Payroll tax exemptions policy - non-government schools

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A. Purpose

This policy is made by the Minister for Education (minister) about declarations to be made under clause 14(3) of Schedule 2 to the Payroll Tax Act 2007 (PT Act) that wages paid or payable by a school are exempt wages for the purpose of the PT Act, including the eligibility criteria for an exemption, an annual reassessment process and requests from non-government schools for declarations to be made (requests) outside of the annual reassessment process.

In particular, the policy documents:

  1. the eligibility criteria for a school to submit a request for a declaration that wages paid or payable by the school in relation to the provision of education are exempt wages under clause 14 of Schedule 2 to PT Act; and
  2. the minister's procedural decisions (advance procedural decisions) and related directions about:
    1. the kinds of requests the minister has decided to consider and in respect of which the minister has decided to make a substantive decision to make, or not to make, a declaration under clause 14(3);
    2. the kinds of requests that the minister has decided not to consider;
    3. the annual reassessment process which the Department of Education (department) is to undertake each year in October/November (annual reassessment process);
    4. the eligibility criteria that the department is to apply to identify:
      1. the schools to be brought to the minister’s attention as part of the annual reassessment process and in respect of which the minister has decided to make a substantive decision
      2. the kinds of requests the minister has decided to consider outside of the reassessment process (unsolicited requests) and in respect of which the minister has decided to make a substantive decision and the process for such a request to be made by a school, and
      3. that the minister will only consider one unsolicited request submitted for each existing school each financial year outside of the annual reassessment process, if the request otherwise meets the requirements of the policy.

B. Context

Section 6 of the PT Act imposes payroll tax on an employer’s taxable wages. Section 7 provides that the employer which is responsible for paying wages is liable to pay payroll tax on those wages. Section 10(2) provides that 'exempt wages' are not taxable wages. Section 3 defines 'exempt wages' to mean wages that are declared by or under the PT Act to be exempt wages.

On 1 July 2024, section 82 of the State Taxation Acts Amendment Act 2023 amended clause 14(1) of Schedule 2 to the PT Act so that wages paid or payable by a school will be exempt from liability for payroll tax if the school is declared in accordance with clause 14.

Clause 14(3) provides that the minister, with the written consent of the Treasurer and having regard to the matters specified in clause 14(4), may declare a school for the purposes of that clause by notice published in the Government Gazette.

Clause 14(4) of Schedule 2 to the PT Act provides that, for the purposes of subclause (3), the matters the minister is required to have regard to are:

  1. the fees and charges imposed by the school in relation to the provision of education within that school
  2. any other financial contributions received by the school, and
  3. any other matter that the minister considers appropriate.

C. Eligibility criteria

  1. Annual recurrent income

    The minister will consider making a declaration in respect of schools which have an 'annual recurrent income’ per student of less than $15,000 per year, calculated in accordance with section C2 or section C3 of this policy.

    1. This threshold has been calculated with reference to:
      1. 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).
      2. the 2023 estimated SRS funding amounts for primary and secondary schools determined by the Commonwealth Government under the Commonwealth AE Act.

In making a substantive decision, the minister will also have regard to any other fees, charges or financial contributions received by a school, including international student fees and donations, and any other matter the minister considers appropriate, as required by clause 14(4)(a), (b) and (c) of Schedule 2 to the PT Act. The minister will give consideration to relevant human rights when making a substantive decision, as required under the Charter of Human Rights and Responsibilities Act 2006.

  1. Calculating the annual recurrent income per student for existing schools

A school’s annual recurrent income is calculated by aggregating the amount of income the school received in the following categories of revenue, which are based on the school’s most recent reported income at the time of assessment in response to the following categories in the Commonwealth Government Department of Education’s Annual Financial Questionnaire (Commonwealth Financial Questionnaire):

  1. Fees and Charges (excluding Overseas Students) - Tuition (System and Diocese funding included)
  2. Income from Excursion State/Territory Government trips - Tuition (System and Diocese funding included)
  3. Other Receipts from Students - Tuition (System and Diocese funding included), and
  4. Fee/levies Allocated for Capital Purposes - Tuition (System and Diocese funding included).

The annual funded enrolments, as submitted by schools for the purposes of determining funding allocation under the Commonwealth AE Act, must also be used as part of the calculation to derive the annual recurrent income per student by dividing the amounts listed in items 2a-d by the number of annual funded enrolments. The number of annual funded enrolments used in this calculation will be taken from the same reporting year as the relevant Commonwealth Financial Questionnaire data.

  1. Calculating the annual recurrent income per student for new schools

The annual recurrent income for new schools must be calculated using the figures derived from an interim assessment of income per student.

The interim assessment of income per student must use the fee schedule (by grade) and projected enrolments (by grade) as submitted by the school to the Victorian Registration and Qualifications Authority for the purposes of becoming registered under Chapter 4 of the Education and Training Reform Act 2006.

