The Victorian government has backed down on its plans to hit 110 private schools with payroll tax, with Premier Daniel Andrews conceding the policy will not raise as much money as forecast in last week's state budget.
The Andrews government has faced a barrage of criticism from the sector for its decision to slug private schools with payroll tax, with particular concern from schools with annual fees of around $7,500.
The May budget removed a payroll tax exemption on high-fee private schools from July 1 next year. It was forecast to raise $422 million over three years.
The budget papers said "approximately 110 schools, or around the top 15 per cent by fee level, will lose their exemption".
That estimate was based on an annual fee threshold of around $7,500 per student. That figure is used by the department to determine which non-government schools are eligible for government funding for capital and other projects.
Speaking at a parliamentary inquiry into the budget, Mr Andrews said the threshold for the payroll tax exemption was yet to be set but he expected it to be higher than $7,500.
"There will be some that will be unhappy, because no one wants to pay additional tax, but it will not be 110 [schools]. I think it will be less than that,'' Mr Andrews said.
The Premier conceded that the current $7,500 threshold was not reflective of fees and pressures in 2023 and that the policy should have been better explained in the budget papers.
Jim Miles, the executive director of the Catholic Education Commission of Victoria, said the changes were "a welcome first step".
"We look forward to ongoing consultation as a matter of priority," he said.
Shadow Education Minister Matthew Bach said the Premier's comments were "an admission of the pain that this tax increase is going to cause families".
"After a week of chaos, the Andrews government has now realised the full impact of its schools' tax on Victorian families,'' Mr Bach said.
"Simply tinkering with this tax isn't good enough, the tax must be scrapped."
The updated fee threshold, and the list of schools that will be liable for payroll tax, will be determined by the minister for education and the treasurer by the end of this financial year.
