The idea behind needs based funding is that universities should be paid according to student characteristics, not just the disciplines of the subjects students take. While agreeing with the broad concept behind needs based funding, I have criticised the government’s approach for its limited use of direct measures of need.

Needs based funding as implemented modifies existing programs rather than making a major conceptual change to the funding system. It converts equity group funding and a regional campus loading to a per student basis, rather than the previous formula-driven shares of a fixed maximum fund.

I won’t re-prosecute my criticisms of the government’s policies in detail here. My focus will be on the how these policies have been translated into legislation through the Universities Accord (Opening the Doors of Opportunity) Bill 2026, introduced into Parliament in late June.

I have two main concerns about the bill compared to expectations. Low SES status will be defined by the time of enrolment in a unit of study, rather than the first address on enrolment with the provider, and so numbers will be under-stated. Also the minister can easily vary down the loadings for various student characteristics and regional campus payments for continuing students.

As with my previous explainer posts on this bill, I am happy to receive feedback via comments or direct communication.

Interim needs based funding

Needs based funding exists this year under interim legal measures. This post describes 2026 funding rules for low SES and Indigenous students. This post explains 2026 funding rules for regional campus students.

In those posts I was critical of their poor-practice legal basis, which allowed the minister to pay needs-based funding grants (or not) entirely at his discretion, with the substantive rules for allocation in a Department of Education document with no legal standing.

The bill will give the needs based funding programs a much stronger legal basis while still leaving significant ministerial discretion.

All legislative references in the following text are to the Higher Education Support Act 2003 unless otherwise specified, ‘current’ signalling the legislation now in force, ‘new’ signalling the amending bill.

Which higher education providers are eligible?

A provider is eligible if it has been allocated Commonwealth supported places for the year: new section 39-10. This applies to both the equity and regional parts of needs-based funding.

Eligible equity students

Two types of eligible equity students are fixed in the legislation. These are Indigenous and low socioeconomic status (SES) students: new section 39-25(1)(b)(i)&(ii). To be eligible, they must also be Commonwealth supported students: new section 39-25(1)(a)(i).

Under current arrangements students are low SES if they come from an area classified as in the lowest 25% of areas according to the ABS Index of Education and Occupation. This classification is unreliable for funding purposes. Its unreliability includes ‘false positives’, people who are not disadvantaged but happen to live in a generally disadvantaged area, and more seriously ‘false negatives’, people who are disadvantaged but live outside the lowest 25% of areas. This post of mine earlier this year shows little higher education participation difference between the second and third IEO deciles where higher education ‘low SES’ cuts out.

While the bill leaves the definitional problem unfixed it at least recognises it. Low SES will be defined in the Needs-based Funding Grants Guidelines: new section 39-29(4). The bill’s explanatory memorandum says that this allows the minister to amend the definition based on advice from ATEC and the sector to use ‘more precise measures’ of low SES (p. 60).

One possible step forward, one certain step backwards

On implementation, however, the bill makes the low SES definition problem worse. A long-running issue with the geographic measure is that students move to study. And because the ABS IEO includes current university students in its formula, areas around universities often end up classified as high SES, regardless of where its resident students came from originally. The partial workaround has been to use the first address recorded by the university, which captures some student locations before they moved. In the official equity statistics, the first address measure adds about 4% to the low SES total over current home location SES.

But the definition of ‘relevant eligible equity unit’ for funding purposes classifies a person as an ‘eligible equity student’ only if ‘at the time the person enrols in the unit, the person is from a low socioeconomic background’: new section 39-25(1)(b)(ii), emphasis added.

The ‘unit’ is a unit of study, or subject. So an initial enrolment by a commencing student, in January or February after first accepting their offer, might be their low SES home address where they grew up. But subsequent re-enrolments in later subjects, if they move to study, would use an address closer to the university that is less likely to be low SES. It will be another case of ‘false negative’ classifications of students as not low SES.

New section 39-25(1)(b)(ii) should be redrafted so that it reads ‘at the time the person first enrolled at the provider’. That would match the low SES definition used in the interim needs based funding policy.

