Letter of Transmission

1. The Secretary's review 1999-2000

2. The Department

3. A summary of the Department's roles and the new reporting framework

4. Analysis of performance for Outcome 1

5. Analysis of performance for Outcome 2

6. Analysis of performance for Outcome 3

7. People management

8. Management and accountability

9. External scrutiny and legal matters affecting the Department

A1. Staffing statistics

A2. Occupational health and safety

A3. Freedom of information

A4. Payments to advertising and market research organisations

A5. Consultancies

A6. Performance against actual results against outcomes and outputs

A7. Financial statements

A8. The Higher Education Contribution Scheme

A9. Discretionary grants

A10. Glossary and acronyms

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Under the Higher Education Contribution Scheme (HECS), most students can choose to pay their contribution up-front or defer payment. The Commonwealth provides a 25 per cent discount to eligible students who pay up-front. Students who choose to defer payment take out a loan with the Commonwealth Government and agree to repay that loan when their income reaches the minimum threshold for repayments. The Commonwealth pays an amount equivalent to the discount for up-front payments and the loans directly to the students’ institutions. These payments are funded by repayments of HECS loans received in that year which are paid into the HECS Special Account. Any shortfall is covered by the Commonwealth’s contribution to the HECS Special Account.

Table 91 shows the total amount of HECS contributions from students by payment method and the financing of the discount and loans from the HECS Special Account.

Table 91: Total HECS liabilities 1998-1999 to 1999-2000

Note: Discount for upfront payments and loans for both years are estimates as is the PAYE for 1999-2000

Table 92 shows the total outstanding HECS debt and the transactions affecting the debt balance during the year.

Table 92: HECS outstanding debt 1998-1999 and 1999-2000

Notes

(1) Adjustment to opening balance as reported by the ATO to the ANAO

(2) Adjustment to opening balance to correct rounding errors in previous years

(3) 1999-2000 reported new HECS debt includes estimates for Avondale and Curtin

* These totals are not the exact sum of the table due to rounding

Notes on Table 91 and Table 92

Note 1: The Higher Education Funding Act 1988 (as amended) gives the Taxation Commissioner sole responsibility for collecting HECS repayments through the taxation system.

The Department has primary responsibility for management of HECS, including the total accumulated debt and includes in its financial statements information collected by the Taxation Office with respect to the total accumulated debt (see appendix 7). This information is supplied by the Taxation Office in certified form pursuant to the Minister for Finance Financial Statements of Department’s Accrual Reporting Guidelines.

Note 2: In 1994 - 1995 the Pay As You Earn (PAYE) system of HECS repayment was introduced whereby additional tax instalment deductions are collected from HECS debtors by the Taxation Office, specifically to cover required HECS payments determined on assessment. In order to reflect the overall operation of HECS, last year the full transactions relating to HECS were presented in the department's financial statements as though this department received the additional tax instalment deductions collected through the PAYE system.

Because the Taxation Office does not apply the additional tax instalment deductions collected through the PAYE system directly to HECS debtors’ accounts, the amount included in last year’s Annual Report for HECS receipts through the tax system in 1998 - 1999 was an estimate. It is now possible to determine what was actually collected in additional tax instalment deductions in 1998 - 1999. Consequently, in Table 91 ‘PAYE’ and in Table 92 ‘HECS receipts paid through the tax system’, ‘Total HECS debt at 30 June’ and ‘Total HECS debt estimated to be repaid’ in 1998 - 1999 have been adjusted from that published in the previous annual report. ‘PAYE’ and ‘HECS receipts paid through the tax system’ in 1999 - 2000 reflect what is expected to have been collected in PAYE tax instalment deductions in 1999 - 2000.

It is not possible to make retrospective adjustments to the outstanding HECS debt at the end of 1998 - 1999 for the purposes of the financial statements. However, a reconciliation between the estimated additional tax instalment deductions collected through the tax system in 1998 - 1999 and what was actually collected has been performed, and the necessary adjustment applied to the determination of outstanding HECS debt at 30 June 1999.

Note 3: The full value of the HECS debt will not be recovered because individuals are not required to make repayments through the taxation system unless their income in a year reaches an indexed minimum ($21 984 for 1999 - 2000). The Australian Government Actuary has estimated that of the total HECS debt outstanding as at 30 June 2000, $1 124 million is unlikely to be repaid.