Contents
Purpose
Background
Financial implications
Main issues
Key provisions
Concluding comments

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Date introduced:  6 July 2011
House:  House of Representatives
Portfolio:  Education, Employment and Workplace Relations
Commencement:  The commencement provisions are complex and varied and are outlined in detail on pages 5 and 9 of the Explanatory Memorandum.

Links: The links to the Bill, Explanatory Memorandum and second reading speech for the Education Services for Overseas Students (Registration Charges) Amendment Bill 2011 can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. The links to the Bill, Explanatory Memorandum and second reading speech for the Education Services for Overseas Students Amendment (Registration Charges Consequentials) Bill 2011 can be found on the Bill’s home page, or through http://www.aph.gov.au/bills/. 

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The purpose of the Education Services for Overseas Students (Registration Charges) Amendment Bill 2011 and the Education Services for Overseas Students Amendment (Registration Charges Consequentials) Bill 2011 (the Bills) is to amend the Education Services for Overseas Students (Registration Charges) Act 1997 (the ESOS Charges Act) and the Education Services for Overseas Students Act 2000 (the ESOS Act) to:

• create a new fee structure to replace the current charging structure for the compulsory annual registration charge payable by all registered providers of courses to students on student visas, and
• introduce an entry to market charge payable for the first three years of registration which will replace the current initial registration charge.

Background

The ESOS Act and associated legislation is the legal framework governing the responsibility of education providers towards students who come to Australia on a student visa. The ESOS legislative framework consists of the ESOS Act, ESOS Regulations, the National Code of Practice for Registration Authorities and Providers of Education and Training to Overseas Students (the National Code) and the ESOS Charges Act.

The legislation provides a nationally consistent approach to registering education providers and sets out clear roles and responsibilities for providers wanting to teach overseas students.

The principal objects of the ESOS framework are:

• to provide financial and tuition assurance to overseas students for courses for which they have paid
• to protect and enhance Australia’s reputation for quality education and training services and
• to complement Australia’s migration laws by ensuring providers collect and report information relevant to the administration of the law relating to student visas.

The current ESOS Act has its origins in the substantial strengthening and reforms that occurred in 2000 amidst allegations of immigration ‘rorts’, poor quality education services, college closures and exploited students.[1] The framework was later generally endorsed as sound by an independent evaluation in 2004–05 and 41 recommendations to improve its effectiveness were implemented in amendments to the ESOS Act in 2006 and 2007.

Despite these reforms, problems in the international education sector came to a head in 2009 with media exposés of unethical behaviour within the sector, college closures and protests by Indian students following some assaults on individuals in their community.

In response the Rudd Government introduced amendments to the ESOS Act pending a review of the Act. The 2009 amendments required the re-registration of all institutions registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) by 31 December 2010, introduced two new registration requirements to strengthen the education credentials of education providers, and required providers to list the names of their agents and comply with any regulations relating to them.[2]

The review which had been scheduled for 2010–2011 was brought forward and former Member of Parliament Bruce Baird was appointed to chair it.

Baird Review amendments take a new regulatory approach

The Baird review of the Education Services for Overseas Students Act 2000 reported in February 2011 and stressed new and strengthened regulatory approaches to protect Australia’s reputation for quality education. The review stated:

The entry requirements need to be strengthened for providers wanting to enter the sector. Changes need to be made to ensure providers have the financial resources to operate and a sustainable business model. They need to have the right capacity, capability and intent to operate successfully. Risk needs to be better identified at entry into the sector and a range of indicators need to be used that go to the heart of whether the provider will be able to operate successfully now and in the future. This assessment of risk should guide whether the provider gains entry to the sector, and it should be used to test and scrutinise providers already through the gateway.[3]

The first stage response to the recommendations was implemented with the passage of the Education Services for Overseas Students Legislation Amendment Bill 2010. Providers are now required to demonstrate access to financial resources, have a sustainable business model and the capability, governance and management structures to support the delivery of education of a satisfactory standard. It also extended the risk managed approach used in the re-registration process to the ongoing monitoring throughout registration. This entails a consistent process for assessing risk to be applied by all state authorities and a consistent risk related management strategy.[4]

On 7 December 2010 the Government released the discussion paper Reforming ESOS: Consultations to build a stronger, simpler, smarter framework for international education in Australia to seek feedback on the second phase of its response to the Baird Review. Many questions focussed on the appropriate way to assess and manage risk.[5]

The provisions in the Bills mark the second stage in the implementation of the recommendations of the Baird review.

Financial implications

The rebasing of the Annual Registration Charge (ARC) will reduce the total amount collected by the Commonwealth by approximately $8 million: from $15 million in 2011 to $7 million in 2012. The annual charges are appropriated back to the Department of Employment, Education and Workplace Relations (DEEWR) to support, administer and enforce the ESOS Act.[6]

The impact on education providers will see the majority of existing providers with a reduced ARC whilst providers with a history of non-compliance may pay more.

The proposed new entry to market charges are higher than the existing initial registration charge but as with the ARC, certain providers may be exempt from the payment.