The annual recurrent income must be calculated by adding all amounts specified in the fee schedule as identified in the interim assessment of income and dividing this amount by the total number of projected enrolments for that school to determine the school's average school fees per student per year.

New schools are encouraged to reach out to the department by September in the year preceding the year in which the school intends to commence operations to discuss the interim assessment.

D. Annual reassessment of annual recurrent income for existing schools

  1. Reassessment of all schools

The department will reassess all schools around October/November on an annual basis. The department will use the Commonwealth Financial Questionnaire data in the same way that it does for existing schools (in section C2 of this policy) if available, or the interim assessment for new schools (in section C3 of this policy) if the Commonwealth Financial Questionnaire data is not available.

The department will conduct this process in relation to all schools in the first half of each calendar year, to enable it to bring to the minister’s attention cases where the department has identified schools have exceeded or fallen below the $15,000 threshold calculated in accordance with section C of this policy.

  1. Advance procedural decisions and directions of the minister

The minister has made an advance procedural decision that, if a school’s annual recurrent income exceeds the threshold of $15,000 per student at the time of an annual reassessment by the department, and the school is the subject of a current declaration under clause 14(3), the minister will consider that case and make a substantive decision to withdraw, or not to withdraw, the declaration in respect of that school for the upcoming taxable period (i.e. from 1 July the following year), under clause 14(5) of Schedule 2 to the PT Act.

Similarly, if the annual recurrent income of a school that is not the subject of a current declaration under clause 14(3) falls below the threshold of $15,000 per student at the time of the annual reassessment by the department, the minister has made an advance procedural decision that the minister will consider that case and make a substantive decision to make a declaration, or not to make a declaration, in respect of that school in relation to the upcoming taxable period (i.e. from 1 July of the following year).

In making a substantive decision, the minister will apply the eligibility criteria set out in section C of this policy.

The department will contact any school whose case will be brought to the attention of the minister as part of the annual reassessment process, prior to bringing the case to the minister’s attention. This will allow the school a reasonable opportunity to provide any relevant information to the minister for consideration before the minister makes a substantive decision regarding a declaration for that school.

E. Requests for declarations by schools not already the subject of a declaration

Outside of the annual reassessment process in section D of this policy, existing schools that are not the subject of a current declaration made under clause 14(3) may submit an unsolicited request for a declaration, which will be considered by the minister if they are able to demonstrate that their annual recurrent income per student has fallen below $15,000 threshold. The minister will only consider one unsolicited request per school each financial year.

In giving effect to this approach, the minister has made the following advance procedural decisions (and related directions):

  1. The minister has decided to consider a request for a declaration outside of the annual reassessment process (unsolicited request) if a school can demonstrate that it satisfies the eligibility criteria for a declaration for existing schools in accordance with section C of this policy.

For example, a school may wish to 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 funding was erroneous or no longer current due to management decisions or other factors. A school may be able to substantiate the grounds for its request by providing evidence that its annual recurrent income per student (based on the reported income calculated in accordance with section C of this policy) was below the $15,000 recurrent income per student threshold in a more recent completed calendar year.

  1. The minister has decided to only consider one unsolicited request submitted for each existing school each financial year outside of the annual reassessment process.
  2. In administering the minister's decision, the department will not bring to the attention of the minister any subsequent or additional request from a school within the same financial year.
  3. The minister has decided to not consider requests that are solely based on other grounds such a school’s general financial position (including as indicated by its balance sheet including school debt levels), changes to a school's corporate form or the establishment of associated entities by or in relation to a school.
  4. The department will not bring requests to the minister’s attention in any other circumstances.

Relevant legislation

  • State Taxation Acts Amendment Act 2023
  • Payroll Tax Act 2007

Contacts

Requests can be submitted to the Schools Finance and Resources Branch at the department via ngs.support@education.vic.gov.au.

For general queries about payroll tax exemptions, contact ngs.support@education.vic.gov.au.

Additional information

The Taxation Administration Act 1997 contains a framework for objections and appeals which applies to payroll tax and is administered by the State Revenue Office (SRO). However, as the decision to declare a school as exempt is made by the minister with the consent of the Treasurer, and not by the SRO, a school cannot lodge an objection or appeal under the Taxation Administration Act 1997 on the grounds that the school should have been declared as exempt.

The SRO can advise on the objections and appeals process, payment plan options and other exemptions available under the PT Act. Further information about payroll tax is available through the SRO at sro.vic.gov.au.

Review and approval

This policy is made by the minister and will be reviewed as necessary.

Commencement

This policy commences from 1 July 2024.

While this policy applies from 1 July 2024, it also applies to any decisions made in accordance with the policy under section 13 of the Interpretation of Legislation Act 1984 in anticipation of the amendments to the PT Act in the State Taxation Acts Amendment Act 2023 commencing on 1 July 2024.

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