Further limits on eligibility

The Needs-based Funding Grants Guidelines let the minister add further criteria to a student’s funding eligibility: new section 39-25(1)(c). The explanatory memorandum does not elaborate on what these might be.

Future eligible students

The minister can add additional equity groups through the Needs-based Funding Grants Guidelines: new section 39-25(1)(b)(iii).

Which courses are eligible?

As well as personal eligibility funding depends on the student being enrolled in an ‘eligible equity course’.

For an Indigenous student, they can be enrolled in an undergraduate or a postgraduate course: new section 39-25(3)(a). Postgraduate courses are a mix of Commonwealth supported and full-fee places. Due to the CSP requirement, an Indigenous student in a full-fee course would not attract needs based funding.

For a low SES student only undergraduate courses are eligible: new section 39-25(1)(b).

FEE-FREE Uni Ready courses are not undergraduate or postgraduate and so their students do not attract needs-based funding.

What is the funding rate for eligible students?

The base rate (or ‘base equity amount’) is set out in the legislation as $1,535: new section 39-35. This will be indexed annually to CPI: amended section 198-5(1).

For commencing students the base rate is payable on a headcount basis: new section 39-30(a).

For continuing students the rate is based on EFTSL: new section 39-30(b).

On top of the base rate there is a loading called an ‘equity modifier amount’. This will be set in the Needs-based Funding Grants Guidelines: new section 39-40(1).

The table below shows the current modifiers. All these categories are in the bill: new section 39-40(3). Because the modifiers will be in the guidelines they are not guaranteed and will be a flexible item when the government needs to cut spending.

The definition of ‘high’ and ‘general’ preparedness will also be in the guidelines: new section 39-40(4). Currently students with an ATAR of 80 or above are classified as ‘high preparedness’ and other students as ‘general preparedness’. The guidelines may deal with issues such as whether old ATARs count or not, or whether strong performance in prior higher education should affect this classification (foreshadowed in general terms at p. 63 of the explanatory memorandum).

Equity expenditure controls

Equity needs based loading money must be spent on ‘activities that are primarily for the purposes of supporting eligible equity students to access, participate in and complete eligible equity courses’: new section 39-70(2).

There can be exemptions to these criteria for activities of a kind specified in the Needs-based Funding Grants Guidelines: new section 39-70(3). I am unsure what is intended by this provision and the explanatory memorandum does not help. It could be used in a positive way, since the general condition entrenches the flaws of this program, blocking assistance to people who have real needs but don’t meet the deficient definition of low SES. The current expenditure controls also prohibit general programs to improve teaching that could be more helpful to equity students than the niche, targeted programs that can be funded under the rules as they stand.

Regional loading

Regional loadings for campuses outside the major capital cities are a longstanding feature of the funding system.

Its latest version will be a ‘regional contribution amount’. The student’s personal characteristics do not matter to the regional contribution, although they must be Commonwealth supported: new section 39-50(1)(a)(i). This loading is for regional campuses rather than regional students. However the minister can add student characteristics through the Needs-based Funding Grants Guidelines: new section 39-50(1)(c). The explanatory memorandum does not say what these may be.

Campus eligibility for regional loading

To be eligible, a campus must be located in a ‘high priority’ area: new section 39-50(1)(b)(i). ‘High priority’ is in turn defined as all ABS regional categories other than major cities: new section 39-50(4)(a). It can also be an area specified in the Needs-based Funding Grants Guidelines: new section 39-50(4)(b). The explanatory memorandum does not give examples of potential other ‘high priority’ areas. I noted in a previous post that ABS reclassifications of areas, which happen with each census, can cause regional classifications and therefore funding to change. The government might want to create some ongoing or transitional arrangements for universities in this situation.

The bill uses the expression ‘administered or delivered’ in relation to a unit of study in determining its connection to a campus: new section 39-50(1)(b). I am not sure how important these two categories are. From the explanatory memorandum a unit of study might be ‘administered’ at a regional campus if the delivery is online but managed by an organisational unit in a regional area (p. 64).

