The financial viability TEQSA registration requires is set out in Standard 6.2.1(c) of the Threshold Standards: the provider must be financially viable and must apply, and have the capacity to continue to apply, sufficient financial and other resources to maintain the viability of the entity and its business model, meet the standards, achieve its objectives and sustain the quality of the education it offers. For a new provider that means demonstrating, before a single student enrols, that the money exists to run a higher education institution properly for several years whether or not the enrolment forecast comes true.
This article is about the concept rather than the document list: what viability means to the regulator at initial registration, how projections, capitalisation and sensitivity are read, where tuition protection fits, and the questions assessors actually ask. It draws on fifteen years of TEQSA registration work, in which finance has stalled more applications than any domain other than governance.
What does TEQSA mean by viable?
The word in the Threshold Standards is viability, not profitability. TEQSA is not asking whether the provider will make money. It is asking whether the provider will be able to keep teaching the students it enrols, to the standard it promised, for the duration of their courses, through the period in which most new institutions lose money. Standard 6.2.1(c) ties viability to the business model, the standards, the objectives and the quality of education, which means an assessor reads the finances alongside the staffing plan, the facilities and the course design rather than in isolation.
The related standard is 6.2.1(i), which requires credible business continuity plans and adequately resourced financial and tuition safeguards to protect students who cannot progress because of unexpected changes to the provider's operations. Read together, the two standards ask for a provider that can survive its own plan failing. That is a different and harder question than whether the plan is attractive, and it is the one most applicants have not prepared for.
Why a new provider is assessed differently
A registered provider has audited accounts and a track record. A prospective provider has a forecast and a bank balance. TEQSA's application guide for prospective providers recognises that, and the assessment focuses on the credibility of the projections and the sufficiency of the capital behind them.
In my experience the assessor's underlying question is simple: if enrolments are half what you forecast for three years, does the provider still exist and still meet the standards. The answer has to be yes, and it has to be visible in the numbers. A provider whose model only works at forecast is not viable in the sense the standard uses, however good the forecast looks.
How assessors read the projections
Projections for initial registration are typically five years. Assessors read the revenue line first and test its assumptions: how many students, at what fee, from which markets, recruited how, and starting when. Each of those assumptions has to be consistent with the rest of the application. If the marketing plan describes domestic recruitment but the revenue depends on international students, or the CRICOS timeline means no international students can arrive until year two but the projection shows them in year one, the projection fails on coherence before anyone checks the arithmetic.
Then the cost line, which is where new providers most often understate. The staffing profile in Domain 3 has to be costed at the salaries the CVs imply, from the dates the course requires those people in post, which is before delivery starts. Library and LMS licences, professional accreditation fees, tuition protection contributions, audit fees, insurance, TEQSA's own fees and the cost of the governance structure all belong in the model. Our guide to how much TEQSA registration costs itemises the regulatory and set-up side. The projection should show the provider losing money in the early years, because it will, and it should show where that loss is funded from.
Capitalisation: the money has to exist now
This is the point on which financial viability TEQSA registration assessments turn most often. A projection that shows losses funded by "shareholder contributions" or "director loans" prompts the obvious question of whether those funds exist and are committed. Assessors want to see the capital in the entity's own accounts, or a binding and evidenced commitment from a party with demonstrated capacity to honour it, covering the cumulative losses in the projection with a margin.
In my experience providers underestimate this badly. They treat the founding capital as the cost of getting registered rather than the cost of operating until break-even, and arrive at substantive assessment with enough money to lodge the application and not enough to run the college. The stronger position is a capitalised entity, a shareholder agreement that commits further funding on defined triggers, and bank statements that show the money is real. Where the funder is an individual, TEQSA will read their capacity in the context of the fit and proper person assessment.
Sensitivity: what the model looks like when it is wrong
A single projection is a claim. A sensitivity analysis is an argument. Assessors want to see the base case, a downside case in which enrolments are materially lower or delayed, and a case in which a key assumption fails, such as CRICOS approval slipping a year or a major source market closing. For each, the analysis should show the effect on cash and the actions the board would take, with the point at which the provider could no longer meet the standards clearly identified.
