Buying a registered training organisation (RTO) gives you the opportunity to take on a well-established business which trains apprentices in industries such as: 

  • health; 
  • security; and 
  • Construction.

RTOs operate within a highly regulated framework of management. Therefore, if you are planning to buy an RTO, there are several obligations and standards that you must meet. This article will outline the key questions to ask from the outset if you want to purchase an RTO. You should consider:

  •  what government standards you will have to meet;
  •  whether RTO registration is transferrable; and
  •  what the ongoing costs of operating an RTO will be.

What Government Standards Will I Have to Meet?

RTOs are privately-owned businesses that provide vocational education and training (VET) services. These services are designed to equip students with the skills needed by their chosen industry. Although RTOs are privately-owned, they can apply for government funding. This distinguishes RTOs from other privately-owned, general education businesses. Accordingly, there are strict government standards RTOs must meet.

RTOs in all Australian states except for Victoria and Western Australia fall within the regulatory oversight of the Australian Skills Quality Authority (ASQA).

In Victoria and Western Australia, RTOs are governed by their respective State regulators.

In order to be an RTO, the business must comply with the National Vocational Education and Training Regulator Act. They must also comply with the VET Quality Framework at all times. Compliance with these standards is an ongoing duty.

The VET Framework emphasises the importance of ensuring that RTOs operate ethically. They also consider the needs of both the students and the industry. The Framework is made up of the following: 

Is RTO Registration Transferrable?

RTO registration is not automatically transferrable from the current owner of the business to the new owner. Therefore, if you are planning to purchase an RTO for the first time, you will need to apply to ASQA for initial registration as an RTO. You must do this before you can legally operate the business. Your registration will remain current for two years if your application is successful. Full details regarding this transfer and registration process can be found online at ASQA. If you are applying for registration as an RTO, you should be clear whether you will be either acquiring the: 

  • business assets; or
  • shareholding of an entity that holds RTO registration.

In the latter option, you can avoid the need to start a new application for RTO registration. However, ASQA will still require you to show that you can comply with all requirements through other business inspection processes.

What Are the Ongoing Costs to Operating an RTO?

There are costs involved in operating an RTO. If you need to register your RTO, the initial fee is $500. ASQA will issue an invoice for this fee after you have completed your application for registration. Other ongoing costs may include the:

  • initial assessment fees;
  • annual RTO registration charge;
  • renewal lodgment fee; and
  • change of scope lodgment fee.

The full list of fees and charges to operating an RTO can be viewed online at ASQA.

What Are My Compliance Audits Obligations?

ASQA may carry out compliance audits to assess an RTO’s ongoing commitment to the relevant law and frameworks. The primary trigger for an audit is if ASQA has serious concerns about the RTO failing to meet its regulatory obligations. These concerns may have been raised through student complaints or based on the results of a previous ASQA audit.

What Is the Process of Renewal?

RTO registration is central to the business you will be buying. However, RTO registration will expire if the seller has not taken the correct steps to renew their registration. To continue operating the RTO, the registration holder has an ongoing obligation to ensure their registration is current. They must apply to ASQA for a renewal at least 90 days before RTO registration expires.  ASQA may grant renewed registration for up to an additional seven years.

All RTOs seeking to renew their registration must be able to demonstrate that they:

  • are fulfilling obligations to learners and clients;
  • have effective governance and administration arrangements in place; and
  • are delivering quality training and assessment outcomes that meet industry needs.

You should speak with the seller about whether they have gone through the renewal process before. This will provide some insight into what the next renewal will require from you when you buy the business.

Key Takeaways

Operating an RTO can be rewarding on a personal and financial level. If you purchase an existing RTO, it is important to be aware that the transfer is not automatic and will need to be approved by ASQA. This will need to be taken into account in the: 

  • pricing of the purchase; 
  • conditions attached to the payment; and 
  • completion of the purchase. 

The operator of the RTO has the responsibility to ensure the business and training materials meet ASQA guidelines and industry requirements. Before spending a significant sum on acquiring an RTO, you should understand its track record and consider whether you can maintain compliance going forward. Importantly, from the outset, you should ask questions to understand the ongoing costs of operating an RTO. If you have any questions about purchasing an RTO, speak with one of LegalVision’s business purchase lawyers about reviewing your agreement by calling 1300 544 755 or fill out the form on this page.

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