This post in an overview of rewards and penalties available to ATEC as it enforces mission based compact terms and student places allocations.

By the standards of recent higher education regulation the ATEC compliance regime seems relatively weak. This may reflect a trade-off between maximising administrative discretion and creating clear laws to which fines could be attached.

The only automatic penalty universities face under the new system is for enrolling more students than the bureaucrats think they should have.

Rewards – the strange absence of mission funding

Despite the word ‘mission’ in the compact title and reference to university missions in the ATEC Act 2026 nothing in the original ATEC legislation, or the Universities Accord (Opening the Doors of Opportunity) Bill 2026 introduced late last month, gives ATEC any power to support universities in achieving their mission other than by allocating additional Commonwealth supported places.

A mission fund could have provided a balance to homogenising compact targets. But no such fund is planned and no legal provision under which it could be paid is in the current or amending legislation. With no mission funding the compacts are just another compliance exercise.

Rewards – the curious end of performance funding

One way that ATEC could encourage universities to meet compact targets would be by paying performance funding when they are met.

The government, however, disagrees. The Universities Accord (Opening the Doors of Opportunity) Bill 2026 repeals an existing power to pay performance funding under the Commonwealth Grant Scheme: Item 4 of the amending bill, removing section 33-1(1)b(v) of the Higher Education Support Act 2003.

No performance funding under this provision has been paid for a long time. But I am surprised the government decided to remove even the possibility of it.

Rewards – additional Commonwealth supported places

The reason given by the bill’s explanatory memorandum for removing performance funding is that the provider’s performance will be a factor in ATEC allocating student places (p. 26).

But providers may not be able to take more students. Currently over-enrolled universities must reduce rather than increase enrolments. Others may be at their physical capacity.

ATEC expects additional places to do too much work in the system. I counted twelve possible grounds for allocating them.

Are additional places a reward for compact box ticking, or are they necessary to achieve ATEC’s equity, participation and skills objectives?

Penalties – fewer Commonwealth supported places

The policy intent is that universities cannot have their total number of Commonwealth supported places reduced year-on-year unless their allocation has not been fully used.

This means CSPs can be used as penalties only for the additional growth allocation (AGA). But not awarding additional places has limits as a penalty mechanism. Is ATEC going to sabotage achievement of its own objectives to discipline a university? In regional areas, where there are no other local on-campus alternatives, isn’t this punishing potential students more than the university?

Penalties – fewer international student commencements

Performance against the compacts will be a factor in the allocation of international student commencements: new section 46D(2)(b)(ii)&(iii) of the Universities Accord (Australian Tertiary Education Commission) Act 2026.

For some universities, that is more of a threat than no or fewer additional Commonwealth supported places. The revenue per student from international students is much higher on average than the CSP rate. There is no floor number on ATEC’s allocation of commencing international students.

But the government is attacking international education on many fronts other than ATEC allocations – higher visa fees, tougher visa criteria, higher visa rejection rates. A few weeks before second semester starts only four public universities have reached 80% of their 2026 allocation of commencements, which has been rolled over into 2027.

If universities cannot use their allocation of international student commencements then threats of cuts may not be meaningful.

Penalties – a default compact

If a provider has failed to meet, or has breached a term of their compact, then ATEC can suspend the compact: current section 33 of the ATEC Act 2026.  

An important issue will be which parts of the compact are ‘terms’. The amending bill specifies that compliance with the international student allocation is not a term: new section 29(4) of the ATEC Act 2026. No parallel provision exists for the Commonwealth supported place allocation. But I would take its different legislative basis to the compacts, and its set procedures for under- or over-enrolment, as implying that it is not a compact term.

If ATEC suspends a compact a default compact comes into force: current section 36. 

As compacts offer universities few benefits – no mission funding, no performance funding, no Commonwealth supported places they can use in some cases, no international student commencements they can utilise in others, it is not clear that a default compact will be much worse than a negotiated compact.

Maybe default compacts will cause reputational damage, although I think this would need compact performance failures to reflect more significant problems than non-compliance with a document that most people have never heard of.

Penalties – reduction in grant?

Under the current system the government can impose a reduction of grant penalty under division 54 of HESA 2003 for breaching a condition of the funding agreement.

Funding agreements are abolished by the Universities Accord (Opening the Doors of Opportunity) Bill 2026, raising questions about whether the new regime will include an equivalent penalty.

The legislation does not give ATEC any direct power to reduce grants. But the minister may create a workaround.

The minister remains responsible for the Commonwealth Grant Scheme Guidelines: current section 238-10 of HESA 2003. These guidelines can specify conditions that providers receiving CGS money must comply with: current section 36-70 of HESA 2003. The amending bill also allows the minister to set conditions applying to a specific provider: new section 36-55.

