During the 2020s the government has implemented policy using a broad ministerial power to impose conditions on funding agreements. Universities must sign these agreements to receive Commonwealth Grant Scheme funding. I have criticised this use of funding agreements when the conditions subvert the intent of the Higher Education Support Act 2003 and/or avoid parliamentary scrutiny.

A repeat offence example is allocating Commonwealth supported places to specific courses, such as in the 20,000 equity places policy, when this is not supposed to happen unless the course is first ‘designated’ by the minister.

Another example is starting implementation of the equity plan expenditure of unused CGS grants through funding agreements, when this was actually to be financed under the ‘other grants’ provisions of HESA 2003. (Eventually proper legal processes were followed.)

A third example is the ban on early offers using funding agreements. Admissions-related issues are covered by other sections of HESA 2003 and by the Threshold Standards administered by TEQSA. A substantive policy issue like this should have gone via one of these processes that include parliamentary scrutiny.

The scope of ministerial discretionary power should be constrained. Instead, the funding legislation introduced in late June would lift some existing restrictions. It exposes universities and other higher education providers to worse misuse of power. This post explains the proposed changes and suggests remedies.

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, the Universities Accord (Opening the Doors of Opportunity) Bill 2026.

Current power to add conditions to funding agreements

Under the current HESA 2003, some conditions of funding are built into the legislation, such as which students are eligible for Commonwealth supported places. These will remain.

On top of the legislated conditions, current section 30-25(2) states that ‘the agreement may specify conditions to which the grants are subject, that are additional to the conditions that apply under Division 36’ [such as CSP eligibility]. This is the legal authority for the examples given above.

Section 30-25(2) has restrictions placed on it.

The minister cannot exclude a course from Commonwealth support using a funding agreement. This must be done under current section 36-15(2), which requires a legislative instrument to be used. This legislative instrument is subject to disallowance by either house of parliament: current section 30-25(2A).

Another restriction is that the conditions cannot relate to industrial relations matters: current section 30-25(2B). This was intended to stop Coalition governments using funding agreements to pursue their IR agendas.

Because funding agreements will no longer exist under the new system current sections 30-25, 30-25(2A) and 30-25(2B) are repealed by the amending bill: item 2, part 1, schedule 1.

Future power to add conditions to Commonwealth Grant Scheme grants

The function of current section 30-25(2) is replaced by new section 36-65 of the amending bill:

36-65  Providers to comply with conditions determined by Minister

             (1)  The Minister may, in writing, determine conditions that a specified higher education provider must comply with for the purposes of this Division.

             (2)  The provider must comply with all such conditions in respect of any year for which the provider receives a grant under this Part.      

       (3)        A determination under subsection (1) is not a legislative instrument. [ends]

Current section 36-65, which the bill repeals, says that higher education providers must comply with their funding agreements.

Genuinely provider-specific versus general conditions

Current section 30-25 assumes that funding agreements will differ between providers, but doesn’t rule out more general conditions applying to all providers. Current section 30-25(2) does not mention conditions only being for a specific provider. It also cross-references general conditions in division 36 of HESA 2003; seeing an analogy between its conditions and those.

For this reason, standard protocols for closing courses with CSPs that have long appeared in funding agreements are probably justifiable uses of section 30-25(2).

New section 36-65, by contrast, refers expressly to a ‘specified higher education provider’. Perhaps that means it cannot support cut-and-paste conditions where every provider gets its own condition but the text is identical in every case.

No parliamentary review

New section 36-65 condition is not a legislative instrument: 36-65(3).

This means that it is not subject to disallowance by either house of parliament.

No timing restriction

If the minister changes rules under the Commonwealth Grant Scheme Guidelines – such as the over-enrolment cap for larger providers or provider eligibility for CSPs for non-Table A institutions – the alteration only applies prospectively, for the following year’s funding agreement/allocation: current section 36-70(3) as amended by item 23, part 1, schedule 1 of the amending bill.

No such limit applies for a section 36-65 condition.

No publication requirement

A section 36-65 condition must be in writing, but there is no publication requirement.

This differs from the current system, in which conditions appeared in the funding agreements, which must be published on the Department’s website within 28 days: current section 30-28.

It also differs from the legislative instrument used for the Commonwealth Grant Scheme Guidelines, which will automatically appear at the legislation.gov.au website.

