Religious schools are pushing back on a revenue-raising move to strip private Victorian education providers of their longstanding payroll tax exemption.
The Catholic Education Commission has written to Victorian MPs to warn against the removal of the payroll tax exemption for about 110 high-fee schools from July next year.
Up to 20 Catholic schools with about 21,000 students are likely to have as much as $1 million a year ripped from their operating budgets under the change unveiled in last week's state budget, the peak body said.
Student fees for Melbourne schools it expects to be affected range from $31,234 a year at Kew's Xavier College, to $8423 a year at Sacred Heart Girls' College at Oakleigh.
The commission's executive director Jim Miles said the plan will lead to increased student fees, stretching already tight family budgets amid the cost-of-living crisis.
"Our principals in these schools are asking why the families in their diverse communities are being punished to help balance the state budget," Mr Miles wrote.
Labor MPs were urged to lobby their colleagues for the proposal to be scrapped, or to significantly increase the fee threshold to qualify for payroll tax.
Another peak body that represents hundreds of Christian schools across the nation called on the government to urgently review the reform, fearing students will be forced to change schools because of fee increases.
"The full ramifications of this decision are still being absorbed by our schools, who have been kept in the dark about how this tax will be applied," said Vanessa Cheng, executive officer of the Australian Association of Christian Schools.
While government schools in Victoria are not exempt from payroll tax, no other state or territory levies payroll tax on Catholic or independent schools.
Education Minister Natalie Hutchins will determine which non-government schools keep their exemption with the consent of the treasurer.
Opposition education spokesman Matt Bach pointed out the government must already have a hit list of schools, because it has forecast the measure will raise $422.2 million over the forward estimates.
"They've got to release that information right now so the schools can have at least some certainty as they start to budget," he told reporters on Thursday.
Victorian businesses with national annual payrolls of more than $10 million are also facing a new COVID-19 debt levy from July, in addition to the mental health levy introduced in 2022.
Private schools don't pay the mental health levy under their existing payroll tax exemption, but those that lose it with payrolls of more than $10m could be on the hook for it and the new COVID levy.
Premier Daniel Andrews accused the opposition of "scaremongering" by giving the impression that all non-government schools were facing a triple tax hit.
"That's not right. All of those matters are being worked through. We want to communicate with the schools first," Mr Andrews said.
He said his government was considering raising some levy thresholds to keep pace with rising inflation, ahead of its tax legislation coming before the upper house this month.
The premier and Treasurer Tim Pallas will face a budget estimates hearing on Friday.
