|
Roy Martin
February 1999
CONTENTS
KEY FINDINGS
1. The GST increases school costs to parents even
allowing for WST removal
-
for boys the additional cost of the GST will be at least $200 per year
and for girls $206. This could easily rise to $300 if some extras such
as music, ballet or sports are undertaken outside the school
-
there is no consistency, which shows that school costs have not been considered
within the compensation package
-
those most affected are lower income groups, who are already experiencing
considerable difficulty with meeting the costs of schooling
-
the school items which they identify as being hard to afford are generally
the items most affected by a GST.
2. In many cases the family package nowhere near covers the costs of schooling,
let alone any other child related GST costs! In many cases the GST cost
of schooling exceeds the amount of the Family Package, as shown in the
following table:
| Family Type |
Increase $/yr |
School related GST Costs |
% of compensation |
| Single income |
|
| 2 children, 1 under 5 |
630 |
208 |
33 |
| 2 children over 5 |
280* |
416 |
149* |
| 3 children, 2 over 5 |
770 |
416 |
54 |
| 3 children over 5 |
420* |
624 |
149* |
| Dual income |
|
| one child |
140 |
208 |
149 |
| two children |
280 |
416 |
149 |
| three children |
420 |
624 |
149 |
(* does not include extra $61 from other elements)
3. It is clear that if the GST is to proceed as proposed, the compensation
package must be increased for those on lower incomes. Alternatively, if
food, books and clothing (or at least school clothing) were made GST free,
many of the worst effects would be ameliorated.
INTRODUCTION
In response to claims that the GST will increase
the costs to parents of providing schooling for their children, the Government
has responded by suggesting there are two amounts which will more than
offset any GST costs:
1. The removal of Wholesale Sales Tax. (eg, in a media release on 26
August 1998, Senator Chris Ellison, then Minister for Schools, Vocational
Education and Training, said " What the AEU consistently refuses to acknowledge
is that there are hundreds of education related items that incur a 22%
wholesale sales tax." He then proceeded to give an extensive list of such
items.
2. The compensation package. In the same release Senator Ellison said
"The average family will be $40 -$50 a week better off after the introduction
of a GST.
This paper examines these claims against independent figures recently
released by the Australian Scholarships Group (ASG) (Checklist and Forecast
of Secondary Education Costs) and considers the impact on parents with
school age children, particularly those on low incomes.
Following pressure from the education community, the Government has
publicly gone some way to meeting the initial concerns of the AEU in regard
to definition of courses and activities which would be GST free, both through
the letter from the Prime Minister of the 24 September, in a reply to a
letter on behalf of several national education and parents organisations,
and in taking the advice of the Consultative Committee on which courses
will be GST free.
Nevertheless, this paper shows that the costs of education to parents
will rise and that for parents with school age children, this can be a
substantial portion of the compensation package.
1.
The WST/GST Equation
Table 1 uses the ASG checklist as the basis for calculating
the net effect of the WST/GST changes.
The first two columns show the items and amounts relevant to government
secondary schools listed in the ASG pamphlet. The amounts shown are for
the year 1999, the lowest figures given. These figures increase dramatically
over the twenty years for which the ASG forecasts. The actual amounts,
and therefore the effects, are therefore likely to be even greater than
shown in this table.
The other columns calculate the increases and savings on these items
and the final column indicates the final amount.
Table 1
| COSTS
OF SCHOOLING |
| Shown
in Australian $ |
1999 |
Current |
Price |
GST |
GST-Price |
Difference |
|
|
WST |
(Ex-WST)
(a) |
|
|
|
| Tuition Fees/Levies |
$ |
% |
$ |
% |
$ |
$ |
| Government High
School (b) |
450 |
0 |
450 |
5 |
473 |
23 |
| - School Fund |
41 |
0 |
41 |
0 |
41 |
0 |
| Requisites |
|
|
|
|
|
|
| School Stationery |
210 |
22 |
175 |
10 |
193 |
-17 |
| Text Books |
318 |
0 |
318 |
10 |
350 |
32 |
| Art & crafts
materials |
84 |
22 |
70 |
10 |
77 |
-7 |
| School Bag |
50 |
22 |
42 |
10 |
46 |
-4 |
| School Clothing |
|
|
|
|
|
|
| Boys: |
|
|
|
|
|
|
| Basic Yearly
Expenditure |
380 |
0 |
380 |
10 |
418 |
38 |
| Winter uniform
(additional) |
195 |
0 |
195 |
10 |
215 |
20 |
| Blazer (additional) |
135 |
0 |
135 |
10 |
149 |
14 |
| Girls: |
|
|
|
|
|
|
| Basic Yearly
Expenditure |
380 |
0 |
380 |
10 |
418 |
38 |
| Winter uniform
(additonal) |
215 |
0 |
215 |
10 |
237 |
22 |
| Blazer (additional) |
175 |
0 |
175 |
10 |
193 |
18 |
| Sports Clothing
(2 sports) |
|
|
|
|
|
|
| Including Tracksuit |
350 |
0 |
350 |
10 |
385 |
35 |
| Equipment eg.
