Victorian Catholic Schools Welcome Softening of Payroll Tax Levy but Remain Opposed to New Tax Policy

Signage is seen at St Kevin's College in Toorak, Melbourne, Australia on Feb. 20, 2020. (AAP Image/Erik Anderson)

Victorian Catholic schools have welcomed the change in the upcoming payroll tax levy threshold but remain opposed to the additional tax.

This follows backlash from the non-government school sector after the May state budget revealed that schools earning more than $7,500 (US4,972) per student would be charged an additional tax levy. This levy will go towards the state’s payment of emergency pandemic spending over the past three years.

The change in the threshold to $15,000 was made by the state government on June 29.

“Non-government schools with income per student of more than $15,000—less than 10 percent of non-government schools—will be subject to payroll tax under laws that come into effect on 1 July 2024,” according to the state government.

“The vast majority of non-government schools—more than 660—will remain exempt, with 60 schools (or eight percent) coming under the new provision that was foreshadowed in the Victorian Budget 2023/24.”

The new threshold will apply to six Catholic and 54 independent schools and will be in place until at least Jan. 1, 2029.

Victorian State Treasurer Tim Pallas said it was up to the schools to adapt to the changes.

“Whether or not this translates into higher fees for students will ultimately be a decision for the schools themselves,” Pallas said on June 29.

Modelling Shows Students Worse Off

However, modelling by Independent Schools Victoria shows that the average impact of the 63,123 students among the 54 listed independent schools will be $1,155.

“While the tax raised is far less than the government’s budget estimated, it amounts to a heavy blow for school communities, where parents are now being milked as a source of government revenue,” Michelle Green, Chief Executive of Independent Schools Victoria, said in a statement.

“The threshold was determined by the Treasurer and the Education Minister who have extraordinary discretion to decide which schools are on the list and which aren’t.”

Meanwhile, Jim Miles, Executive Director of the Catholic Education Commission of Victoria, said that the listed schools are going to pay more in payroll tax than they receive from the state government.

“Government schools don’t cut teachers or programs because of payroll tax grants,” Miles said in a statement.

“It should also be made clear that the government sector, in effect, pays payroll tax to itself. It’s completely misleading to say this new tax results in equal treatment of school sectors.”

According to the state government, Victoria’s highest-fee non-government schools will be subject to new payroll tax provisions that will bring them into line with government schools from July 1, 2024.

“Every government school in Victoria pays payroll tax—and high-fee non-government schools will also contribute—with the threshold set at a higher level to ensure lower-fee schools are not affected,” the state government said.

Miles said that while the adjusted threshold is welcome news, it shows that the government recognised its original proposal was unreasonable.

“We want to work in partnership with the government to help build a world-class education system for all Victorian children, regardless of which school they attend.”

“We will continue to engage with the Victorian Government to help ensure this measure is a short-term response and that schools’ funding policy is developed in a fair and consultative manner moving forward.

“Catholic schools are not-for-profit community services working to provide the best quality education they can for Victorian children while also remaining affordable and accessible for families who seek a Catholic education.”

Shadow Minister for Education, Matt Bach, said the payroll tax levy was an unprecedented measure that would affect hardworking Victorian families.

“School communities should not be the ones to pay for the waste and mismanagement of the Andrews Government,” Bach said, adding that the Liberal Nationals Coalition will scrap the tax if it wins at the next election.

Union Body Says More Public School Funding Needed

However, Meredith Peace, Deputy Federal President of the Australian Education Union, said public schools are being left behind due to “inequitable funding arrangements.”

“More than 98 percent of private schools are funded by the Commonwealth and state and territory governments above the Schooling Resource Standard, and over 98 percent of public schools are funded below it. This is the education funding standard agreed to by all Australian governments in 2012,” Peace said.

Additionally, analysis by the union shows that public schools are shortchanged $1,800 of their share of Schooling Resource Standard (SRS) funding—the minimum funding needed to fund each student’s educational needs—while some private schools are overfunded up to 20 percent above their SRS benchmark, the union says.

The state government says it provides non-government schools around $1 billion in funding each year, including $450 million over four years to the Non-Government Schools Capital Fund for new builds and upgrades. This also builds on the $522 million previously invested in non-government school infrastructure since 2015.

Meanwhile, education minister Hutchins said the $3.1 billion funding allocated to public schools in the budget was one of the state’s most significant investments ever made.