Victorian private schools with annual fees over $15,000 will be stripped of their longstanding payroll tax exemption as part of the watering down of the Andrews government’s controversial budget measure.
Initially the government expected to make $420m in revenue over three years from the tax, announced last month, impacting 110 private schools with annual fees over $7,500.
But amid a fierce backlash from the sector the government agreed to revisit its definition of a “high-fee school”.
On Thursday the treasurer, Tim Pallas, said the tax would now only apply to 60 schools – less than 10% of the state’s private school sector – and bring in $100m less than originally budgeted over the forward estimates.
“We think this is an important step for fairness,” Pallas said.
The state’s education minister, Natalie Hutchins, said the government had listened to the concerns of the non-government school sector. She suggested some private schools could raise fees while others would be able to absorb the payroll tax.
“It’s going to be horses for courses across the non-government school system,” she said.
The change will come into effect in July 2024 and the school fee threshold has been set for the next five years.
The threshold includes fees and charges that non-government schools pass on to parents.
New non-government schools opening in the five years to 2029 will be subjected to the same fee benchmark.
The state’s Catholic Education Commission said the change provided some relief to the sector but stressed it fundamentally opposed the tax.
The opposition on Thursday maintained the reformed measure would punish Victorian families and described the change as a “humiliating backdown”.
“Simply tweaking the threshold will not fix this unfair and regressive tax,” the opposition’s education spokesperson, Matthew Bach, said in a statement.
The opposition has vowed to scrap the payroll tax if elected in 2026.
The state’s public school teachers union has argued the focus on private school payroll tax has detracted from the underfunding of public schools against the schooling resource standard (SRS) – the estimated minimum funding required to meet a student’s educational needs.
Meredith Peace, president of the Australian Education Union’s Victorian branch, said the state’s budget resulted in a 2.7% funding cut to the public school sector in real terms.
The union’s analysis showed Victorian public school students are missing out on $1,800 of their share of SRS funding while some private schools are overfunded up to 20% above their SRS benchmark.
But Hutchins said the $3.1bn allocated for public schools in the budget was “one of the single biggest investments any state has made in an annual budget”.
