Maximum Grants Rules 2008

Administered by Department of Education, Employment and Workplace Relations

Legislation au F2008L02341 Rules Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Announcement of the Education Investment Fund

The Government announced as part of its 2008‑09 Budget that the Higher Education Endowment Fund (HEEF) will be absorbed into the broader Education Investment Fund (EIF) when established and that payments from the EIF would commence from 2009‑10, i.e. there will be no payments from the HEEF in 2008‑09.  Until the EIF is established by legislation, requirements under the Higher Education Endowment Fund Act 2007 (the Act) remain, including the requirement to determine Maximum Grants Rules.

Maximum grants amount

Under the Act, the HEEF has been established to make grants of financial assistance to eligible higher education institutions in relation to capital expenditure and research facilities.

Subsection 47(1) of the Act provides that the Treasurer and the Minister for Finance and Deregulation (as the responsible Ministers) may, by writing, make rules for ascertaining the maximum amount that can be debited from the HEEF Special Account (the Fund Account) during a financial year for the following purposes:

(a)   making grants of financial assistance to eligible higher education institutions in relation to capital expenditure;

(b)   making grants of financial assistance to eligible higher education institutions in relation to research facilities.

The responsible Ministers must make at least one such rule before 1 July 2008.  Subsection 47(2) of the Act clarifies that these rules are to be known as the Maximum Grants Rules.

In making the rules, subsection 47(3) of the Act requires that the responsible Ministers must have regard to:

(a)   the objective that, over the medium to long term (i.e. a period of five years or longer), grants authorised under section 45 of the Act should not result in the balance of the HEEF falling below the real value of the Government contributions to the Fund Account; and

(b)   the objective of moderating volatility in maximum grants amounts from financial year to financial year;

and must not have regard to any other matters.

Subsection 47(5) of the Act states that the maximum amount that can be debited from the Fund Account must not exceed the accumulated nominal earnings of the HEEF as at the start of the financial year.  Section 49 of the Act defines accumulated nominal earnings at the start of a financial year as:

(a)   if the balance of the HEEF as at the start of the financial year exceeds the total of the Government contributions to the Fund Account that were made before the start of the financial year—the amount of the excess; or

(b)   otherwise—nil.

In preparing the Maximum Grants Rules, modelling was undertaken to ensure that, over the medium to long term, the balance of the HEEF will not fall below the real value of the Government contributions and the volatility of the maximum grants amounts is moderated.

Calculating the amount

Clause 5 of the Maximum Grants Rules describes how to calculate the maximum grants amount.  The formula is the sum of:

(a)   $175 million; and

(b)   the annual maximum grants amount adjustment,

with the amounts at (a) and in the calculation of (b) indexed after 1 July 2008. 

Indexation is in accordance with the June All Groups Consumer Price Index published by the Australian Bureau of Statistics, in publication 6401.0, and applicable immediately before the start of the financial year.

If the result of the Maximum Grants Rules calculation results in a value below zero, then the maximum grant amount for that year is treated as zero.

The two components of the formula provide at (a) a stable component (indexed) and at (b) a component that takes account of the actual performance of the Fund.  The quantum of the stable amount and the parameters within the annual maximum grants amount adjustment have been determined through modelling.  The calculation reflects that, over the medium to long term, the balance of the HEEF will not fall below the real value of the Government contributions and that the volatility of the maximum grants amounts is moderated.

Annual maximum grants amount adjustment

Part (b) of the formula is determined by the actual performance of the HEEF, as described in the steps below.

Step 1

In step 1, the market value of the Fund as at 30 June in the preceding financial year is identified.

Step 2

In step 2, the real value of the total Government contributions to the Fund Account is subtracted from the figure identified in step 1.

The real value of the Government contributions are indexed in accordance with the June All Groups Consumer Price Index published by the Australian Bureau of Statistics, in publication 6401.0, and applicable immediately before the start of the financial year.

Step 3

In step 3, $500 million is subtracted from the figure derived in step 2.

The $500 million figure is a buffer.  The buffer acts to stabilise payments.

The buffer will also be indexed after 1 July 2008 in accordance with the June All Groups Consumer Price Index published by the Australian Bureau of Statistics, in publication 6401.0, and applicable immediately before the start of the financial year.

Step 4

The result of step 4 is multiplied by 0.3.  The 0.3 figure is a weighting applied to the calculations, determined from the modelling undertaken.

Consultation

As required by paragraph 47(6)(a) of the Act, the Education Minister was consulted on the Maximum Grants Rules.

The Future Fund Board of Guardians (Board) was consulted in relation to any implications for the performance of the Board’s HEEF investment functions, as required by paragraph 47(6)(b) of the Act.  The Board was also consulted on whether the Investment Mandate given under subsection 24(1) should be varied or revoked, as required by paragraph 53(2)(d) of the Act.