Tennis racquet |
150 |
22 |
125 |
10 |
138 |
-12 |
| Cricket
bat |
95 |
22 |
79 |
10 |
87 |
-5 |
| Hockey
stick |
60 |
22 |
50 |
10 |
55 |
-5 |
| Incidentals |
|
|
|
|
|
|
| Travel/Commuting |
264 |
0 |
264 |
10 |
290 |
26 |
| Lunches/Tuckshop
(c) |
795 |
3 |
777 |
10 |
855 |
60 |
| Outings, camps
etc. (d) |
150 |
0 |
150 |
3 |
155 |
5 |
| Extras (some
examples) (e) |
|
|
|
|
|
|
| Private tuition
(1 hr pw x 42 wks) |
630 |
0 |
630 |
10 |
693 |
63 |
| Music Tuition |
756 |
0 |
756 |
10 |
832 |
76 |
| Instrument (strings,
Brass etc.) |
300 |
22 |
251 |
10 |
276 |
-24 |
| Ballet Classes |
1,172 |
0 |
1172 |
10 |
1289 |
117 |
| Sports coaching
(tennis, swimming) |
560 |
0 |
560 |
10 |
616 |
56 |
(Notes:
a)Assumes that the mark
up is 25% of the final retail price. WST is then calculated at rate times
75% .
b) The 5% indicates that
there is confusion in this area and assumes that GST will apply to 50%
of these fees and levies.
c) WST applies to biscuits,
snack food, and juice (12%) and soft drinks (22%). A nominal WST of 3%
is made for this.
d) Food will incur GST. Excursions
that are "recreational" will incur a GST. A nominal 3% is made for this.
e) Tuition provided through
the school will not incur GST. Tuition not provided through the school
(as is frequently the case in government schools) will incur GST.) Table 2 looks at the cost under each of the categories of expenditure.
It should be noted that there is no category where the saving from WST
compensates for the increased cost of the GST.
Table 2
| Category |
Additional Cost |
| Fees/Levies |
$23 |
| Requisites |
$4 |
| School Clothing |
$72 (boys) |
$78 (girls) |
| Sports |
$10 |
| Incidentals |
$91 |
| Extras |
Various |
| For boys the additional cost of the GST
will be at least $200 per year and for girls $206. This could easily rise
to $300 if some extras such as music, ballet or sports are undertaken outside
the school. |
These figures represent conservative averages for children starting secondary
school. Figures for students towards the end of schooling will be considerably
higher. Figures for Primary students may be slightly lower, but can be
expected to be in the region of $150.
For simplicity, the calculations below use an average of $4 per student
per week, ($208 per annum).
2.
The Compensation Package
In Tax Reform: Not a New Tax a New Tax System,
the government illustrated its compensation package with reference to a
range of tables based on various tax payer individual and family profiles.
It is surprising that very few of these "cameos", as they have been called,
in fact relate to families with all children attending school, and particularly
secondary school. Within the sets for families, only the "cameos" given
for one dependent child between 5 and 13 years and two dependent children
aged between 5 and 13 years relate solely to school age children. Many
of the sets which include children include one child below 5, for which
there is a specific allowance. There is no "cameo" for sole parents without
a child under five, a group likely to very affected. None of the "cameos"
include a child over the age of thirteen. It is, of course, quite common
for families to have one or more of their children attending secondary
school.
Consequently, it is not possible to make comparisons with the cameos
across a range of likely possibilities.
Appendix 1 lists the per cent of the compensation package that will
be taken by school related costs for each of the families with children
for which the government produced figures.
Table 3 is a sample of some of these figures, selecting "cameos" of
families that will be amongst the most disadvantaged.
Table 3
| "Cameo" |
"Total Package" |
School related GST Costs |
% of compensation |
| Single income,
1 dependent 5-13, $15 000 |
$13.02 |
$4 |
31% |
| Single income,
2 dependents 5-13, $25 000 |
$16.44 |
$8 |
49% |
| Dual income (50/50),
1 dependent $35 000 |
$9.49 |
$4 |
42% |
| Dual income (67/37)),
2 dependents $10 000 |
$10.42 |
$8 |
77% |
It should be noted that:
-
those on lower incomes lose the highest percentage to schools costs
-
at higher incomes the effect is minor, whereas at lower incomes it is
often major
-
there is no consistency, which shows that school costs have not been
considered within the compensation package.
|
3.
The Family Package
Another way of assessing the adequacy or inadequacy
of the compensation package is in relation to the Family Tax Initiative.
This is the initiative which is specifically aimed at compensating families
for the cost of the GST in relation to their children.
Table 4 indicates the proportions of the family initiative that will
be taken up by school related costs.
Table 4
| Family Type |
Increase $/yr |
School related GST Costs |
% of compensation |
| Single income |
|
|
|
| 2 children, 1 under 5 |
630 |
208 |
33 |
| 2 children over 5 |
280* |
416 |
149* |
| 3 children, 2 over 5 |
770 |
416 |
54 |
| 3 children over 5 |
420* |
624 |
149* |
| Dual income |
|
|
|
| one child |
140 |
208 |
149 |
| two children |
280 |
416 |
149 |
| three children |
420 |
624 |
149 |
(* does not include extra $61 from other elements)
| It is clear that the Family Tax Initiative nowhere near
covers the costs of schooling, let alone any other child related GST costs!