Perhaps the Commonwealth Grant Scheme Guidelines will include a condition that providers comply with the terms of their compact. The minister could then impose a grant reduction in the event of a breach.

One difficulty with this approach is that compact performance terms are aspirational and may not be achievable. Terms include outcomes of potential or actual student decision-making that universities can influence but cannot control, such as recruitment and retention. The ATEC Act 2026 recognises this, requiring that ATEC consider, in assessing provider performance, ‘any matter reasonably outside the provider’s control’: current section 30(3)(b).

The ATEC Act 2026 requires an assessment of performance but the only clear fail grade is suspension and a default compact. In deciding to suspend, ATEC can only take into account matters within the provider’s control: current section 33(1).

For this reason, I doubt the Commonwealth Grant Scheme Guidelines would provide for potential penalties unless failure to meet the terms of the compact resulted in suspension.

Before imposing a penalty for breach of a condition, the minister must consider various factors. These include whether the breach of a condition is minor or major, whether it has occurred before, the impact of the breach on students, and its impact on Australia’s reputation as a quality higher education provider: current section 54-5 of HESA 2003.

There are also provisions requiring the minister to give the provider notice and the right to respond: current section 60-10 of HESA 2003.

As is the case for ATEC penalties cutting Commonwealth supported places a problem with reductions in grants is their collateral damage. They punish people who had nothing to do with the breach – the people who don’t get hired, the students who don’t get services, the research that isn’t done – because the university has less money to spend.

Penalties – student contribution confiscation for over-enrolment

The one automatic penalty in the new regime is breach of the over-enrolment cap.

As explained in an earlier post, there are complex penalty differences depending on circumstances but all are variations on multiplying average student contributions by the level of over-enrolment.

Penalties – referral to TEQSA

Section 27(1) of the ATEC Act 2026 includes a note saying that breach of a compact term may result in TEQSA taking regulatory action in relation to the provider’s compliance with the Higher Education Standards Framework.

Poor results on some potential compact indicators, such as student success rates (pass rates) or retention, may also be of interest to TEQSA. But TEQSA will receive that data through other channels and the fact that results may also constitute breach of a compact term is legally irrelevant.

The revised Higher Education Standards Framework released this week makes no mention of ATEC or compacts.

ATEC has a general power to provide advice and recommendations to TEQSA ‘in relation to the Higher Education Standards Framework’: current section 11(f) of the ATEC Act 2026. But this is not a general power to complain to TEQSA about a specific provider.

While the Universities Accord (Opening the Doors of Opportunity) Bill 2026 includes amendments to allow various agencies to give information to ATEC, no amendment allows ATEC to give university-level information to TEQSA.

And this threat of referral to TEQSA raises a broader question – why does the government think that TEQSA rather than ATEC should deal with breaches of ATEC’s compacts?

Why are there no fines in the ATEC regime?

Recent higher education legislation makes extensive use of civil penalty fines. For example, a university can be fined up to $330,000 for not complying with the gender-based violence code that came into effect on 1 January 2026: section 20, Universities Accord (National Higher Education Code to Prevent and Respond to Gender-based Violence) Act 2025. The maximum fine for breaching the new law on offering courses at offshore campuses without TEQSA approval is $396,000: section 106A, Tertiary Education Quality and Standards Agency Act 2011.

But the ATEC Act 2006 has no fines. While the minister can, by legislative instrument, create rules ‘necessary or convenient for carrying out or giving effect to this Act’, this instrument cannot ‘create an offence or civil penalty’: current sections 75(1)(b) & 75(2)(a).

The absence of civil penalty fines likely reflects the character of compacts as administrative decisions or quasi-agreements rather than formal laws, such as acts or legislative instruments. Under the Legislation Act 2003 for an instrument (such as a compact) to be of a legislative nature it needs a provision that ‘determines the law or alters the content of the law, rather than determining particular cases or particular circumstances in which the law … is to apply or is not to apply’: section 8(4). The Regulatory Powers (Standard Provisions) Act 2014, which sets out how civil penalties operate, applies to acts or legislative instruments.

The ATEC Act 2026 specifies that none of the minister’s strategic priorities, ATEC’s priorities statements or allocations of domestic and international places are legislative instruments: current sections 15(6), 43(8); new sections 30-15(3), 46C(7).

The Universities Accord (Opening the Doors of Opportunity) Bill 2026 explanatory memorandum also emphasises ATEC decisions being of an administrative rather than a legislative character, including the allocation of Commonwealth supported places (p. 15), commencing student CSPs for universities on the ‘glidepath’ (p. 47), and international student commencements (p. 82).

Imposition of a maximum civil penalty fine requires a decision by the Federal Court. The ATEC model minimises scrutiny of its decisions. The last thing they want is a judge deciding that they have exceeded their legal power or punished a university on inadequate evidence.

ENDS