Schools to pay more tax while kinder gets a boost – State Budget 2023

Victoria’s State Budget announcement yesterday left many schools surprised by unexpected news that their long standing payroll exemption was to be scrapped with effect from mid 2024.

Announcements referred to “high fee” schools, although the apparent threshold of annual fees of more than $7,500 (to be clarified exactly in its application) looks to capture many mid-tier and mid-fee schools, including some outer metro and regional independents and Catholic schools.

Many schools in this mid-tier have a tight surplus after meeting growing staff costs and will need to explore costs savings in upcoming School Board budget meetings in August and September. Tuition fee increases in circumstances where parents are already feeling cost of living pressures are unlikely to be welcomed.

This payroll tax decision follows the 2021 land tax amendments (see our land tax article here) and further erodes the tax concessions historically afforded to charitable organisations in Victoria. 

On the other hand, low fee schools will get a boost and the early childhood sector is celebrating the continuation and extension of free kindergarten, noting that 15 hours of fully funded three year old kinder has been on the sector wish list for a number of years. Combined with the Federal Government’s increase to the child care subsidy, families with younger children should have more access and lower costs, with long daycare operators apparently restricted from passing on some costs.

In a pleasing development, 150 new bush kinder programs will be funded.

The budget also allocates significant investment by the State in new schools and school programming including camps, which may alleviate the risk of camps being cancelled due to recent changes to time in lieu payments for teachers.

Lastly, although we understand teaching staff will be spared the public sector job cuts, with the budget announcement that up to 4,000 positions will be cut from the public service, the Department of Education and Training is very likely to be impacted, although it is currently unclear how this will flow on to schools.

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