How much payroll tax on private schools is driving up fees – and the battle to stop it

High-fee private schools are waging a guerilla campaign to pressure the state government to reverse its decision to charge payroll tax, which they say has left them with no choice but to pass the charge on to parents.

As schools finalise their 2025 fees, some are telling parents the tax – which includes COVID-19 and mental health levies – is the primary driver of fee increases.

Trinity Grammar in Kew said it faced an annual payroll tax bill of $2.5 million.Credit: Joe Armao

Others have introduced a levy or surcharge, rather than rolling the tax into a consolidated charge. Some schools said they would adjust the surcharge – if the state government cut or scrapped the tax.

Trinity Grammar in Kew has lifted next year’s fees by 7.5 per cent, taking year 11 and 12 fees to $42,944.

In a letter to parents, the school said it faced an annual payroll tax bill of $2.5 million. Without the tax, the rise in fees would have been between 3.5 and 4 per cent, it said.

“It is also an unfair decision impacting on families who already take on much of the tax burden for the state,” the letter states.

A Trinity spokesperson told The Age that the tax was “financially significant”.

It came into effect in July and requires about 60 Victorian private schools – those with annual fees of $15,000 or more – to pay a 4.86 per cent payroll tax. Collectively, these schools would pay the state an estimated $101.8 million next year to help tackle the state’s COVID-19 debt.

The Age revealed in August that some Labor MPs had been privately lobbying for elite schools in their electorates to be exempt from the tax – despite voting for it in parliament.

Lauriston Girls’ School told parents the 2025 tax was “directly attributable” to a 3 per cent increase in tuition fees. The school charged $42,700 for year 12 this year. In total, its fees will jump by 5.3 per cent to $44,960 next year.

Victorian treasurer Tim Pallas on budget day in 2023.Credit: Joe Armao

In a letter to parents, Wesley College described the tax’s impact as “significant and unavoidable”, costing the school $2.9 million this year and $6.1 million next year. Fees for students in years 10 to 12 will rise from $40,053 this year to $43,156 next year.

Principal Nick Evans told The Age that the school had done all it could to absorb the tax through operational efficiencies while also helping families in financial hardship.

Haileybury’s payroll tax bill will be $7.6 million next year, rising to $9 million by 2029 when the tax is due to end. Tuition fees for years 9 to 12 next year will be $39,985.

In a letter to families, the school said the tax was a major contributor to the 5.5 per cent increase.

“Parents across the state are being punished for choosing to send their child or children to an independent school,” vice-principal Scott Doran told The Age.

Caulfield Grammar School’s payroll tax bill will be $6.5 million next year.Credit: Simon Schluter

Caulfield Grammar faces a $6.5 million payroll tax bill next year. The school has added a $1362 surcharge for primary school students and $1782 for secondary students, on top of tuition and consolidated charges. Year 12 school fees will be $42,822.

Chief financial officer Mark Lopez said the school was “actively engaging in advocacy and discussions around this issue” but that there was no pressure on parents to act.

Both Caulfield Grammar and Haileybury said the surcharge would be adjusted if the state government amended or repealed the tax.

Carey Baptist Grammar School principal Jonathan Walter said the school’s tax bill next year would be $4.5 million – pushing up fees by 2.5 per cent.

St Michael’s Grammar School introduced a payroll tax surcharge this year, with the $720 levy covering the six months to December. Next year’s surcharge will add $1510 to parents’ annual bills, taking year 12 fees to $40,932.

Lobby group Independent Schools Victoria said 16 private girls’ schools, five boys’ schools and 31 co-ed schools were currently liable for payroll tax.

“It’s not at all unreasonable to draw the connection between the impact of the tax and the fact that some schools are having to lift their fee,” said chief executive Rachel Holthouse.

“Parents are already making sacrifices to use their after-tax income to educate their children. They feel like they’re paying income tax, and now they’re forced to pay payroll tax.”

School fee increases may also take more schools over the $15,000 threshold, making them also liable to pay the tax from next year.

Alphington Grammar will next year charge $15,640 for a student in year 12. The school has added a $450 payroll tax levy on top of its $6800 consolidated fees and levies charge and tuition fees.

The Department of Education said more than 90 per cent of independent schools remained exempt from payroll tax.

“Every government school in Victoria pays payroll tax. It’s only fair that the highest-fee private schools now also contribute,” the spokesperson said.

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