That last point is the useful one. A board that knows its own trigger for a teach-out decision is demonstrating exactly the monitoring Standard 6.2.1(b) and (d) require: realistic targets, progress monitored, action taken on underperformance, cash flows understood. A board that presents one optimistic case and no alternative is telling the assessor it has not thought about failure, and the assessor will do the thinking instead.
Tuition protection and the safeguard question
Standard 6.2.1(i) requires financial and tuition safeguards for students who cannot complete because the provider ceases to operate or cannot offer a course. For providers enrolling international students, the Tuition Protection Service under the ESOS framework is mandatory. For domestic students, and for the period before CRICOS registration, the provider needs its own arrangement: a teach-out agreement with another institution, a tuition assurance scheme, or a funded reserve, and it needs to be able to show the arrangement is real.
In my experience the safeguard is often the last thing assembled and the first thing questioned. A letter of intent from a friendly provider to accept students "subject to agreement" is not a safeguard. A signed teach-out agreement that names the courses, the mechanism and the funding is. The business continuity plan should sit beside it and describe what actually happens in the first thirty days of a closure, who tells the students, and where the money for the transition comes from.
The financial viability questions TEQSA registration assessors ask
Beyond the documents, the questions I have seen asked of boards and CEOs at initial registration are consistent. How much cash does the entity have today, and how long does it last at forecast and at half forecast. Who is funding the losses, and what have they committed in writing. What happens to the model if the first intake is delayed by two study periods, and which costs are fixed.
Then the governance questions: when does the board see management accounts, what would trigger it to act, and who on the board can read a cash flow.
That last question is a governance question dressed as a finance question, and it is deliberate. Standard 6.2.1 places the assurance obligation on the governing body, not the accountant. A board that cannot explain its own projections has not assured itself of anything, and the financial viability TEQSA registration depends on is, in the end, the board's demonstrated grip on the numbers. Our articles on meeting TEQSA's financial viability requirements and on how small colleges succeed with TEQSA registration cover the evidence file and the small-provider case respectively.
Build the model for the regulator's question, not the investor's
Investors ask whether a business will grow. TEQSA asks whether it will survive. The financial case for registration should be built for the second question: capitalised for the losses, sensitised for the disappointments, safeguarded for the students, and owned by a board that can explain it. In my experience a provider that builds its model that way is not only registered faster but is also, three years later, still open, which is the point of the standard.
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— a five-year projection template with built-in downside cases, capitalisation and safeguard schedules structured around Standard 6.2.1, drawn from our TEQSA registration and governance work with private providers. Get the template
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Frequently asked questions
How many years of projections does TEQSA expect at initial registration?
Typically five years. TEQSA's renewal guidance asks providers assessed as high financial risk for five-year projections, and in my experience the same horizon is expected of a prospective provider, with the early loss-making years and their funding clearly shown.
Does a new provider have to be profitable to be registered?
No. Standard 6.2.1(c) requires viability, meaning the capacity to keep meeting the standards and teaching enrolled students, not profitability. A new provider is expected to lose money initially and must show that those losses are funded from committed capital.
What is a sensitivity analysis and why does TEQSA want one?
It is a set of alternative projections showing what happens to cash and operations if key assumptions fail, such as lower or delayed enrolments. It shows the assessor that the board has considered failure and knows the point at which it would need to act to protect students.
What tuition protection does a new domestic-only provider need?
The Tuition Protection Service applies to international students under the ESOS framework. For domestic students, Standard 6.2.1(i) still requires adequately resourced safeguards, which in practice means a signed teach-out agreement, a tuition assurance arrangement or a funded reserve, together with a business continuity plan.
Dr Brendan Moloney is CEO of Darlo Higher Education, Australia's largest specialist TEQSA consultancy. He holds a PhD from the University of Melbourne, is a Cambridge University Press author on governance in higher education, and has advised private providers on registration and course accreditation for more than fifteen years.