Payroll Tax Changes for Non-Government Schools – Frequently Asked Questions

In particular, the FAQs provide guidance on:

the changes to the payroll tax exemption currently available to non-government schools once amendments to the Payroll Tax Act made by the State Taxation Acts Amendment Act 2023 commence on 1 July 2024, and
the Payroll Tax Exemptions Policy – Non-Government Schools (the policy) which the Minister for Education has issued, and how this policy operates.

The information provided below is explanatory guidance only, and does not add to or alter anything set out in the policy as issued by the Minister for Education and amended from time to time.

Overview

On 1 July 2024, amendments to the Payroll Tax Act will commence to remove the existing payroll tax exemption for wages paid by non-government schools and replace it with a model that exempts wages paid by non-government schools that are declared by the Minister for Education. On 28 June 2023, the Minister declared certain schools to be exempt from payroll tax for the 2024-25 taxable year and beyond.

The policy establishes a framework for the Department of Education (department) to support the Minister for Education (minister) in administering their power to make declarations for payroll tax exemptions under the Payroll Tax Act.

The central feature of the policy is that the department will reassess all Victorian non-government schools each year in relation to their payroll tax exemption status. Schools do not need to individually contact the department and request an exemption in order to be included in this annual reassessment. Each school will automatically be reassessed. Further explanation of the process and eligibility criteria applied as part of the department’s annual reassessment is set out below.

Schools will be notified if their payroll tax exemption status has changed after the annual reassessment process has concluded, for example:

if the minister has declared them and they are exempted from payroll tax liability, or
if the minister has withdrawn an existing declaration and they become liable for payroll tax.

Where the minister is considering withdrawing a school’s declaration, the department will contact the school to give it an opportunity to provide any further information to be taken into account by the minister before a final decision is made.

Outside of the department’s annual reassessment process, schools may also make one request per financial year to the department to be included in the minister’s declaration and exempted from payroll tax. Further information on how the department assesses such requests under the policy is set out in the FAQs below.

FAQs

What are the changes to the Payroll Tax Act and when will they come into effect?

The amendments to the Payroll Tax Act, contained in the State Taxation Acts Amendment Act 2023, which remove the payroll tax exemption for non-government schools will take effect on 1 July 2024.

Wages paid by non-government schools have previously been exempt from payroll tax. From 1 July 2024, unless a non-government school is declared by the Minister for Education to be exempt from payroll tax, it will no longer be exempt by virtue of being a non-government school, and may be liable to pay payroll tax.

Which schools are included in the current declaration?

The schools included in the current declaration (made by the Minister for Education on 28 June 2023), which exempts certain non-government schools from payroll tax on and from the commencement of the amendments to the Payroll Tax Act on 1 July 2024, are listed in the Government Gazette, and can be found on the Victorian Government website here: Payroll tax for non-government schools | vic.gov.au (www.vic.gov.au).

Schools in the current declaration, and which will therefore be exempt from payroll tax, were included on the basis that their annual recurrent income per student has been assessed to be lower than $15,000 (based on the most recent Commonwealth data available at the time of declaration).

Schools not included in the declaration, and which will therefore not be exempt from payroll tax, were not in included on the basis that their annual recurrent income per student has been assessed to be higher than $15,000,

How has the $15,000 per year threshold been derived?

The $15,000 annual recurrent income per student threshold has been set by reference to:

the Schooling Resource Standard (SRS) core funding amounts used to determine state and territory, and Commonwealth Government, funding contributions to non-government schools under the Australian Education Act 2013 (Cth) (Commonwealth AE Act), and
the 2023 estimated SRS funding amounts for primary and secondary schools determined by the Commonwealth Government under the Commonwealth AE Act.

How is ‘annual recurrent income per student’ calculated?

A school’s annual recurrent income per student is calculated by aggregating the amount of income the school receives in the following categories of revenue, based on the school’s most recent reported income at the time of assessment in the Commonwealth Government Department of Education’s Annual Financial Questionnaire:

Fees and charges (excluding Overseas students) – Tuition (System and Diocese funding included)
Income from Excursions State/Territory Government trips – Tuition (System and Diocese funding included)
Other receipts from students – Tuition (System and Diocese funding included), and
Fees/levies allocated for capital purposes – Tuition (System and Diocese funding included)
Please note that this is not identical to the ACARA definition of ‘net recurrent income per student.

When and how will the schools included in the declaration be reviewed?

All schools will be reassessed by the department annually, once the latest Commonwealth data becomes available. As part of this annual reassessment, the department will follow the policy and bring certain schools to the Minister for Education’s attention, who may then decide to update the declaration (including by adding or removing schools to or from the declaration).

In making any decision to declare a school as exempt or withdraw its declaration, the Minister will apply the $15,000 annual recurrent income per student threshold while also taking into account:

fees and charges imposed by the school related to the provision of education
any other financial contributions received by the school, and
any other matters the Minister considers appropriate, including the eligibility criteria in the policy and the annual recurrent income per student threshold it sets out.

