Andrews government quietly exempts universities from its Covid debt levy

After inadvertently hitting universities with the mental health levy in 2021, the Andrews government has given them a temporary exemption from its latest tax hike.

Premier Daniel Andrews meets students from Mt Waverley Secondary College at Monash Tech School.

The Andrews government has quietly exempted universities from the payroll tax increase it announced in last week’s Victorian budget, at the same time as it ­is ­imposing the revenue grab on 110 private schools.

As part of a suite of measures intended to help Victoria repay $31.5bn in debt attributed to the Covid pandemic, the state government last week announced a new decade-long business levy intended to raise $3.9bn over four years.

Companies with a national payroll of more than $10m will pay 0.5 per cent of payroll, while those with payrolls above $100m will pay 1 per cent – with the taxes levied on the Victorian share of wages above the relevant threshold.

Additionally, 110 private schools are set to be stripped of their payroll tax exemption, raising $420m for the government over three years.

Last week’s budget papers made no reference to an exemption for universities, but government sources have confirmed that Victoria’s eight public universities will receive a temporary exemption in recognition of the ongoing impact of pandemic ­disruptions to the international education sector.

It is not clear how long the exemption will apply, or what it will cost the Victorian budget.

The Covid debt levy effectively doubles the payroll tax liability ­imposed on businesses via the ­Andrews government’s mental health levy in the 2021 state ­budget. At the time, the government’s inadvertent inclusion of universities among entities required to pay the mental health levy sparked a backlash from the tertiary sector, which was being asked to pay tens of millions of ­dollars at a time when Australia’s borders were closed to international students.

In a concession to universities, the Andrews government in September 2021 announced a $50m international education resilience fund and the deferral of $130m in payroll tax, which is not due to be paid until 2024.

The latest exemption appears to be a further concession to the sector, but comes at a time when there is a strong recovery in international student numbers.

Independent Schools Victoria chief executive Michelle Green said she hoped the government would recognise that the pandemic had “also caused massive disruption to all Victorian independent schools, including those that enrol international students.

“These enrolments fell from 2721 before the pandemic to 1052 last year – a dramatic drop of 61 per cent,” Ms Green said.

“The decision regarding universities is a commonsense one.

“We hope the same common sense and consideration of facts will help the government to reconsider its arbitrary decision to impose payroll tax on over 100 independent schools.

“Independent Schools Victoria is always ready to assist the government to better understand our sector, and the real consequences their out-of-the-blue decision has for all Victorian non-government schools”

Opposition education spokesman Matt Bach said someone could “drive a truck” through the government’s reasoning for its payroll tax hikes. “On the one hand, universities remain exempt from payroll tax increases because of the collapse of international ­student numbers during Covid. On the other, schools will be stripped of $422m despite being heavily exposed to exactly the same pressures,” Dr Bach said.

“If Labor actually cares about the impact of Covid on educational institutions, it would scrap its new schools tax, which is set to be initially applied to a ­secret hit-list of 110 schools.”