Main issues

Annual Registration Charges (ARC)

The ARC was last amended in 2007. Since then the number of overseas students studying in Australia has risen from 450 500 in 2007 to 620 000 in 2010. The Vocational Education and Training (VET) sector has seen the greatest growth from 102 000 students in 2007 to 206 000 in 2010.[7] There continues to be a growing diversity in course provision and providers. The proposed new ARC reflects the diversity of provision, it allows for a reduction in cost for providers offering courses of less than 13 weeks (currently the minimum is 26 weeks) and allows cost recovery from providers assessed as higher risks and a reduction in charges for providers assessed as low risk.

Entry to Market Charges

The new entry to market charges follows recommendations from the Baird review to implement further risk management and assessment. New providers are considered to be of higher risk and will pay more. The Government fact sheet states:

The entry to market charge has been designed to more accurately recoup the additional costs associated with new applications for registration and the additional supervision required by providers with a shorter history of registration. Evidence suggests that these providers present a greater risk to the sector, so the new entry to market charge will enable better targeting of compliance efforts and shift the regulatory burden to those providers with the greatest risk to quality, the student experience and the reputation of the sector as a whole.[8]

Key provisions

Education Services for Overseas Students (Registration Charges) Amendment Bill 2011

There is one schedule to the Bill proposing amendments to the ESOS Charges Act.

Proposed subsection 5(2) introduces new ARC amounts comprised of the sum of:

• $1300 base fee
• $10 per overseas student enrolment per year (as calculated by proposed subsections 5(3) and 5 (4)
• $100 for each course registered on CRICOS plus
• $1000 payable only by a provider against whom the Minister has imposed sanctions for non-compliance under section 83 of the ESOS Act in the past 12 months.

As discussed in the main issues above these proposed provisions widen the existing provisions and more appropriately cater for the diversity of providers and courses.

Proposed subsection 5(4)(b) reduces these administrative costs for provision of courses of 13 weeks or less by reducing the count of the enrolment to 0.25 of an enrolment.

Item 5 repeals section 5A of the ESOS charges Act which allows the ARC to be varied by a written instrument approved by Parliament. Proposed subsection 5(7) allows a regulation-making power to vary the ARC.

Proposed Section 6 deals with a new entry to market charge. The entry to market charge replaces he current initial registration charge and is payable annually in each of the first three years of CRICOS registration. Under the Bill providers seeking registration on CRICOS will be liable to pay three entry to market charges:

•  $7500 at the time the provider first becomes registered
• $5000 on the first anniversary of the day on which the provider was registered and
• $2500 on the second anniversary of the day on which the provider was registered.

The amounts will change under a formula provided for in section 7 – ‘Indexation of amounts’.

Proposed section 6(4) allows a regulation making power to exempt one or more classes of providers from paying the entry to market charge. The fact sheet states that ‘under this proposal providers deemed to present a significantly lower risk to the market may pay a lesser amount or be exempt from the requirement to pay components of the registration charges’.[9] The Explanatory Memorandum is more specific stating that those classes would be:

Publicly-funded providers who present a significantly lower risk of defaulting on their obligations under the ESOS Act such as publicly funded providers (ie, Table-A providers under the Higher Education Support Act 2003 and, TAFEs), and government schools. The rationale for the exemption from the entry to market payment is based on the evidence that the likelihood of publicly-funded institutions closing or defaulting on their obligations is extremely low compared to some private providers. On this basis, such bodies require far less supervisory activity under the ESOS framework, and accordingly should be charged a reduced or lesser amount.[10]

Item 13 repeals section 9 and proposes a new section 9 that confers a regulation making power on the Governor-General. The Explanatory Memorandum states

Under this amendment, the Governor-General may make regulations prescribing matters required, necessary or convenient for the operation of or giving effect to the ESOS Charges Act. Any such regulations would be legislative instruments under subsection 6(a) of the Legislative Instruments Act 2003.

Education Services for Overseas Students Amendment (Registration Charges Consequentials) Bill 2011

The provisions of the consequential Bill are technical in nature and simply implement the primary Bill’s provisions.  They do not warrant further discussion in this Digest, other than to note that there are guidelines for the Secretary with respect to registering providers and the notice that must be given to providers liable to pay an entry to market charge.

Concluding comments

The Bills are the second stage in the Government’s implementation of the Baird review’s recommendations to strengthen the risk management elements of education services to overseas students. The Government believes the provisions in the Bills will further protect the quality and reputation of Australia’s international education export industry (estimated to be worth $19 billion annually), by adjusting the amounts to be paid under the ESOS legislation and introducing greater fluidity as to which entities are to be charged.

The measures are the latest in many amendments to the ESOS framework since 1997 aimed at protecting the industry. They should be welcomed by stakeholders at a time when added pressures such as the value of the Australian currency, competition from other countries, visa rule changes and concerns of student welfare have resulted in falling enrolments.[11] In particular the measures should be welcomed by those providers who will be classed as low risk and exempt from charges.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2709. For copyright reasons some linked items are only available to members of Parliament.