Private schools should pay rates according to the Municipal Association of Victoria. It claims that local councils are missing out on millions of dollars in revenue because private schools are exempted from paying rates. It says the exemptions are unfair and inequitable as other ratepayers must pay more to cover the revenue loss.
The call by the Municipal Association was made in a submission last November to an inquiry into Victoria’s Local Government Rating System. It said that the rate exemptions amount to several million dollars in subsidies for private schools. For example, there are 69 rates exempt private school properties owned by 30 private schools in the Boroondara Local Government Area (LGA) which includes the suburbs of Balwyn, Camberwell, Canterbury, Kew and Hawthorn. These are some of the most expensive suburbs in Melbourne. The private school properties have a Capital improved Value of $969 million and the revenue loss from the rate exemption will amount to $1.4 million in 2019-20.
The Association said that the exemptions mean that private schools are subsidised by other ratepayers in a Local Government Area. Other ratepayers must pay the costs of providing roads, footpaths, drains, traffic measures, carparking works and school crossing supervision around exempted schools. These costs are considerable because the volume of vehicle and pedestrian activity is often very high in a school precinct. Other costs include the use of public open spaces and sportsgrounds maintained by the local council.
Under Victoria’s Local Government Act, land used exclusively for a charitable purpose is exempted from paying rates. Private schools are recognised as charities. The submission also called for exemptions for a range of other organisations to be also revoked, including universities and religious property holdings used for commercial purposes.
The Association’s call for rate exemptions to be reviewed was also supported in submissions by several individual councils. The Melbourne City Council questioned why land used for charitable purposes should be exempt from rates and called for a review of charitable purposes. The Boroondara Council said that rate exemptions for private schools should be revoked.
The exemptions for private schools from rates have been a long-standing concern of many local councils. For example, in 2013 the Local Government Association of NSW called for a review of rates exemptions following a report it commissioned from Deloitte Access Economics. The report found that such exemptions placed an unfair burden on other ratepayers. The North Sydney Council said that the exemptions for seven private schools in its area were costing it over $1 million a year in lost revenue. In 2008, both organisations criticised rate exemptions applying to the large land holdings of many private schools in their submissions to the Productivity Commission inquiry on Assessing Local Government Revenue Capacity.
Private schools are charities because they are considered to provide a public benefit by advancing education. Under existing legislation, a charity whose purpose is the advancement of education is presumed to be of public benefit and does not have to demonstrate this. On this basis, the Commonwealth and state governments grant a range of benefits including exemptions from income tax, GST, payroll tax and land tax as well as local government rates. These exemptions are not entitlements of charities but are decisions of governments. As the Deputy Dean, Melbourne Law School, University of Melbourne says: “There’s no reason why being a charity must lead to an entity being tax-exempt.” These exemptions can be revoked by governments without affecting the charity status of schools.
However, it is incongruous that elite schools charging fees that only the very wealthy can afford should be entitled to charity status and the substantial benefits that accrue thereby. The exorbitant fees charged by these schools ensure exclusivity. For example, the fees of 10 private schools in the Boroondara LGA range from $21,000 to over $30,000 per student a year (see table). Between 70 and 86% of the students in nine of the 10 schools are from high socio-economic status families and all have no students or one to two per cent from low SES families.
Six private schools in the North Sydney LGA charge fees ranging from nearly $18,000 to nearly $32,000 a year. Between 76 and 91% of the students from these schools are from high SES families while three have no students from low SES families and the other three have only one or three per cent.
Apart from the subsidies provided by being tax exempt, these schools receive millions of dollars each year in direct funding by the Commonwealth and state governments. The 16 wealthy private schools in the two LGA’s received $99 million in government funding in 2018.
Wealthy Private Schools in the Boroondara & North Sydney Local Government Areas
|School||Local Govt Area||% Low SES||% High SES||Fee Income per Student||Total Govt Funding $M|
|Monte Sant’ Angelo Mercy College||North Sydney||1||76||20,637||9.1|
|Loreto Kirribilli||North Sydney||0||79||19,055||9.5|
|SCEGGS Redlands||North Sydney||0||84||31,781||4.9|
|St Aloysius’ College||North Sydney||0||91||17,923||8.0|
Source: My School 2019
These schools are exclusive bastions of the wealthy. It is incomprehensible that the education provided by these schools is assumed to be a public benefit justifying charity status. The fact that wealthy private schools enjoy charitable status and the tax advantages it confers is incompatible with any common sense view of what it means to be a charity. The benefit goes to an exclusive group of students from wealthy families, many of whom also benefit from a range of other government tax concessions such as superannuation concessions, negative gearing and capital gains tax concessions costing taxpayers billions of dollars annually. Some of these families are being pursued by the Australian Taxation Office because they are hiding income in overseas tax havens.
Rather than a public benefit, elite private schools are a public bad. Their whole purpose is to give a privileged group of students an advantage over others and a prestige status marker. They cost governments millions annually in funding and tax concessions. This is a complete waste of taxpayer funds. These schools do not need this funding – their income from fees and other sources alone is double that of most public schools. Their government funding would be far more efficiently used to support highly disadvantaged schools where a large proportion of students do not achieve national standards in literacy and numeracy. Moreover, elite private schools are highly socially segregated and as such are a source of social inequality. They widen education and income inequality and thereby reproduce social advantage and division.
The public benefit criteria for registration as a charity should be more rigorously defined. It is insufficient for private schools to say that they provide education to gain charity status, especially in the case of exclusive wealthy private schools. Private schools must be required to show that they deliver a real public benefit before being granted charity status and the tax benefits that come with it. Schools that do not provide a net public benefit should not be given charity status. One criterion of public benefit could be that 20% of their enrolments be comprised of disadvantaged students. Failing this, another approach should be to start dismantling their unfair tax advantages such as exemptions from local government rates.