Private Schools Serving Richest Western Australian Families Over-Funded by Millions

New figures reveal scandalous over-funding of Western Australian Independent schools serving the richest families in the state. Hundreds of millions of taxpayer funds are being squandered on just 19 highly privileged schools  while public schools go begging. The new figures demonstrate the innate unfairness of school funding in Western Australia. The Commonwealth and Western Australian   governments must ensure that public schools are genuinely fully funded in future.

The new figures show that 16 Independent schools with a median taxable family income of $200,000 or more will be over-funded by $88 million from 2022 to 2028 inclusive by the Commonwealth Government. Of these, just seven will be over-funded by $63 million. The 16 schools will receive $693 million in funding by the Commonwealth over the period.

The most over-funded schools are St. Mary’s Girls School, Hale School,  Guilford Grammar, Perth College and Wesley College (Table 1). Over-funding figures for other schools are in Attachment Table A1.

On average, Independent schools in Western Australia are significantly over-funded by the Commonwealth Government. Figures provided to Senate Budget Estimate 2022-23 show that they were funded at 83.5% of their Schooling Resource standard (SRS) in 2023 instead of the legislated target of 80%.

This is the first time family income figures for private schools have been published. Previously, only income ranges were available. The new 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.

Christchurch Grammar had the highest median taxable family income of any Independent school in Western Australia at $376,000 in 2023. Other high median taxable family income schools include Methodist Ladies College (356,000), St. Hilda’s Girls School ($356,000), ($293,000) Scotch College ($3388,000 and Quintilian School ($315,000). Income for other schools is available in Attachment Table A2.

It was possible to identify 30 Western Australian private schools as having a median adjusted taxable family income of $200,000 or more in 2023. Commonwealth funding and SRS shares could be obtained for 21 of these school. Of these, 16 are over-funded by the Commonwealth Government over 2022 to 2028 inclusive. The other five schools are not over-funded. One of these schools is fully funded over 2022-2028 inclusive and four were under-funded in 2022 but are fully funded for the rest of the period. It is not possible to determine the funding of the other nine schools because they are funded as part of school systems such as the Catholic system and Anglican School Queensland.

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 Western Australian Catholic system schools were funded at 83.7% 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, about one quarter of all households are single income families with single person 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 Western Australian public schools. Every public school is hugely under-funded. Western Australian  public schools are only funded at 90.3% of their SRS in 2024. The under-funding  amounts to $600 million or more a year. This is entirely due to under-funding by the Western Australian Government. Its funding of public schools is only at 70.3% instead of the current benchmark of 80%.

The Western Australian Government also continues to over-fund private schools. The National Schools Resourcing Board found that the Western Australian  Government funded private schools at 21.46% of their SRS in 2022 instead of its target of 20%. This over-funding amounts to nearly $28 million.

The new school funding agreement between the Albanese and Western Australian Governments promises increased funding for public schools. The Albanese Government has agreed to increase its share of funding public schools from 20% of their SRS to 22.5%. The Western Australian Government has agreed to start clawing back the cuts it made to its funding share of public schools over the past five years. It cut its funding share from 84.4% of their SRS in 2018 to 75% in 2024. Its share will now increase by 2.5% by 2026

The Commonwealth and Western Australian government’s claim that their new agreement will ensure that public schools are fully funded at 100% of their SRS by 2026. However, this is a lie.  Accounting tricks in the previous funding agreement struck with the Morrison Government that defrauded public school are retained in the new agreement.

These accounting tricks mean that the current funding share of the WA Government is actually only 70.6%, not 75%. The new agreement will only get its funding share to 73.1% over the next five years, substantially less than it was in 2018. Overall, with Commonwealth funding, WA public schools will only be funded to 95.6% of their SRS by 2026, not 100%. The cumulative under-funding over five years will be about $1.6 billion.

All this shows just how unfair school funding is in Western Australia, as in the rest of Australia. It heavily favours the already advantaged sectors of Western Australian society at the expense of the most disadvantaged. Funding for public schools is calamitous because of past funding cuts by the Western Australian Government and because they will remain vastly under-funded under the new funding agreement with the Albanese Government.

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