Legal context

New section 36-65 is also in a different legal context compared to current section 30-25(2). In its original version conditions were added as part of an overall funding agreement to which the minister was a party (although in practice this was delegated to the Department). But in the new system the allocation of Commonwealth Grant Scheme funding is, with the exceptions of demand driven funding and medicine, the legal responsibility of ATEC.

Two questions are therefore raised by new section 36-65 – what it means for ATEC and what it means for providers.

ATEC

ATEC controls three quasi-regulatory documents: allocations of CSPs, mission based compacts, and allocations of international student commencements.

Allocations of CSPs are closest to the current funding agreements in their function. But as I argued in an earlier post, ATEC’s power to regulate is quite limited. There is no power to add conditions to the allocations of CSPs. Penalties for under- or over-enrolments are in the legislation, with no ATEC penalty power for other provider actions. Template compacts distributed to universities include course closure provisions previously in the funding agreements, which could perhaps relate back to the statements of strategic priorities that will drive compact content. But penalties for breaching a compact are limited and non-university providers don’t have compacts at all.

One possibility is that the minister will delegate the power to add conditions to ATEC. This is possible under current section 238-5.

But the minister could retain the power and use it in ways that run at cross-purposes to ATEC. ATEC would only definitely prevail where it had a clear statutory authority, such as specifying the number of places allocated to a specific provider. This is protected for ATEC by both new section 30-15 of HESA 2003 and section 71(2)(c) of the ATEC Act 2026 that prevents the minister from directing ATEC in relation to a specific higher education provider.

One possible scenario is that, although ATEC is not permitted to allocate places to specific courses at Table A providers without designation, the minister adds a condition to a provider that does specify those places for a named course. This is similar to what the minister has repeatedly done under the current rules. I have wondered how the nuclear submarine places program will continue under the new system, and this might be it. Each provider would get a different allocation, consistent with the section 36-65 reference to specific providers.

As new section 36-65 has no constraints on timing the minister could make this determination after ATEC has allocated places.

Implications for providers

For higher education providers the problem with the amendment is two-fold – the risk of overlapping management of the same CSPs from the minister and ATEC, and the loss of previous constraints on the minister imposing conditions.

Without section 30-25(2A) on CSP status could a future minister identify ‘woke’ courses at each provider that would no longer be funded?

Without section 30-25(2B) on industrial relations conditions could section 36-65 conditions be used to pursue industrial agendas, with the content flipping between pro- and anti-union conditions as governments come and go?

Could section 36-65 be used to force universities to end protests that the government does not like?

Reading the CGS and CSP provisions as a whole I think a court would probably rule that conditions must relate to the purpose of these provisions. Industrial relations or protests have only tenuous connections to the CGS. But picking specific courses for support or not isn’t so far from historical use of funding agreements, framed negatively rather than positively.

But getting a court ruling requires taking legal action against the government. Universities are reluctant to do that when so much of their funding relies on government discretion.

Consequences of a breach of a section 36-65 condition

The minister can reduce a grant if a condition is breached: current section 54-1.

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.

Remedies

There are legitimate roles for conditions on CSPs, but these need tight control to prevent abuse of power. This means both ensuring their content is limited and that they are made public.

For general conditions relevant to all providers the Commonwealth Grant Scheme Guidelines should be used. Under current section 27-5 the guidelines can only be used when specifically referenced in HESA 2003. A new section could list topics that can be the subject of general Commonwealth Grant Scheme Guidelines conditions. Protocols on course closure are an example. Their legislative instrument status would ensure publication and potential disallowance by either house of parliament.

Something like section 36-65 could still exist with a limited list of topics covered by such conditions. Some place-specific conditions, such as on where CSPs can be offered, inherently differ between institutions.

Fragmentation of responsibility for CSPs – most under ATEC, but medical under the minister and demand driven not under either unless capped – suggests the power to add conditions will need to be replicated for each funding category, as appropriate. Non-medical demand driven should go with ATEC, as under current policy Indigenous DDS student are enrolled in courses otherwise funded through ATEC processes. Medical Indigenous DDS should go with the minister, reflecting overall responsibility for medical education.

These conditions should only be added prospectively and should be published with other allocation information.

ENDS