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2024 Victorian State Government Budget – Payroll Tax Exemption Removed for ‘high fee’ Independent Schools

Update 29/06/2023

On Thursday 29th June 2023, the Victoria State Government released its long-awaited list of non-government schools exempt and not exempt from payroll tax from 1 July 2024.

View the list here:

In a major concession from the original assumed $7,500 threshold of fee income per student, the Government has doubled this to $15,000.

Therefore, non-government schools below $15,000 fee income per student, based on their 2021 Financial Questionnaire data, will continue to be exempt from income tax. Victorian non-government schools over this amount (there are 54) will be required to pay payroll tax on wages. If their wages are above $10m, this will incur an additional 0.5% payroll tax surcharge on top of the current 4.85% rate. The payroll tax-free threshold will also not be available.

This threshold is set until 1 January 2029 and we understand will not be remeasured each year. New schools opening will be assessed against this threshold.

If you have any questions on the State Government Budget announcements or other challenges impacting your school or organisation, reach out to our specialised Education Sector Team here.

Update 5/6/2023

After a busy week of lobbying by Independent Schools Victoria and various Independent Schools, the Victorian government has now conceded this State Government announced measure would not raise as much as initially forecast. According to the budget announced on the 23rd May 2023, it was predicted that the COVID Debt Repayment Plan measure of removing the Payroll Tax Exemption for ‘high fee’ Independent Schools would raise more than $420m over three years. Here are a few developments over the last week:

  • Independent Schools Victoria has been lobbying hard over the last, on behalf of Independent Schools, citing the impact of the proposed measure on certain schools, the unintended consequences of the measure and the uncertainty under the outlined plans.
  • The State Taxation Act Amendment Bill 2023 was introduced into State Parliament and approved by the Legislative Assembly. This alters the Payroll Tax Act 2007 to remove the payroll tax exemption on all non-government schools and introduces a new condition whereby the payroll tax exemption will only apply to those schools declared by the Minister for Education.
  • After the budget outlined a potential impact on 110 ‘high fee’ schools, or around the top 15% of non-government schools, raising $420m over three years, the State Government conceded this week it is unlikely to raise that much revenue. It was assumed that a ‘high fee’ school would be defined as one which had more than annual fee threshold of $7,500 per student, as this was a previous measure used by the Department to determine high and low fee school in 2020. However, the government has said the $7,500 was “not necessarily reflective of the fees and costs and pressures in the school fee environment now” and that they would consult with the sector on an appropriate new threshold. They also said less than 110 schools would be impacted.

We expect more details to come out in the coming weeks as the Budget legislation is due to be passed by 30 June 2023.

If you have any questions on the State Government Budget announcements or other challenges impacting your school or organisation, reach out to our specialised Education Sector Team here.

Payroll Tax Exemption Removed for ‘high fee’ Independent Schools

The Victorian State Budget was announced yesterday. Amongst a raft of COVID Debt Repayment Plan measures, it was announced that ‘high fee’ Independent Schools are set to be hit with the removal of their payroll tax exemption.

Currently in Victoria, all non-profit non-government schools are exempt from payroll tax by the State Revenue Office. However, from 1 July 2024, ‘high fee’ Independent Schools will have this payroll tax exemption removed until 2034. What a ‘high fee’ schools is, has not been defined, however, the Victorian State Government has previously determined a ‘high fee’ school as one that charges more than $7,500 for school fees. This is expected to impact over 100 schools in Victoria and cost over $400,000 per school per year. The Minister for Education will determine, with the consent of the Treasurer, the non-government schools that will continue to be exempt from payroll tax.

There is also the likelihood of a double hit with an additional rate of 0.5 per cent to apply for businesses with payroll over $10m. For more information on the payroll tax changes, click here.

These measures will require legislation changes, so we expect further

information to come out in the coming months about this change.
For more information click here.

There is positive news for Kindergartens, with $1.4bn announced for the free kindergarten program and $1.6bn for the new 3 year old kindergarten scheme. There is also allocated $235m to help students living with disabilities, their carers and families.

If you have any questions or if we can assist you in tax consulting, please contact us.