University wealth ‘tax’ proposed in landmark report calling for funding overhaul

Australia’s universities should pay a “tax” on their revenue to fund the facilities needed to cater to a doubling of student numbers within 25 years, a landmark review has proposed, with prosperous institutions to contribute the most and the proceeds to be redistributed across the sector.

The recommendation, contained in the final 400-page report of the Universities Accord, is accompanied by a call for university funding to first be overhauled and responsibility handed to a new commission to design a better system, after concluding the current model is broken and “does not provide for sufficient growth in enrolments to meet the nation’s skills needs”.

Education Minister Jason Clare has not committed to implementing any of the report’s recommendations.Credit: Alex Ellinghausen

The financial levy on universities’ untied revenue – or “wealth tax”, as it has been dubbed by critics – will be fiercely resisted by the leaders of the nation’s most prestigious universities, but is expected to be welcomed by other smaller, less well-resourced institutions.

It is the main revenue-raising proposal contained in a suite of sweeping changes expressed across 47 recommendations, which lay out a blueprint for a major reshaping of university education and research funding. It puts the onus on the Albanese government and future governments to inject billions more dollars into the sector.

Education Minister Jason Clare, who commissioned the year-long review chaired by Professor Mary O’Kane, did not immediately commit to implementing any of the report’s recommendations. Clare said the government would embark on a process of costing the proposals and identifying the priorities, with the intent of formally responding to the recommendations within months.

The report recommends the creation of a $10 billion higher-education future fund with matching co-contributions from universities and government. It does not describe the financial contribution as a wealth tax or identify how much universities should pay under the levy.

But it makes clear the expectation that “those universities with the financial means to pay a higher proportion should be expected to do so”, adding that “Australia’s oldest universities enjoy the benefits of many decades of taxpayer support” and had more ability to raise revenue than smaller, newer institutions.

Sydney University vice chancellor Mark Scott, who is chair of the elite Group of Eight universities, said the proposal was a “tax dressed up as a fund” and that the group would lobby the government to reject that recommendation.

“We think if the federal government has $5 billion to contribute to the sector, then it should make that contribution and it should be addressing those universities in those areas of greatest need that are well-identified in the report,” Scott said.

“But the prospect that the government then wants to turn around and tax universities for the initiative that they’re showing in filling the funding gaps, that just seems to be shortsighted and counterproductive.”

Sydney University’s Mark Scott said the Group of Eight would oppose the proposal of a compulsory contribution fund. Credit: Louie Douvis

Universities would be expected to source their contribution from non-government revenue – a key stream of which is international student fees, but could also include money from commercial deals and philanthropy – with an independent panel to advise on how the funds should be redistributed and which projects should be funded.

The report suggests it could fund the construction of new teaching facilities, libraries and affordable accommodation for students.

Newcastle University vice chancellor Alex Zelinsky, who advocated for a levy through the Accord process, said the final co-contribution model was “good policy” that recognised there were “inequalities in the system”, namely that metro unis benefited from strong international student revenues because overseas students want to live in major cities.

“We should be talking about how to implement it in a way that works for everybody. The bigger universities will put in more because like all taxes it’s progressive, but they will also get something back because the fund is designed to support the whole system,” he said.

Deakin University vice chancellor Iain Martin said it was difficult to assess the merits of the future fund idea because it was contingent upon a whole new funding model for the sector being implemented first, but he cautioned against including philanthropy in the taxable revenue basket.

“I can tell you if the government started taxing our philanthropic giving, our philanthropic giving would disappear very, very quickly, because the whole point is that donors have given to a particular cause,” he said.

The future fund idea marks a change from the proposal in the accord’s interim report to impose a levy on international student fees. This was denounced as an “envy tax” by the Group of Eight, which represents top institutions including UNSW and Melbourne University, and takes in billions of dollars in revenue from international students.

The report sets an 80 per cent target for working-age Australians having a tertiary qualification by 2050. Achieving this is dependent upon a target of 55 per cent of young people obtaining a university degree – an increase from the current level of 45 per cent – and one that would require the government to fund a doubling of university places to 1.8 million over the next 25 years.

The report calls for a new statutory body, called the Australian Tertiary Education Commission (ATEC), to design and manage the new university funding model to cater for the growth, which would include “needs-based” loadings for underrepresented cohorts – such as disadvantaged and First Nations students – and “effectively introduce demand-driven places for equity students”.

In the Accord’s vision, the ATEC would be given a broad remit as the “steward” of the tertiary system, but would have a priority focus on pricing, issues including determining student fees and the cost of teaching.

Other recommendations include changes to the HECS-HELP student loans system to limit the financial burden on graduates; “urgent” changes to the Coalition-era fee-hikes for certain degrees such as arts and humanities to lower costs for students; fee-free preparatory courses to drive enrolments; and paid placements nursing, care and teaching professions. It also calls for a “complete reshaping” of research grants, centred on a major boost to baseline funding to put universities on a pathway to “fully funded research”.

On HECS-HELP, the report proposes transitioning from the current system – where repayments are levied based on a debtor’s entire income – to one based on marginal income, where repayments would only be levied on earnings above the minimum and each subsequent threshold; a move that it says would result in the majority of graduates repaying less in a given year than they are now. But it stops short of recommending specific threshold rates.

Professor David Lloyd, Universities Australia chair.Credit: Alex Ellinghausen

It also recommends changing the indexing of student debt to whichever is the lowest of the Consumer Price Index (CPI) or Wage Price Index, after CPI soared above 7 per cent in 2023, so that “growth in HELP loans does not outpace growth in wages”. The timing of indexation should also be changed to deduct compulsory repayments first, it said.

The report does not provide an estimated cost to the federal budget for delivering the suite of changes, which it said should be implemented in a staged way, but it said the reforms were “not only large, they are urgent” and “must get under way as soon as possible”.

Clare would not be drawn on which reforms the government would prioritise and how they would be funded.

“This is bigger than one budget. It’s not about ruling things in or ruling things out,” he said.

Professor David Lloyd, chair of peak body Universities Australia, who had been briefed on the report’s findings, said it laid out a pathway for generational change, and individual institutions would spend the coming days digesting the findings.

“I think there is probably more in the report the sector will like than not,” he said.

The report taps heavily into Clare’s vision of increasing the number of students from underrepresented backgrounds, seeing an increase in equity access as key to driving enrolment growth.

“We’re not going to have a workforce by the middle of the century with 80 per cent of people with a TAFE qualification or a uni degree unless we break that barrier down, unless we help more young people from the outer suburbs and the regions to go to university,” Clare said.

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