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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
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property
of
the
Australian overnm
ent
and is not t o be
copi
ed or reproduced
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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
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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
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CABINET IN CONFIDENCE
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
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CABINET IN CONFIDENCE
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
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N CON
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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
CABINET IN CONFIDENCE
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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
CABINET IN CONFIDENCE
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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
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CABINET IN CONFIDENCE
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
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C BINET IN CONFIDENCE
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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C BINET IN CONFIDENCE
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
CABINET IN CONFIDENCE
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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
________
_
-
ESTABLISHING A HIGHER
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 ~ -
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CABINET IN CONFIDENCE
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. _____________ _ _ _ _ _ =
ESTABLISHING A HIGHER
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
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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.
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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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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.
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C BINET
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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
i n s t i t u t i ons
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;
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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
i n s t i t u t i ons
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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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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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.
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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.
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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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. . .
CABINET IN CONFIDENCE
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