Biljana Apostolova, Gadens Partner has cautioned about the impact of the Victorian Government’s State Budget’s payroll tax changes on schools and charities.
“The Victorian Budget’s measure to remove the payroll tax exemption for high-fee, non-government schools falls short of being a good tax policy. It is selective and based on capacity to pay, which will likely create uncertainty in its application and administration.
“The measure dismisses the fundamental principle in this country that tax exemptions to charities are generally available on the basis of not-for-profit status. The Government has indicated that the taxing base will be non-government schools that are profitable. This foreshadows a policy trend of taxing charities that are perceived to be able to afford the additional tax burden. This has concerning implications for the broader charity sector if it signals a change in policy that charities should be taxed on the basis of their financial sustainability. This is a policy trend which has been developing in Victoria in the arena of land tax, and is now finding its way into other taxes like payroll tax.
“Charities will be in the invidious position of their prudent financial management being used as a basis to increase their tax obligations, while simultaneously reducing their capacity to pursue their charitable mission.
“The details of this budget measure, including the method to determine which schools are in or out of the net and how exemptions will work, are yet to be announced.”
Gadens is continuing to consider the impacts on our school and charity clients as a result of the proposed reforms. Please reach out to us if you want to be part of the discussion.
