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Private schools in Victoria will be stripped of their long-held exemption to payroll tax next year, netting the state more than $420 million in revenue over three years.
About 110 of the state’s highest-fee non-government schools will lose their payroll tax exemption from July 2024. The budget papers say the change will affect roughly the 15 per cent highest-priced schools.
About 110 of the state’s highest-fee schools will lose their payroll tax emeption from July 2024.Credit: Vince Caligiuri
The education minister and the treasurer will have discretion to exempt schools from the change, which is forecast to increase revenue by $134.8 million in 2024-25, rising to $140.3 million in 2025-26 and $147.1 million in 2026-27.
The change will bring affected non-government schools into line with the government school sector, which is not payroll tax-exempt.
It is too soon to say if schools will pass the tax increase on to families.
Non-government schools increased their fees this year by between 4 and 10 per cent – the biggest rise in five years – following years of COVID-related fee freezes. Twenty-three schools charge more than $35,000 a year at senior year levels.
But the change will also hit the finances of many mid-fee schools.
The hit follows recent changes to the funding formula for non-government schools, which is now based on students’ parental income instead of the socioeconomic profile of a school’s postcode. Those changes, heavily lobbied for by the Catholic sector, saw many independent schools lose government funding, particularly in regional and outer suburban areas.
Payroll tax is one of the state’s three largest revenue sources. It will be increased for large national businesses with payrolls above $10 million for the next 10 years from July 1, to help pay down the state’s COVID debt.
Revenue from the temporary levy on large business payroll is expected to be $836 million in 2023-24, and the revenue is expected to grow by an average of 8.6 per cent a year over the forward estimates, the budget papers state.
Treasurer Tim Pallas said big businesses had enjoyed profit spikes during the pandemic while government had directed tens of billions of dollars in support their way. But he said the budget would also invest in small business.
The budget will also raise the payroll tax-free threshold from $700,000 to $900,000 for small businesses. This will result in 4200 businesses becoming payroll tax-exempt from July 1, 2024, the budget papers state. The threshold will increase to $1 million the following year.
“More than 26,000 businesses, or around 60 per cent of payroll tax-paying businesses will benefit from these arrangements,” Pallas said.
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