Fears that stripping “high-fee” Victorian private schools of their payroll tax exemption will lead to job losses are a “red herring”, education experts say.
The change, revealed in last week’s state budget, means about 110 private schools will be required to pay tax on staff salaries, raising more than $420m over three years.
The reform has sparked backlash from the independent school sector and the opposition, who have warned it will lead to higher school fees and job losses and say it was announced without consultation.
Emma Rowe, a senior lecturer in education at Deakin University, said the independent school sector was engaged in “fearmongering” over the move.
She said it was not inevitable the reform would lead to job losses, describing such suggestions as a “red herring”.
“This is simply the removal of a tax exemption they’ve enjoyed for a long time that public schools don’t have,” she told Guardian Australia. “This is not a loss – it’s just making the playing field far more equitable.
“The fear that private schools are going to be financially hurt from this is a ludicrous argument.”
Rowe said since the Gonski reforms were introduced by the Gillard government in 2012, school funding had aimed to be “sector-blind”, meaning funding was based on the individual needs of a child.
But she said tax exemptions incentives parents to choose private schools and gave the sector a financial privilege.
According to a government factsheet, schools required to pay payroll tax “will be informed by a well-established delineation between ‘high fee’ and ‘low fee’ non‑government schools”, which will take into account fees, as well as other contributions and compulsory levies.
This definition of “high fee” was set at $7,500 in 2020-21, based on school fees in 2019, and will be indexed. It is expected that by July 2024, when it comes into effect, this figure is likely to be above $8,000.
David Zyngier, an adjunct associate professor at Southern Cross University, said all private schools should pay payroll tax. He said the tax would be a similar rate to that paid by public schools because salaries were equivalent across the two sectors, except for at the senior level.
Rebecca Thistleton, the executive director of progressive thinktank the McKell Institute and a former Labor candidate, said the state could no longer provide tax exemptions to benefit people “who were better off”.
The Victorian opposition on Tuesday pledged to return the payroll tax exemption if elected in 2026 and introduce a legislated debt cap.
The Coalition stopped short of committing to repeal two new 10-year “Covid debt repayment” levies on property investors and big business, which according to the budget will raise $8.6bn over the next four years.
In his budget reply speech on Tuesday the shadow treasurer, Brad Rowswell, said the government was punishing “6.8 million Victorians for trying to get ahead”.
“If you’re a family hoping to send your children to an independent school, to give them the very best start in life, it will cost you an extra $1,000 per child every single year for the next decade,” he said.
“If you’re hoping to invest in the property market, you’ll pay an extra $1,000 a year for the privilege and you’ll go on paying an extra $1,000 every year for the next 10 years.
“If you’re a business wanting to grow and employ more people, you’ll be slogged with higher payroll tax.”
Independent Schools Victoria on Tuesday backed the opposition’s pledge to vote against the reform and repeal it, if elected in 2026.
Michelle Green, the lobby group’s chief executive, said last week’s announcement was “causing great anxiety and uncertainty for school leaders, their staff and for parents”.
But the Australian Education Union’s Victorian branch president, Meredith Peace, said the backlash from independent schools was derailing the conversation away from the underfunding of public schools.
The Victorian Greens, meanwhile, are demanding a two-year rent freeze in exchange for supporting the new taxes but would not say it would block the legislation if its demands are not met.
