The ACT government agreed to a Greens ploy to invoice NSW for the cost of educating its students as it struggles to keep schools within budget.
The government will now have to cost the price of educating NSW students in ACT schools, check if this is fully funded by the Commonwealth, and invoice on a cost recovery basis, including capital and depreciation, for students enrolled from term 3 this year.
Greens leader Jo Clay said while NSW students are welcome in the territory, their families were not supporting the education system through taxes.
"We must acknowledge they do not contribute through ACT taxation streams. This is unfair, it's that simple," Ms Clay said.
"We don't even have a clear accounting of how much ACT taxpayers are subsidising non-resident students. How can the government claim to manage education funding effectively if it cannot quantify a major cost pressure in the system?"
The federal government pays the ACT based on how many students it educates and takes the fact it teaches NSW children into consideration that when allocating goods and services tax (GST).
Education Minister Yvette Berry said, that in August 2025, 979 NSW children were enrolled in ACT public schools, making up 1.95 per cent of all students. In 2025, 170 ACT students were enrolled in NSW schools.
The ACT government also subsidises private schools, but it is not known how many of those students are from NSW.
In 2022, 18.9 per cent of Canberra Institute of Technology students were from NSW.
A report by Saul Eslake into the territory's finances said NSW should pay the ACT for teaching its students like it does with healthcare. NSW residents make up about a quarter of ACT hospital patients.
"In the areas of school and post-secondary education, the ACT provides services to students resident in adjacent areas of NSW - but in contrast to health services, the NSW government does not contribute to the cost of providing these services," Mr Eslake said.
"However, the Grants Commission does take these costs into account in assessing the ACT's expenditure 'needs' with regard to school and post-secondary education.
"The ACT's long-standing practice of providing senior secondary education through separate colleges almost certainly entails higher unit costs than the comprehensive ... high school systems operating in other jurisdictions."
Ms Berry said cross-border enrolments were common in Australia and no other state or territory charged another for teaching their students.
She said many of the children educated in the ACT had parents working in the territory.
NSW families living close to border in one of 113 NSW suburbs and towns can enrol their children at one of six primary schools and attached preschools, five high schools and three colleges.
Children can come to school from as far north as Coolac, a 1.5 hour drive away, as far south as Avonside near Jindabyne and from larger towns like Queanbeyan, Goulburn, Yass and Cooma.
A review into public school resourcing, commissioned after 80 of 92 schools were expected to be over-budget at the end of 2025, found schools were too siloed to be efficient, and funding for students with disabilities or English as a second language had not increased in line with need.
As part of the upcoming 2026-27 budget, the government will spend $9.3 million over four years to make changes to the school system.
Education is not the only space in which the ACT may be underpaid by NSW.
Mr Eslake's report claimed the ACT could be missing out on $88 million from NSW for treating its patients in Canberra hospitals under the national efficient price. The ACT government claims it costs more to run healthcare in Canberra because it lacks scales of efficiency.
A NSW nursing and midwifery union representative has claimed that underfunded hospitals in southern NSW send patients to Canberra. Health Minister Rachel Stephen-Smith denied that Canberra hospitals had started refusing patients from NSW unless they could access the treatment in their local area.
