Pearls and Irritations

New figures reveal scandalous over-funding of NSW Independent schools serving the richest families in the state. Hundreds of millions of taxpayer funds are being squandered on just 52 highly privileged schools while public schools go begging.

The new figures demonstrate the innate unfairness of school funding in NSW. The Commonwealth and NSW governments must ensure that public schools are genuinely fully funded under the next bilateral funding agreement.

The new figures show that 52 Independent schools with a median taxable family income of $200,000 or more will be over-funded by $353 million over seven years from 2022 to 2028 inclusive by the Commonwealth Government. Of these, just 13 of these schools will be over-funded by $178 million. The 52 schools will receive $2.4 billion in funding by the Commonwealth over the period.

The most over-funded schools are St. Augustine’s College – $22 million, Northern Beaches Christian School – $17.4 million, Trinity Grammar $16.6 million, MLC School – $13.9 million and Newington College – $13.4 million. Over-funding figures for other schools are in on the SOS website.

These figures demonstrate that claims by the NSW Association of Independent Schools that Independent schools are not over-funded are absurd. Indeed, figures provided to Senate Budget Estimate 2022-23 show that NSW Independent schools were funded at 84.6% of their SRS by the Commonwealth Government in 2023 instead of the legislated target of 80%.

The family income figures were supplied to Senate Estimates by the Commonwealth Department of Education in May. They also reveal the schools with the highest median taxable family income. SCEGGS Darlinghurst heads the table with a median taxable family income of $495,000 in 2023. Families with children at SCEGGS have the highest median taxable family income for a private school in Australia.

Another seven schools had a median taxable family income of over $400,000. These are Mosman Church of England Preparatory School with $485,000, SCEGGS Redlands $450,000, Queenwood $490,000, Wenona $442,000, Loreto Kirribilli $418,000, Shore $409,000 and Cranbrook $402,000. Income for other schools is available in Attachment Table A2.

It was possible to identify 98 NSW private schools as having a median adjusted taxable family income of $200,000 or more in 2023. Of these, Commonwealth funding and SRS shares could be obtained for 77 of these schools. Of these, 52 are over-funded for 2022 to 2028 and 25 are not over-funded. Those not over-funded are either fully funded at the Commonwealth target of 80% of their SRS or were under-funded slightly only in 2022 and are fully funded for the rest of the period.

Many families of students in Catholic systemic schools also have a median adjusted taxable income of $200,000 or more. The extent of any over-funding cannot be determined because Commonwealth funding and SRS shares cannot be obtained for individual Catholic systemic schools because funding is provided as a block to each system. However, figures provided to Senate Budget Estimate 2022-23 show that NSW Catholic system schools were funded at 83.8% of their SRS by the Commonwealth Government in 2023 instead of the target 80%.

It should be emphasised that these figures are for what is termed adjusted taxable income.  The major difference between taxable income and adjusted taxable income is that the latter includes personal and employer superannuation contributions and the capital gains tax concession.

The total income of these families is likely to be much higher because high income families account for the large proportion of deductions to reduce their taxable income. For example, Australian Taxation Office statistics for 2020-2021 (Table 10) show that 16 individuals with a total income $500,000-$1,000,000 had average tax deductions (excluding superannuation contributions and capital gains tax concession) of $1.3 million each, that is, their average adjusted taxable income was less than zero. Similarly, 152 individuals with a total income of $500,000-$1,000,000 were able to reduce their average adjustable taxable income by average tax deductions (excluding superannuation contributions and capital gains tax concession) of $326,308 per person.

It is worth noting that an adjusted taxable family income of $200,000 or more represents a high income by national standards. The latest tax statistics show that the median taxable income for males in 2020-21 was $59,415 and $44,547 for females. This amounts to a total median taxable family income of $103,962, assuming two income earners per family. However, there are many single income families with single person households constituting about one quarter of all households. Consequently, the actual median taxable family income is very likely to be well below $100,000, less than half the benchmark used here to determine high income schools.

The over-funding estimated from official government figures is just the tip of the iceberg because of defects in the Commonwealth system of funding private schools. The Direct Measure of Income (DMI) method introduced by the Morrison Government is fundamentally flawed because it under-estimates the income capacity of families to pay school fees and therefore over-estimates the need for taxpayer funding.

The DMI under-estimates the capacity of families with children in private schools to pay fees because it ignores other sources of income. It ignores income from grandparents – the Bank of Mum and Dad – such as payment of school fees, childcare, house deposits, etc. It also ignores non-taxed capital gains and business and investment diverted to family trusts, which are largely the preserve of high income earners.

The DMI also ignores lucrative sources of income of elite private schools such as multi-million donations to school building funds as well as income from financial investments, rental properties and hire of facilities such as swimming pools.

The result of all these and other defects is that private schools are vastly over-funded by the taxpayer.

The over-funding of the schools attended by the children of the rich is in stark contrast to the under-funding of NSW public schools. Every public school is vastly under-funded. NSW public schools are only funded at 88.7% of their SRS in 2024. The under-funding amounts to $1.9 billion a year. This is entirely due to under-funding by the NSW Government. Its funding of public schools is only at 68.7% instead of the current benchmark of 80%.

The NSW Government also continues to over-fund private schools. The National Schools Resourcing Board found that found that the NSW Government funds private schools at 24.09% of their SRS in 2022 instead of its target of 20%. This over-funding amounts to nearly $250 million.

All this shows just how unfair school funding is in NSW, as in the rest of Australia. It heavily favours the already advantaged sectors of NSW society at the expense of the most disadvantaged. Funding for public schools is calamitous because they are massively under-funded by the NSW Government. Private schools serving the rich are in clover, being fully funded with many over-funded by millions by the Commonwealth Government.

The Commonwealth and NSW governments must end their stand-off over the next bilateral funding agreement. They must ensure that NSW public schools are genuinely fully funded.

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