What happens if a reassessment shows that a school which is currently exempt now has an annual recurrent income per student of more than the $15,000 threshold?

If a school is included in an existing declaration, however, the most recent data considered as part of an annual reassessment shows that the school’s annual recurrent income has met or exceeded $15,000 per student at the time of reassessment, the department will bring the school’s case to the Minister for Education’s attention.

The Minister will then consider that school’s case and may withdraw its exemption for the taxable year beginning in July of the next calendar year.

In so considering, the Minister will apply the $15,000 annual recurrent income per student threshold while also taking into account:

fees and charges imposed by the school related to the provision of education
any other financial contributions received by the school, and
any other matters the Minister considers appropriate, including the eligibility criteria in the policy and the annual recurrent income per student threshold it sets out.

What happens if a reassessment shows that a school which is not currently exempt has an annual recurrent income per student of less than the $15,000 threshold?

If a school is not included in an existing declaration, but the most recent data considered as part of an annual reassessment, or as part of an assessment requested by the school outside of the annual reassessment process, shows that the school’s annual recurrent income per student has fallen below $15,000 at the time of reassessment, the department will bring the school’s case to the Minister for Education’s attention.

The Minister will then consider that school’s case and may make a declaration and exempt the school for the following taxable year (i.e. the next financial year). In so considering, the Minister will apply the $15,000 annual recurrent income per student threshold while also taking into account:

fees and charges imposed by the school related to the provision of education
any other financial contributions received by the school, and
any other matters the Minister considers appropriate, including the eligibility criteria in the policy and the annual recurrent income per student threshold it sets out.

Schools may submit any out of session requests to ngs.support@education.vic.gov.au.

How are new schools assessed for eligibility for the payroll tax exemption where the Commonwealth does not have available income data from previous years?

The annual recurrent income for new schools will be calculated using the figures derived from an interim assessment of annual income per student. This interim assessment will be based on the fee schedule and projected enrolments the school submits to the Victorian Registration and Qualifications Authority for the purposes of becoming registered.

New schools are encouraged to reach out to the department as soon as possible (at the latest, by September in the year preceding the year in which they intend to begin operating), in order to discuss this interim assessment.

Is there a process for schools to request another assessment if they are not included in a declaration and exempted?

Yes. Schools can submit one request each year to the Department of Education for a declaration, which will be considered by the Minister for Education if they are able to demonstrate that their annual recurrent income per student is or has fallen below the $15,000 threshold.

For example, a school can submit a request for a declaration if it believes and can substantiate that the information or data used to calculate the school’s annual recurrent income was erroneous or no longer current due to management decisions or other factors.

If an assessment requested by the school outside of the annual reassessment process shows that the school’s annual recurrent income per student has fallen below $15,000 at the time of reassessment, the department will bring the school’s case to the Minister for Education’s attention.

fees and charges imposed by the school related to the provision of education
any other financial contributions received by the school, and
any other matters the Minister considers appropriate, including the eligibility criteria in the policy and the annual recurrent income per student threshold it sets out.

Schools may submit any out of session requests to ngs.support@education.vic.gov.au.

How many requests for a declaration can a school submit?

A school can submit one request to the Department of Education each financial year outside of the annual reassessment process.

That said, all schools will be reassessed every year automatically as part of the Department of Education’s annual reassessment process.

Will a school’s wider financial position (including deficits, debts and plans) be taken into account when the department is assessing a request for a declaration?

No. The department will only bring a school’s request (or a school’s case during the annual reassessment) to the Minister for Education to make a decision where the school meets the requirements of the policy, including the annual recurrent income per student threshold.

The department will not bring requests based on grounds other than income, such as the school’s broader financial position, to the Minister for Education if the school making the request does not meet the requirements of the policy.

When considering the case of any school brought to their attention by the department, the Minister for Education will apply the $15,000 annual recurrent income per student threshold while also taking into account:

fees and charges imposed by the school related to the provision of education
any other financial contributions received by the school, and
any other matters the Minister considers appropriate, including the eligibility criteria in the policy and the annual recurrent income per student threshold it sets out.

Can a school submit a request for a declaration based on the demographic of the school (such as a high number of students with disabilities, students supported through bursaries and discounts, or religious character of the school?)

The department will not bring requests based on grounds other than income, such as the demographic of a school, to the Minister for Education if the school making requesting does not meet the requirements of the policy.

fees and charges imposed by the school related to the provision of education
any other financial contributions received by the school, and
any other matters the Minister considers appropriate, including the eligibility criteria in the policy and the annual recurrent income per student threshold it sets out.

Schools can contact the State Revenue Office (SRO) at sro.vic.gov.au if they believe that they are eligible for an exemption from payroll tax under other provisions of the Payroll Tax Act.

How can I find further information on the Payroll Tax Act?

The SRO can provide general payroll tax information, payment plan options and information about other exemptions that may be applicable.

Further information regarding payroll tax is available through the SRO at sro.vic.gov.au.

Education

Updated 4 October 2024