The bill allows the minister to set other requirements for campus eligibility in the Needs-based Funding Grants Guidelines: new section 39-50(1)(b)(ii). The explanatory memorandum says that this will be used to keep the current minimum 50 EFTSL before a campus is eligible (p. 65). They want to distinguish between a campus and a ‘learning centre’.

Which courses are eligible?

For commencing students the bill refers to a ‘course of study’, which is defined in the current HESA 2003 to include both higher education award courses and enabling courses: current schedule 1, clause 1 & new section 39-55(1)(a). This means FEE-FREE Uni Ready, undergraduate and postgraduate enrolments will be counted, a wider definition than for the equity component of needs based funding.

While the course definition is wide, the student also needs to be enrolled in an ‘eligible regional unit’: new section 39-50(1)(a)(ii). This in turn will be defined in the Needs-based Funding Grants Guidelines ‘in relation to the provider’: new section 39-50(3). The explanatory memorandum is unhelpful on this: ‘necessary to ensure that relevant aspects of the program can be updated as the program evolves over time’ (p. 64). The phrase ‘in relation to the provider’ implies that the guidelines could specify unique provisions relevant to one provider only.

The funding rate for commencing regional students

The base regional amount for commencing students will be $1,398: new section 39-55(3). This will be indexed annually to CPI: amended section 198-5(1).

As with the equity part of the needs based funding, there will be a loading system, called a ‘regional modifier amount’. The modifiers will be set by the Needs-based Funding Grants Guidelines: new section 39-55(4). In setting the modifier the minister must take into account the mode of delivery – online, on-campus or or multi-modal: new section 39-55(5)(1). The current relativities are in the table below, but these can be changed. As with the equity modifier, lowering these rates will be an easy way to reduce higher education expenditure.

The commencing student regional contribution is headcount but EFTSL will be used to classify them according to mode.

In setting a regional modifier amount, the minister must also consider the cost of delivering or administering regional units to commencing relative to other kinds of students: new section 33-55(5)(b). I know what this provision is getting at – commencing students are more likely to be adjusting to university study than continuing students, and so need more help – but it might lead to some counter-intuitive conclusions. It specifies the unit of study rather than the student. Commencing units may have lower costs, because they are more likely to be relatively large enrolment compulsory introductory subjects. As the course branches out into specialisations and electives the economies of scale of first year subjects decline.

The funding rate for continuing regional students

There does not seem to be a guaranteed minimum regional contribution amount for continuing students. The rate will be set in the Needs-based Funding Grants Guidelines: new section 39-40(2). The minister must do no more than take the base rate into account: new section 39-40(3)(b). He must consider the mode of study: new section 39-40(3)(a).

Total regional funding

Total regional funding will be the sum of regional contribution amounts for all eligible regional students: new section 39-45.

Regional expenditure controls

Regional funding can be used for a wide range of expenses associated with regional campuses as well as supporting students: new section 39-70(4).

Needs based funding and over-enrolment

If universities over-enrol Commonwealth supported places against an ATEC allocation they will lose associated Commonwealth and student contribution revenue. There is no connection with this in the needs based funding provisions. Payments will made for all students meeting the program’s criteria.

Timing of equity and regional payments

I heard from someone who attended the ‘targeted consultation’ on the bill that it was going to be retrospective, so that the money universities received in a year would be based on the previous year’s enrolments. That is how equity funding has worked historically.

Certainly the final sum paid under needs based funding will be arrived at after the year in question; both the equity and regional provisions refer to the ‘verified’ student data, with verification taking place after the funding year: new sections 39-25(1)(a)(iii) & 39-50(1)(a)(iii) respectively.

But HESA 2003 has a general provision that allows the payment of advances of ‘an amount that is expected to become payable under a provision of this Act’: current section 164-10. That is unchanged, but a power to recover overpayments is altered by the bill to include overpayments of needs based funding: amended section 164-15.

This implies that there will be advances of needs based funding based on estimates of current year entitlements. Advances for other variable entitlement programs, like HECS-HELP or FEE-HELP, are modified several times a year as newer data becomes available, with the final reconciliation in the subsequent year.

ENDS