A refund clause can look commercially sensible, appear in a signed student agreement and still produce the wrong legal outcome.
For CRICOS providers, visa refunds are not simply an internal policy decision. When a student visa refusal causes a student not to commence, to withdraw or to stop paying, the Education Services for Overseas Students framework prescribes how the refund must be calculated. A provider cannot reduce that statutory amount merely because its own policy says that an application fee, administration fee, deposit or first instalment is non-refundable.
The compliance risk usually sits in the gap between the refund policy, the written agreement, finance-system coding, the evidence held on file, and the action recorded in PRISMS. One document may refer to a flat deduction. Other may distinguish between pre-commencement and post-commencement cancellations. Finance may calculate by teaching weeks while the legislation uses calendar days. The result may be an underpayment even when staff believe they have followed the policy.
This article explains section 10 of the Education Services for Overseas Students (Calculation of Refund) Instrument 2024 in practical terms and identifies the controls a CRICOS RTO should test now.
Why section 10 matters to CRICOS RTOs
The refund obligation is built across several connected provisions rather than contained in one policy clause:
- Section 47A of the ESOS Act identifies when a student defaults, including failure to commence, withdrawal and certain provider-initiated cessations.
Section 47B requires a compliant written agreement setting out the refund requirements applying to student default. - Section 47D generally requires the provider to pay the amount required by that written agreement.
- Section 47D(5) removes the visa-refusal case from the ordinary written-agreement calculation where the refusal causes the relevant default.
- Section 47E then requires the provider to calculate and pay the amount prescribed by the legislative instrument.
- Section 10 of the 2024 Refund Instrument supplies the visa-refusal formulas.
In other words, the written agreement remains essential, but it does not give the provider unlimited discretion. In a qualifying visa-refusal case, the statutory calculation takes priority over a less favourable internal clause.
When does the visa refusal calculation apply
The visa refusal must be connected to the default. Section 10 applies where the refusal causes the student to do one of the following:
- fail to start the course at the location on the agreed starting day;
- withdraw from the course at that location; or
- fail to pay an amount the student was liable to pay to undertake the course.
That causal connection is important. A visa refusal letter on the file does not automatically prove that every earlier or later cancellation falls under section 10. Providers should establish the chronology: the visa decision date, when the provider was notified, the agreed starting day, whether training commenced, the withdrawal or default event, and the period covered by each payment.
If a student independently withdrew for another reason before the visa was refused, the provider should not simply assume section 10 applies. Equally, a provider should not relabel a visa-refusal default as a voluntary withdrawal merely to rely on a more restrictive internal refund clause. The decision must be based on evidence.
Scenario one visa refused before commencement
Where the refusal causes the student not to start on the agreed day, subsection 10(2) requires the following calculation:
Refund amount = course fees received – the lower of 5% of course fees received or $500
What can the provider retain
The maximum statutory deduction is $500, but the provider cannot always retain $500. It must compare 5% of the course fees received with $500 and retain whichever figure is lower.
| Course fees received | 5% | Maximum deduction | Refund |
|---|---|---|---|
| $4,000 | $200 | $200 | $3,800 |
| $8,000 | $400 | $400 | $7,600 |
| $10,000 | $500 | $500 | $9,500 |
| $15,000 | $750 | $500 | $14,500 |
Example including a non tuition fee
Assume the provider received $10,000 in tuition fees and a $500 materials fee before the default day. The total course fees received are $10,500. Five per cent is $525. Because $500 is lower than $525, the provider may deduct $500 and must refund $10,000.
A common error is to refund only the tuition component and automatically retain all non-tuition charges. Section 10(3) expressly includes tuition and non-tuition fees received in the pre-commencement course-fee calculation. Whether a particular charge is properly characterised as a course fee must therefore be considered carefully rather than decided by its label alone.
Scenario two visa refused after commencement
Where the visa refusal causes the student to withdraw after commencing, or to fail to pay an amount required to undertake the course, subsection 10(4) uses a different formula:
This is designed to identify the tuition amount paid for the remaining period affected by the default. The formula does not state that the provider may make a further 5% or $500 deduction.
How the weekly tuition fee is calculated
How the default period is calculated
Section 7 calculates the weeks in the default period using the number of calendar days from the default day to the end of the period to which the tuition payment relates, divided by seven. A partial week is rounded up to the nearest whole week.
This makes the payment allocation important. The provider should be able to show which course period each receipt covered. If the student management system records only a running account balance without a defensible payment period, staff may struggle to reproduce the statutory calculation during a complaint, audit or TPS enquiry.
Worked post commencement example
Assume a course has total tuition fees of $20,000 and runs for 280 calendar days. The weekly tuition fee is $500: $20,000 divided by 280, multiplied by seven. Assume the student’s tuition payment covers a period extending 12 weeks beyond the default day. The statutory refund is $500 multiplied by 12, which equals $6,000.
The actual result in a student file depends on the documented course dates, total tuition fees, default day, payment receipts and the period to which each payment relates. Providers should retain the calculation worksheet and supporting evidence, not only the final refund figure.
The seven compliance failures worth testing
1. Using the written agreement as the final authority
A signed agreement does not authorise a provider to pay less than the statutory visa-refusal calculation where section 47E applies.
