New figures obtained from the Australian Charities and Not-for-profits Commission show that 50 private schools serving the richest families in NSW raked in over $150 million in 2023 from donations, investment income and other income. Shockingly, this money is ignored by governments when determining taxpayer funding of these schools. It is a fundamental flaw in how the Commonwealth Government funds rich, exclusive private schools. It means they are being over-funded compared to public and other private schools that do not have such privileged income streams. It is an inequity that must be ended.
Financial statements and reports lodged with the Charities Commission show that 50 schools with a median adjusted taxable family income of $243,00 a year or more received $153.4 million in 2023 from donations, investment income and other income, such as from rental properties, hire of facilities and sale of assets, up by $40 million over the previous year. They received $48.7 million in donations, $27.3 million as investment income and $77.4 million in other income. Of the 50 schools, 27 received $132 million from these sources. Twelve received $91.5 million. The 50 schools got nearly $400 million in government funding in 2023.
The big winner in NSW is Sydney Grammar which raked in $16.4 million, including $3.4 million in donations, $6.8 million from investments and $6.2 million in other income (see table below). According to school family income data released to Senate Estimates by the Department of Education, the median family income for Sydney Grammar was $380,000 and 25% of its families had an income of more than $730,000. Despite its privileged families and other income sources, the My School website shows it received $7 million in government funding in 2023, with $5 million from the Commonwealth and $2 million from the NSW Government.
St Aloysius’ College raked in $9.9 million including $9.1 million in donations in 2023. Its median family income was $357,000 and 25% of families had an income of more than $546,000. Its government funding amounted to a massive $17.4 million, $13.9 million from the Commonwealth and $3.5 million from the NSW Government.
The Scots College received $9.5 million including $4 million in donations, $0.4 million from investments and $5 million in other income. Its median family income was $336,000 and 25% of families had an income of over $682,000. It received $9 million in government funding, $6.6 from the Commonwealth and $2.4 from the NSW Government.
Six other schools collected over $5 million from such sources. They are Presbyterian Ladies College $7 million, SHORE $6.9 million, Cranbrook $6.3 million, Kincoppal-Rose Bay $6.2 million, Moriah College $5.6 million and SCECGS Redlands $5.2 million.
SCEGGS Darlinghurst had the highest median family income of all these highly privileged schools at $495,000 and 25% of families had an income of over $1 million a year. The school collected non-fee income of $2.9 million in 2023, including $1.3 million in donations, $0.8 million from its financial investments and $0.8 million in other income. It received $3.9 million in government funding as well – $2.8 million from the Commonwealth and $1 million from the NSW Government. It really is a case of welfare for the rich.
In this context, it is worth noting that the family income measure is adjusted taxable income which is generally far less than the total income of the wealthy because they can take advantage of an array of tax concessions such as negative gearing, capital gains discount, deductible donations and gifts to reduce their taxable income. For example, Australian Taxation Office statistics (Table 10) show that 188 millionaires had a taxable income of $18,200 or less in 2021-22 and therefore paid no income tax.
The donation stream for these schools is supported by multiple tax-exempt organisations such as foundations, building funds, scholarship funds, library and funds or trusts which have Deductible Gift Recipient (DGR) status. Donations to these funds are tax deductible for the donors. This is effectively another form of taxpayer subsidy for the schools as they would receive fewer donations without DGR status.
For example, Sydney Grammar has a foundation incorporating building, scholarship and library funds according to the DGR Register. St Aloysius’ College has building, bursary and library funds. The Scots College has a foundation and building, scholarship and bursary funds. SHORE raises funds through its SHORE Foundation which had assets of $42 million in 2023.
School building and other DGR funds are largely the preserve of rich schools. A report by the Productivity Commission on Philanthropy showed that such funds are heavily concentrated in highly privileged schools. For example, seven schools out of 719 schools with tax deductible school building funds, or 1% of such schools, received $24.6 million in donations in 2020-21 which was 35% of all donations to building funds. Just 72 schools (10% of schools with such funds) received $58 million, representing 84% of all donations to building funds (see table). In regard to schools with multiple funds, 74 schools out of 736 (10%) with such funds received $133 million in tax deductible donations which is 71% of all donations to such funds. The Commissin recommended removing tax deductibility for these funds.
Many rich, exclusive NSW private schools also receive donations from the Australian Universities & Schools USA Foundation which is incorporated in the United States. Sydney Grammar, St Aloysius’ College, The Scots College, Cranbrook, SHORE and others are members of the Foundation. It raised about $13 million over 2019 to 2023 for its affiliates.
Apart from receiving millions in donations and dividends from financial investments, many schools obtain substantial income from rental properties and hiring out facilities such as swimming pools and theatres. For example, Abbottsleigh received $1.4 million in rent in 2023 and $5 million in rental income over 2018-2023. Kincoppal-Rose Bay raised $1.4 million from hiring out its pool in 2023 and received $6.5 million over 2018-2023. St. Catherine’s School raised $1 million from hiring out its pool in 2023.
None of this commercial income is subject to income tax because private schools are classified as charities and therefore are tax exempt. A charity can undertake commercial activities with the purpose of generating profit to fund its charitable purpose or where the activity is only incidental to the purpose of the charity.
It is incredible that tax-exempt commercially derived income of private schools is ignored in how taxpayer funding of private schools is determined. Rich private schools attract millions in tax deductible donations to build luxurious facilities which they are able to hire out to earn income that is also disregarded in assessing their government funding entitlement. Only the rich benefit from this arrangement.
Commonwealth Government funding of private schools ignores all this non-fee income. It is based only on the capacity of families to pay fees, called the capacity to contribute (CTC) which is measured by the adjusted taxable income of families as reported by the Australian Taxation Office.
Disregard of donations, investment income and other commercially sourced income is a major loophole in the private school funding system. It provides enormous benefits to rich families ans welathy schools who are best laced to take advantage of hte loophole. The benefits are not available to any significant extent for public schools and less advantaged private schools.
In summary, the loophole results in higher government funding for schools than if non-fee income were included in the Commonwealth Government funding assessment. Moreover, government funding of these schools is boosted by the ability of rich families take advantage of the tax deductible status of building and other funds to reduce their taxable income. Such claims reduce the median adjusted taxable family income used to determine government funding.
Schools also have incentives to maximise their income from financial investments, rental properties and hire of facilities because this income is tax-exempt. Wealthy schools are in the privileged position of being able to collect millions in donations to fund more luxurious facilities which they can hire out to gain tax-exempt income. All this is because bysome twisted logic these schools are regarded as charities.
These arrangements result in massive over-funding of wealthy private schools by the taxpayer. It is a huge waste of funds and simply adds to the huge resource advantage that exclusive private schools have over public schools. It reduces the amount of funds that would have far greater impact if spent on schools educating children from disadvantaged backgrounds.
One step towards a fairer funding method and eliminating the waste is to include non-fee income of private schools, especially that flowing to the richest schools, in determining their level of Commonwealth Government funding. The Albanese Government should commission the National School Resourcing Board to conduct an inquiry on including non-fee income in the funding model to ensure fairer funding of private schools. A further step would be to adopt the recommendation of the Productivity Commission that school building funds no longer be eligible for tax deductible donations.