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Victorian private schools that charge more than $7500 a year are warning they will be forced to increase fees, cut programs or shed staff to pay millions in payroll tax from which they were previously exempt.
One top school said it could be up to $7 million a year worse off and others worried parents struggling financially would be prompted to withdraw their children.
Oakleigh Grammar principal Mark Robertson said his school could be $700,000 a year worse off.Credit: Joe Armao
More than 130 independent and Catholic schools in Victoria charge fees above $7500 – the sum at which schools are defined as high-fee and therefore ineligible for government support programs such as catch-up tutoring or capital grants.
Most of those schools are expected to lose their long-held exemption to payroll tax, in an Andrews government measure to pay down the state’s debt.
Premier Daniel Andrews said private schools have had “a sweetheart taxation deal” that was not affordable in the state’s current financial situation.
“They have had a preferential tax treatment for a long time, and they’re running businesses,” Andrews said.
“These schools have always been judged to be in a unique category. They have not been eligible for our other support. They are not low-fee schools. 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.”
But Independent Schools Victoria chief executive Michelle Green said all Victorian schools were not-for-profit organisations, and independent schools’ long-standing exemption from payroll tax recognised that they “perform a public good”.
Green urged the government to reconsider, warning that the 112 independent schools expected to be subject to the tax will “either have to cut programs, services or staff, or increase fees”.
The Catholic Education Commission of Victoria said the tax would probably apply to 25 Catholic secondary schools – potentially wiping up to $1 a million a year from their operating budgets.
The commission said it would seek further discussions with the state government as a matter of urgency.
A government spokesperson declined to confirm the $7500 threshold but said it had an “established process for separating low-fee from high-fee schools” and would provide more detail before July.
School principals began to write to their communities on Wednesday, warning parents that the tax change could force them to make cuts to educational programs in areas including child mental health.
Mark Robertson, principal of Oakleigh Grammar, which charges about $12,000 for year 12s, said he had been blindsided and was greatly concerned by the new tax.
“That will mean for us approximately a $700,000 cost to the school. So before we even start our budget for 2024, we’re starting off with $700,000 less money than what we should have, and that’s very concerning to us and should be concerning to the parents,” he said.
Bacchus Marsh Grammar principal Andrew Neal said his school did not have capacity to pay the tax without raising fees. Credit: Justin McManus
The payroll tax would flow on to school fees, he said.
“The fact that Oakleigh Grammar is considered a high-fee school – that is any school over the $7500 threshold, and therefore subject to payroll tax – just defies any logic,” he said.
“A school like ours, both parents are working very hard to send their children to our schools so any incremental fees that unnecessarily goes up causes hardship for many parents.”
Bacchus Marsh Grammar – one of the state’s largest schools – charges $13,215 in year 12. Principal Andrew Neal said it was being hit the same way as those that charge more than twice as much.
“Governments of both extractions seem to think that independent schools have an infinite ability to deal with their ‘smart’ tweaks – we don’t,” he said.
“This will result in higher fees and more pressure on government school places, if indeed they were actually building enough in our part of the world.”
Professor Jillian Blackmore, an Alfred Deakin Professor at Deakin University, defended the move, arguing that most schools on the list were wealthy enough to absorb the increased tax.
“If the state can forestall their building program, so can the schools I think. They can just redirect their resources,” Blackmore said.
“They have assets. The schools that are going to be impacted I’m sure have significant capacity to call on funds.”
Australian secondary school prices have almost tripled in the past 20 years, the third-biggest price rise behind only tobacco and gas and other household fuels.
The principal of Caulfield Grammar – one of Melbourne’s largest private schools – wrote to parents on Wednesday, slamming the “unfair and arbitrary” tax change and warning it will cost the school an estimated $6 million to $7 million a year.
Ashleigh Martin said it was difficult to comprehend that the government would impose the tax without consulting schools, in the midst of a teacher shortage and a mental health crisis among students.
Caulfield Grammar has more than 3300 students and more than 500 staff. This would also make it liable to pay mental health and COVID recovery levies – each worth 1 per cent – on top of the 4.85 per cent payroll tax that non-government schools had been exempted from before Tuesday’s budget.
Martin said it was “presumptive to assume that families can foot the bill for this poorly planned tax and levy increase”.
“To ensure we are doing what’s best for our students and educators requires careful investment and targeted initiatives,” Martin wrote. “This unforeseen material cost increase will impact independent schools’ ability to deliver on initiatives, which take years of planning and implementation.”
Caulfield Grammar principal Ashleigh Martin said the high-fee school could have a payroll tax bill of $6-7 million.
Jewish schools have also raised the alarm about the new tax, warning that it could put the cost of a Jewish education out of financial reach for many families.
There are eight independent Jewish schools in Melbourne, most of which charge high fees.
Australian Council of Jewish Schools executive director Leonard Hain said the tax would force schools to raise their fees by at least 4 per cent a year.
“This is on top of the annual fee increases already imposed on our parents to cover the escalating cost of power, utilities, and materials and increases in staff salaries and wages,” Hain said.
Hain said that a third of families enrolled in Jewish schools receive fee assistance and that requests for fee assistance had been rising.
“Many of our parents are already under considerable financial strain, trying to cope with escalating housing costs and cost of living pressures, and are making enormous sacrifices to provide their children with a Jewish education,” he said.
Hain predicted that any further fee rises would force some of those parents into the state school system.
Tuesday’s budget said the exemption would be cancelled for about 110 schools that comprise the top 15 per cent most expensive schools in the state. The minister for education and the treasurer will have discretion to exempt schools from the list.
The change will raise a forecast $422.2 million over three years, beginning on July 1, 2024.
Southern Cross University adjunct associate professor David Zyngier said private schools were not charities and should pay payroll tax like “everyone else”, including government schools.
“If private schools need to raise their fees to pay for this, they might want to reconsider building their next rowing shed or wellbeing centre or trip to China,” he said. “These private schools that are crying poor are property portfolio owners like you would not believe. They are not poor.”
Zyngier, who founded the Public Education Network, also called on the Labor government to fully fund state schools.
“There’s no additional funding for public schools in the budget at all,” he said.
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