In many cases the GST cost of schooling exceeds the amount of the Family
Package. |
4.
Effects on Disadvantaged Families
There have been two noteworthy independent studies
conducted on the effects of the costs of government schooling on low income
families.
-
Paul Grogan, Vulnerable Families and the Impacts of Schooling Costs, Brotherhood
of St Laurence, July 1997.
-
Elizabeth Orr, Free Education: Who Can Afford It? The Smith Family, 1997.
The study by Brogan looked initially at 120, and then 628 low income families
who received "education packs" containing basic stationary items, from
the Brotherhood's Material Aid Service in1996.
Table 5 (Table 4 in Brogan) shows the number of families experiencing
difficulty in paying for selected costs.
Table 5
| Costs |
Families experiencing difficulty |
|
No. |
% |
| Uniforms |
579 |
93.8 |
| Fees |
530 |
86.3 |
| Subjects |
354 |
62.8 |
| Fundraising |
371 |
65.0 |
| Books |
533 |
88.7 |
| Excursions |
524 |
87.5 |
| Transport |
323 |
57.9 |
Table 6 (Table 5 in Brogan) shows the effects of these costs.
Table 6
| Effect |
Families experiencing this effect |
|
No. |
% |
| Missing out on school uniform |
365 |
60.6 |
| Missing out on books |
222 |
37.6 |
| Missing out on excursions |
368 |
60.5 |
| Missing out on subjects |
163 |
28.7 |
| Missing school events |
254 |
42.9 |
| Missing school |
173 |
20.5 |
Those experiencing difficulty in meeting costs found that this affected
the relationship between the parents and the school and the students' attitude
to school.
| What is most notable about these results is that, not
only are those most disadvantaged in society the most affected by the GST
on schooling, but the very items with which they are experiencing the difficulty
are the ones which will most increase under a GST. |
The study by Orr was based on 640 families who were experiencing disadvantage
in four Australian states. All the families were receiving financial support
for school costs through The Smith Family's EDU-CATE program. Of the 640
families:
-
44% were two parent families
-
55% were families headed by a sole parent
-
the most common family type was a sole parent with two secondary school
children who had either been deserted, widowed, or had left a violent or
otherwise dysfunctional relationship. (NB: This is the very family type
for which there are absolutely no cameos!)
-
57% reported an income that was below $316 per week (pp.1-2)
Orr observes:
Many respondent families could not afford the most basic costs associated
with schooling. Although all families surveyed received a yearly bursary
of $320 from TSF, 20% mentioned difficulties in paying general fees and
levies, and another 20% said that they could not afford textbooks.
Whilst the majority of respondents said that they could afford school
uniforms, many had difficulties buying more than one set of the appropriate
clothing, or affording more expensive items such as school blazers. Other
respondents pointed out that without the financial assistance they receive
through the EDU-CATE program, it would be impossible for them to afford
school uniforms at all.
Furthermore, many could not afford to let their children participate
in the full range of socialisation experiences offered within the school
system.
Table 7 lists the average and maximum costs found by the survey in relation
to a range of activities, the current WST, and the proposed GST.
Table 7
| Activity |
Average |
Maximum |
WST |
GST |
| General Fees for one child |
89 |
350 |
|
see note) |
| Voluntary levy for one child |
$55 |
$235 |
0 |
(see note) |
| Contribution to P & C for one child |
$24 |
$125 |
0 |
(see note) |
| Summer uniforms for one secondary child |
$106 |
$400 |
0 |
10% |
| Winter uniforms for one secondary child |
$118 |
$400 |
0 |
10% |
| Cost of school camp for one child |
$132 |
$1,205 |
0 |
(see note) |
| Cost of excursion for one child |
$47 |
$500 |
0 |
(see note) |
| Cost of summer sport for one child |
$42 |
$500 |
0 - 22% |
10% (net increase) |
| Cost of winter sport for one child |
$45 |
$400 |
0 - 22% |
10% (net increase) |
| Costs of text books for one child |
$84 |
$500 |
0 |
10% |
| Costs of paper/photocopying for one child |
$16 |
$150 |
0 |
0 |
(Note: Some of these items may be subject to GST under some circumstances.)
CONCLUSION
There can be no doubt that:
-
the GST will increase the costs of schooling
-
in many cases, these costs represent a substantial portion of the compensation
package
-
those most affected are lower income groups, who are already experiencing
considerable difficulty with meeting the costs of schooling
-
the items which they identify as being hard to afford are generally
the items most affected by a GST
-
there is evidence that this can affect both the relationship between
the schools and the parents and students, and the age at which students
leave school.
It is clear that if the GST is to proceed as proposed, the compensation
package must be increased for those on lower incomes. Alternatively, if
food, books and clothing (or at least school clothing) were made GST free,
many of the worst effects would be ameliorated. |
Appendix
1
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