Victoria's changes to payroll tax for independent schools in this week's budget do not take into account the needs of low- to mid-fee schools, according to one Melbourne school principal.
This week's budget included the removal of payroll tax exemptions for high-fee non-government schools under revenue initiatives, with 110 schools, or around 15 per cent, set to be liable for payroll tax.
A number of independent schools and the state opposition have raised concerns about the loss of exemptions.
Premier Daniel Andrews defended the move in the wake of criticism of the move in the budget.
"They've had a sweetheart taxation deal and we cannot afford to continue that," Mr Andrews said.
"They are very high-fee elite schools, and therefore they're in a very different position, and they have now a tax treatment that recognises their profitability."
Minister for Education Natalie Hutchins said on Thursday the move was aimed at getting independent schools to contribute back into the state.
"Government schools have been paying payroll tax as part of their contribution, and the time is now for us to ask the most wealthiest private schools in the state to do the same thing, and to step up," she said.
Criticism from independent sector
The principal of Oakleigh Grammar, Mark Robertson, told the ABC's Drive program that the new payroll tax was a "significant additional cost" that he described as "catastrophic".
The Orthodox Christian school in Melbourne's south, which charges $12,651 in tuition fees in the 2023 school year for a student in year 12, would be liable for an estimated $700,000 in payroll tax for the 2024 school year.
Robertson said the potential tax bill was a "significant concern" for the school's budget.
"A school like ours … we basically aim to break even, perhaps with a very small surplus. There's certainly angst from a staffing point of view," he told ABC Radio Melbourne.
"From a parent's point of view, they're also concerned because it could impact our programs."
Oakleigh Grammar 's faith-based curriculum includes a focus on Greek language and culture, programs that Mr Robertson said were important to the school community.
"But with an increase of $700,000, that means we have to look at fee increases that we do not wish to impose upon our parents," he said.
"I guess the reality is that an independent school does serve a public good, and it takes the pressure off the government and state school system. And without independent schools, there would be an overflow on the government's sector and I don't think they'd be able to cope with it.
"We'll be very vulnerable with this type of cost to the school. We've had more financial applications in the last year than we've ever had.
"By and large, the majority of parents who send their children to our school are sacrificing other things.
"There is a lot of anxiety and there's a lot of unease in the independent school communities as a result of that. Family budgets are under extraordinary pressure at the moment," he said.
Political opposition to the changes
Liberal Nick McGowan, the member for the North Eastern Metropolitan Region, joined the number of principals and administrators calling for the measure to be dropped, calling it a "new 'school tax'".
"This tax will cost in the order of $420 million in the forward estimates. It's a significant amount of money and these schools will be left with little alternative other than [to] actually raise fees on parents," he said.
In a letter sent to all non-governmental schools in his electorate, Mr McGowan urged principals to seek exemptions for their schools from the education minister.
"You know, everyone right now is struggling to cope with cost of living pressures. This is the last thing Victorians need."
Mr McGowan said the changes were penalising parents, and that the calculations in the budget did not account for any exemptions for any schools.
Earlier this week, Independent Schools Victoria chief executive Michelle Green said the news had come as a shock to the sector and would be "greeted with dismay" by parents who sent their children to private schools.
"It was made without consultation and is based on an arbitrary definition of a 'high-fee' school," she said.
"It is likely to have a damaging impact on the operations of many Independent schools, with the potential to disrupt the education of their students."
'Dollar-for-dollar increase in expenses'
Senior manager of tax policy at CPA Australia Elinor Kasapidis said that while state-run schools are liable for payroll tax, this is often made up through their regular government funding.
Independent schools receive less funding overall, hence the existence of the exemption.
"These costs are non-deductible as these education providers are non-profit organisations, so it's a dollar-for-dollar increase in expenses," she said.
Ms Kasapidis noted it was disappointing that the revenue increases were not going to fund educational outcomes, but rather pay off the state's COVID-19 debt.
The actual schools that will lose their payroll tax exemption is at the ultimate discretion of the minister for education and Treasurer Tim Pallas.
Schools have demanded clarity on which schools will be subject to the changes, but the government has so far not outlined the guidelines or final decision on the exemptions.
The changes will come into effect on July 1, 2024, and are anticipated to generate $134.8 million in revenue in the 2024-25 tax year.
