Victorian schools left in the dark as state government faces budget black hole

The Andrews government is set to end up with a $200m budget black hole from its controversial new tax and schools are still waiting to hear what threshold will be applied.

The state government will end up with a $200m budget black hole by applying the payroll tax to only high-fee schools, new modelling shows.

Data from Independent Schools Victoria shows that limiting the tax to schools with average fees starting at $20,000 would affect 43 private schools with 52,883 students.

Those schools would pay $67m of tax, along with about $7.5m from five Catholic schools with fees at this level.

This would raise only $74.5m next year, well short of the projected revenue of $134m.

Modelling shows there could be a $200m budget black hole. Picture: iStock

Over three years the gap would amount to $197m. The surprise measure was originally budgeted to raise $422m in three years.

It was originally stated that about 110 schools – the top 15 per cent by fees – would lose their exemptions on the 5.8 per cent payroll tax.

The original threshold for schools to be exempted from the tax was average fees of $7500, but this has since moved closer to $10,000.

School leaders and parents are still waiting to hear the final threshold for schools to be chosen.

Michelle Green, chief executive of Independent Schools Victoria, said it was clear the government “will come nowhere close to the revenue it expected to take from its learning tax”.

The original threshold for schools to be exempted from the tax was average fees of $7500. Picture: iStock

“Analysis suggests the government didn’t understand school finances when they decided to impose this tax on schools it has arbitrarily classified as a high fee, using a formula known only to itself,” Ms Green said.

“The government should think again and scrap the tax.”

The ISV modelling shows that at a threshold of average fees of $10,000 and above, 85 schools will be taxed, bringing in a total of $90m. It’s estimated that a further $25m would be raised from 20 Catholic schools. This would raise $115m of the projected $134m, but is being strongly resisted by lower-fee schools who have started a political campaign against the government.

If the threshold was schools with fees of $15,000 or above, it would apply to 56 independent schools raising $78m along with six Catholic schools raising around $8.9m. The shortfall would be $47m in the first year alone.

A department of education spokeswoman said the “Minister for Education and Treasurer will determine the fee threshold for high-fee, non-government schools that will no longer receive an exemption from payroll tax, in consultation with the sector”.

Opposition education spokesman Matthew Bach said: “What this shows is Labor’s Budget is in disarray.”

“The government handed down its Budget three weeks ago, yet schools are still in the dark about whether they’re on Labor’s hit list – and therefore will be paying millions in extra taxes”.