounts that would otherwise have applied.

Items 5 and 6 Subsections 7(1) and 7(1A)

Amend subsections 7(1) and 7(1A) to reflect the amendments made by Items 1-3 and 7 by providing that section 7 (dealing with the indexation of amounts) applies for the purpose of working out the amount of the initial registration charge for any year after 2004 (in lieu of 1997) and also applies for the purpose of working out the amount of annual registration charge for any year after 2004 (in lieu of 2001) unless that year is the first year to which a particular section 5A instrument applies. [The reason for the exception is that the possibility of indexation for that year can be taken into account in making the section 5A instrument, so there is no need for section 7 to apply as well.]


Item 7 Subsection 7(2)

Amends subsection 7(2) to reflect the amendments made by Items 1-3 by providing that, in relation to the indexation of amounts, the dollar amounts specified in subsection 5(2) or in an instrument in effect under section 5A and the amount specified in the formula in subsection 6(2) [dealing with the initial registration charge], are to be adjusted for the current year by multiplying the amounts that applied to the year before the current year by the indexation factor worked out using the formula in subsection 7(2).