Is your RTO trustee of a trust? A quick restructure may be in order if you want to be an Approved Course Provider of VET Student Loans

This article is the second in a series about Vocational Education Training sector changes in connection with the VET Student Loans Act 2016 (the Act).

Our previous article (which you can read here) outlined the application process for becoming an Approved Course Provider (ACP) for VET Student Loans. This article continues with the theme of ACP eligibility requirements. A requirement that ACP applicants may not have picked up or understood fully is their inability to be trustees of a trust. Imminent organisational restructuring is on the cards for those ACPs who fall into this category.

Prohibition on trustees

The Act prohibits persons who are ACPs from being a trustee by stipulating that in order to meet the "course provider requirements" an RTO must "be a body corporate that is not a trustee". This is a blanket prohibition. No "if's" or "but's".

Clearly if you are an RTO which is not a trustee then you can breathe a sigh of relief and continue worrying about the other changes you need to comply with under the Act.

However, if you are an RTO which is a trustee then you may have a major problem on your hands. It may be that your RTO already has provisional approval as an ACP or has applied to become an ACP. If you have failed to properly disclose that you are a trustee, section 36 of the Act could come home to roost as it allows the Department to suspend, cancel or revoke your status as an ACP or application for approval as an ACP where you do not comply with the Act.

How can you comply with the requirements of the Act if you are a trustee?

This will ultimately depend on the nature of your corporate, tax and other structuring arrangements as an RTO and how you have been operating your existing RTO business. For some it may be all too hard to restructure. For others, there may be a range of changes which can be considered to your existing structure to manage this issue, including the following:

  • Retirement of your RTO as trustee of any trusts of which it is trustee and appointing a replacement trustee
  • Establishing a new RTO entity (not a trustee) and moving all of your RTO arrangements from the existing trustee to the new RTO (noting that this would require approval from the relevant regulatory authorities, including ASQA, VRQA and TAC)

In considering either of the above options or any other structural options available to you, careful consideration will need to be given to the following non-exhaustive list of matters:

  • The terms of the RTO's funding and other material contracts
  • Course material licensing and other IT and IP arrangements
  • Banking and other financing facilities which may contain restrictions or other consent covenants
  • Taxation implications for the RTO and any trust of which it is trustee

It is never fun to make a hasty organisational restructure, but better to comply with the requirements now before you have your provisional ACP status suspended or revoked or your application to be an ACP rejected.

Stay tuned for the rest of our VET Sector series in the months to come!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.