2. Applying a flat $500 deduction to every pre-commencement refusal
The provider must retain the lower of 5% or $500. On smaller payments, 5% will be lower.
3. Applying the $500 deduction after commencement
Subsection 10(4) uses the unused-tuition formula and does not add the pre-commencement deduction.
4. Excluding every non-tuition fee before commencement
Subsection 10(3) includes tuition and non-tuition fees received when defining course fees for subsection 10(2).
5. Calculating by teaching weeks
Sections 6 and 7 use calendar days and contain mandatory rounding rules.
6. Waiting for a formal refund application before starting the section 47E clock
Under section 47E, the provider obligation period is four weeks after the default day, not four weeks after a later written claim.
7. Closing the student file without completing the required PRISMS outcome notification
The Department’s student-default guidance states that the section 47H notice is entered through PRISMS for each relevant CoE.
Refund timing and PRISMS obligations
For a refund required under section 47E, the ESOS Act requires payment within four weeks after the default day. This differs from the ordinary section 47D written-agreement pathway, under which the four-week period generally runs after the provider receives a written claim from the student.
Section 47H also requires the provider to notify its ESOS agency and the TPS Director of the outcome. The notice is due within seven days after the end of the provider obligation period and must include whether the refund was provided, the student details and the refund amount. Departmental guidance directs providers to enter the required information in PRISMS for each relevant CoE.
A compliant process therefore needs more than a payment approval. It needs a trigger for the four-week deadline, an evidence-based calculation, proof of payment, correct CoE action and a completed PRISMS outcome notification.
Why the written agreement still matters
The existence of a statutory formula does not reduce the importance of the written agreement. Section 47B of the ESOS Act and Standard 3 of the National Code require the provider to establish a compliant written agreement. Department guidance states that the agreement should clearly address course details, tuition and non-tuition fees, refund and cancellation policies, the refund claim process, any person authorised to receive a refund, complaints and appeals, and the role of the Tuition Protection Service.
The operational risk arises when the agreement accurately describes the law but the finance procedure, template letters or student management system use different rules. Compliance must align across the full student journey.
What an audit-ready refund file should contain
- the signed or otherwise validly accepted written agreement;
- the applicable refund policy version supplied to the student;
- the Department of Home Affairs visa-refusal evidence or other reliable evidence of the decision;
- a chronology establishing how the visa refusal caused the default;
- the agreed starting day, actual commencement status and default day;
- course start and end dates used in the calendar-day calculation;
- the total tuition fee and each tuition and non-tuition payment received;
- the period to which each tuition payment relates;
- a calculation worksheet showing the formula and rounding method;
- the refund decision, approval and communication to the student;
- evidence of payment to the correct recipient; and
- the CoE and PRISMS records demonstrating completion of the reporting obligations.
A practical control framework for RTO directors
| Control | What the RTO should test | Evidence |
|---|---|---|
| Policy | Does the visa-refusal clause separate pre- and post-commencement calculations? | Current approved policy |
| Agreement | Does the offer and written agreement align with the ESOS Act, section 10 and Standard 3? | Executed agreement and version control |
| Calculation | Does the worksheet use calendar days, payment periods and correct rounding? | Refundable worksheet |
| Timing | Can staff identify the default day and four-week deadline immediately? | Case timeline and workflow alerts |
| Payment | Is the refund paid to the student or properly specified recipient and fully evidenced? | Approval and transaction record |
| PRISMS | Is the outcome entered for each relevant CoE within the reporting timeframe? | PRISMS record and completion check |
| Assurance | Are completed cases sampled to compare policy, calculation, payment and PRISMS? | Internal audit or compliance review |
Questions RTO directors should ask now
- Can our staff explain the difference between sections 47D and 47E without relying on the wording of our policy?
- Does our system distinguish a visa refusal before commencement from one after commencement?
- Can we demonstrate the period to which every tuition payment relates?
- Does our calculator use calendar days and apply both statutory rounding rules?
- Do we retain non-tuition fees merely because they are labelled non-refundable?
- Who monitors the four-week payment deadline and the later PRISMS notification deadline?
- When did we last reperform a sample of completed visa-refusal refunds from source documents?
If you’re unsure how your current process holds up,
Frequently asked questions
Can an RTO state that all deposits are non-refundable
Can an RTO retain $500 when the visa is refused before commencement
Does the pre-commencement calculation include non-tuition fees
Can the provider deduct another administration fee after commencement
How quickly must the refund be paid
What happens if the provider pays the wrong amount
The commercial lesson
Refund compliance is not achieved by adding a visa-refusal paragraph to a policy. It requires a controlled process connecting admissions, finance, compliance and PRISMS. The strongest system is one in which another competent staff member can take the source evidence, reproduce the calculation and reach the same result.
For RTO directors, the most useful test is not whether the policy looks comprehensive. It is whether the last five visa-refusal cases were classified correctly, calculated under the correct pathway, paid within time and closed properly in PRISMS.
About VET Advisory Group
VET Advisory Group supports RTO and CRICOS providers with compliance reviews, audit readiness, rectification, policy and written-agreement reviews, and practical implementation across admissions, student administration, finance and regulatory reporting.
