By Michael Bachelard
Parents in the Exclusive Brethren avoid paying tax on the bulk of their children's school fees in an arrangement that would be illegal if sought by other Australian parents.
Independent senator Nick Xenophon has called for a tax office investigation into the arrangement which he said looked ''at first blush like a tax lurk of biblical proportions''.
When most parents pay school fees, they are paying it from income which has already been taxed. If they sought to avoid tax by paying it via tax-deductable donations, or through a family trust, they could be prosecuted for tax evasion.
But figures released on the MySchool website show the Exclusive Brethren, a radically separatist Christian sect with about 15,000 members in Australia, gets around this law.
The website reveals that, at their Victorian school, Glenvale, 54 per cent of the income is tax-free because it is paid by parents through distributions from family trusts as well as donations. Because a school is a tax-free entity, Brethren families who arrange their business in this way do not need to pay tax on that money.
This tax-free money makes up the majority of the Brethren schools' income, with another 28 per cent at Glenvale coming from government hand-outs, and the rest from modest fees paid from Brethren families' post-tax income.
At the Meadowbank Education Trust, the Exclusive Brethren school in Sydney, government funding (state and federal) totals almost $9000 per student, fees paid by parents from post-tax income are just $2700, and the rest, $14,300 per student, comes from tax-free donations and distributions.
This means that, though the government funding is on par with the most disadvantaged schools, the controversial Christian sect has $26,000 per student to spend — more than some top flight private schools such as Xavier College, Scotch College and Wesley College.
The pattern is replicated at the six Exclusive Brethren schools around Australia. In 2009, the sect raised $32.4 million in tax-free money to send its 2537 students to school.
This dwarfs the tax-free component of any other private school in Australia, and acts as a de facto second government subsidy to Exclusive Brethren schools. At other comparable small Christian schools, tax-free payments by parents make up between about 1 and 4 per cent of income.
The tax office has ruled that if parents seek a special agreement with an ordinary private school to pay their fees as a distribution from a family trust, it constitutes tax evasion. But the Exclusive Brethren obtained legal advice in about 2006 that their arrangement, which covers all their members, was legal.
Only Brethren children attend these schools, and in the theology of the sect, they are constantly warned to stay separate from the outside world. They are told that ''worldly'' people are dangerous, and will ''defile'' and ''contaminate'' them. As a result, many grow up in fear.
They are also all but barred from going to university.The sect, whose leader is Sydney-based businessman Bruce D. Hales, is adept at what it describes as ''spoiling the Egyptians'' — or taking as much money from the public purse as it can legally manage.
Exclusive Brethren spokesman Bob Lawrence, of PR firm Jackson Wells, denied the system was specifically set up to avoid tax.
''The schools and parents follow all appropriate tax, education and other guidelines and comply with Australian law,'' he said.
Senator Xenophon said the tax office ''needs to tell Australian taxpayers whether this sort of arrangement is sanctioned''.
''If what the Exclusive Brethren is doing is more broadly applied it could cause a multi-billion dollar hole in tax revenue,'' he said.