Providing the maximum grants amount to the Education Minister

Subclause 48(1) of the Act provides that as soon as practicable after 1 July 2008 and for each later financial year, the Board must calculate, in accordance with the Maximum Grants Rules, the maximum amount that can be debited from the Fund Account for the purpose of making grants of financial assistance to eligible higher education institutions for capital expenditure and research facilities.  The Board must give the Education Minister a written statement setting out the result of the calculation and must give a copy of that calculation to each responsible Minister.

While this statement will indicate the maximum amount of money that can be withdrawn from the HEEF during 2008-09, no money will be withdrawn from the HEEF during this period consistent with the Government’s announcement in the
2008-09 Budget.

Under subclause 48(2) of the Act, the Board may also provide any relevant comments on the calculation.

Overview

The Higher Education Endowment Fund Act 2007, enacted by the Parliament of Australia, was introduced to establish the Higher Education Endowment Fund (HEEF) to provide financial assistance to eligible higher education institutions for capital expenditure and research facilities. This Act was designed to ensure that grants from the HEEF are sustainable and do not lead to a depletion of the fund's balance over the medium to long term. The policy objective of the Act is to support higher education institutions while maintaining the integrity and growth of the fund. The Act mandates the Treasurer and the Minister for Finance and Deregulation to determine the Maximum Grants Rules, which ascertain the maximum amount that can be debited from the HEEF Special Account each financial year. These rules must consider the medium to long-term sustainability of the fund and aim to moderate volatility in grant amounts. The Board of Guardians of the Future Fund is required to calculate and report the maximum grants amount to the Education Minister and relevant Ministers, although no withdrawals from the HEEF will be made during the 2008-09 financial year as per the government's budget announcement.

Scope and Application

The Higher Education Endowment Fund Act 2007 applies to the Higher Education Endowment Fund (HEEF) and its operations, specifically concerning the determination of maximum grants for financial assistance to eligible higher education institutions. The Act pertains to the entities involved in the management and distribution of funds from the HEEF, including the responsible Ministers (the Treasurer and the Minister for Finance and Deregulation) who are tasked with making rules for ascertaining the maximum grants amount. The Act is a Commonwealth legislation, extending its reach across Australia. However, it is noted that the HEEF will be absorbed into the Education Investment Fund (EIF) and payments from the HEEF will cease from 2008-09. The Act does not explicitly state exclusions or exemptions, but the scope of its application is inherently limited by its focus on the HEEF and its financial rules. The Act may be extended or restricted through subordinate instruments such as the Maximum Grants Rules, which outline the specific calculations and considerations for determining the maximum grants amount.

Key Provisions

The main operative sections of the Higher Education Endowment Fund Act 2007 (the Act) pertain to the establishment and management of the Higher Education Endowment Fund (HEEF) and the transition to the Education Investment Fund (EIF). Section 47(1) allows the Treasurer and the Minister for Finance and Deregulation to make rules for determining the maximum amount that can be debited from the HEEF Special Account during a financial year for grants related to capital expenditure and research facilities. These rules, known as the Maximum Grants Rules, must be made before 1 July 2008. Section 47(3) mandates that these rules must consider the objectives of maintaining the real value of government contributions to the Fund Account over the medium to long term and moderating volatility in maximum grants amounts from financial year to financial year. Section 49 defines the accumulated nominal earnings of the HEEF at the start of a financial year, which plays a crucial role in calculating the maximum grants amount. The Act imposes several obligations and requirements on the parties involved. The responsible Ministers must determine the Maximum Grants Rules in accordance with the objectives specified in section 47(3) and must not consider any other matters. They are also required to consult with the Education Minister and the Future Fund Board of Guardians on the implications of these rules, as stipulated in subsection 47(6) of the Act. The Board of Guardians must calculate the maximum grants amount each financial year, in line with the Maximum Grants Rules, and provide a written statement to the Education Minister and a copy to each responsible Minister, as mandated by subclause 48(1). This statement must include the calculated maximum amount and may include any relevant comments, as permitted by subclause 48(2). Breach of the obligations and requirements under the Act may lead to civil or criminal consequences. While the explanatory statement does not detail specific penalties, breaches of legislative provisions typically incur fines or imprisonment under Australian law, depending on the severity of the breach. The maximum penalties for breaches can vary, but they often align with the penalties prescribed under the relevant legislation or by-laws. For instance, administrative penalties for breaches of financial regulations can include substantial fines, which are determined based on the nature and extent of the breach. Additionally, individuals or entities found to have wilfully or negligently breached the Act may face criminal charges, which could result in imprisonment if convicted.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.