Private schools’ budget planning hit by payroll tax backflip

Private schools’ budget planning hit by payroll tax backflip

Private schools in Victoria earning over $15,000 per student will now be subject to the state government's payroll tax after the Andrews Government backflipped on an earlier decision that would have seen some schools exempt from paying the tax despite crossing the threshold.

The payroll tax, announced following the May state budget and signed into law the following month, will apply to roughly 110 of Victoria’s wealthiest high-fee private schools, who will now lose their payroll tax exemption from July 2024.

On Tuesday, the Victorian Government announced that while the threshold for paying the tax would remain fixed until 2029 – currently arbitrarily set at annual school fees of $15,000 and above – “schools’ liability would be assessed annually.”

This means that some schools which thought they would not have to pay the tax will now have to from July next year.

Independent Schools Victoria Chief Executive Michelle Green said the government’s backflip is “adding to the confusion, anxiety, and uncertainty for Independent schools.”

“Schools that thought they had clarity about whether they are on or off the tax list have had that certainty swept away,” Green said.

The Victorian Government’s announcement comes as schools plan their budgets for next year – planning that Green says has now been disrupted.

“The certainty the government promised just a month ago has now been pulled from under them – without consultation and without consideration of the disruption it is causing school leaders and parents who pay fees to educate their children in a school that matches their needs,” she said.

Green said ISV is now seeking an urgent meeting with Education Minister to discuss ways in which the association and the government “can maintain a cordial relationship”.

Victoria's Education Minister Natalie Hutchins said the state's government is clarifying arrangements for non-government schools and payroll tax following questions from the sector.

:The threshold has been set at $15,000 and will remain in place until at least 1 January 2029, when it will be reviewed ahead of the 2029 school year," Minister Hutchins told The Educator.

"Using the annual data provided to ACARA, non-government schools will be assessed on an annual basis against the threshold and if a school’s total income per student exceeds the threshold the school will become subject to payroll tax."

Minister Hutchins noted that if a school’s total income per student falls below the threshold, the school will no longer be subject to payroll tax.

"New non-government schools opening between now and 2029 will also be assessed against the threshold."