Independent schools warning to Victorian government ahead of state budget next week

Independent Schools Victoria has fired a warning shot at the state government, saying it wants to see a ‘no surprises’ budget handed down.

Victorian Deputy Premier and Education Minister Ben Carroll with Treasurer Tim Pallas. Picture: David Crosling

Independent Schools Victoria has fired a warning shot at the state government, saying it wants to see a “no surprises” budget handed down as 59 schools gear up to foot a more than $46m bill in payroll from this year.

As Victorian Treasurer Tim Pallas prepares to hand down his 10th budget on Tuesday, independent schools are bracing for the impact of last year’s budget surprise, with 52 independent schools set to pay an estimated $46m in payroll tax from July.

Another seven Catholic schools will also be subject to the tax.

The impost on independent schools will increase to an estimated annual $95m payroll tax bill next year, and by 2029, close to 70 independent schools will be trapped in the tax net, which removes the payroll tax exemption for all schools with fees of $15,000 or more.

Earlier this week, Mr Pallas sought to reassure Victorians that Premier Jacinta Allan had “made very clear” that she did not want the budget to have adverse impacts on family budgets.

But despite Mr Pallas’s pledge that there will be no cuts to frontline services, the budget is expected to contain grim news for many, as the government battles to rein in net debt which is forecast to reach $177.8bn by 2026-27.

ISV acting chief executive officer Meg Hansen said a surprise was the last thing school communities and families need in a time of financial strain.

She said there was a false assumption that independent schools and families have the capacity to absorb the costs of the tax.

“We hope there will be no surprises this year,” Ms Hansen told The Weekend Australian.

“The last thing school communities want are any new measures that will complicate their operations, hit family budgets, and risk disrupting students’ education.

Ms Hansen said she has restated her organisation’s opposition to the payroll tax in a recent meeting with state Education Minister Ben Carroll.

“When Mr Carroll became Education Minister, ISV expressed the hope that his appointment would lead to a reset in the relationship between Independent schools and the Victorian Government, which was put under extraordinary strain by the sudden and unprecedented imposition of payroll tax last year,” the ISV chief said.

“Parents, who pay fees from their after-tax income to educate their children in schools that match their needs, resent being doubly taxed, especially at a time of severe pressure on household budgets.

“Schools are not immune to this financial strain. They face rising salary bills, and increases in the cost of utilities, insurance, Workcover premiums, and the need to build and maintain facilities for growing enrolments.

Following last year’s state budget, the government initially flagged that the tax would impact approximately 110 schools with fees of $7,500 or more, but was forced to double that threshold to $15,000 amid a furious backlash from the independent and Catholic school sectors.

Business and the property sector have warned ahead of Tuesday’s budget that the private sector cannot sustain further tax hikes, after the Australian Bureau of Statistics last month confirmed Victoria as the highest taxing state in the nation, raking in $5,795 per person in state taxes in 2022-23.

Last year’s state budget contained a range of new payroll and property taxes, including the private schools tax, aimed at repaying $31.5bn of debt attributed to the Covid pandemic over the next decade.

A Victorian government spokesperson said the upcoming budget will be about delivering commitments made at the last election and “protecting jobs and services that families rely on”.

“We’ll continue working closely with non-government schools on their eligibility for payroll tax exemption based on each school’s annual recurrent income per student,” they said.

“More than 660 non-government schools are currently exempt from payroll tax.”

Victoria’s Opposition Education spokeswoman Jess Wilson said that independent schools would be “rightly on high alert” following the tax announced last year.

“In the midst of a cost of living crisis, now is the worst time to be increasing taxes and charges on Victorian families,” Ms Wilson said.

“Labor’s unfair Schools Tax has added an increase of around $1,000 to school fees and that’s only set to increase as the full impact of the tax hits in the next financial year.”