What is the Direct Measure of Income?
The Schooling Resource Standard (SRS) benchmark establishes the minimum (or “base”) cost of educating each Australian student. For the 2022 calendar year, the SRS benchmark for each student is $12,462 for Primary students and $15,660 for Secondary students.
On top of base funding, students in priority cohorts and disadvantaged schools attract additional funding called “loadings”. The loadings a student in a priority cohort attracts are the same regardless of where the student goes to school.
In contrast with loadings, base funding for most non-government schools is means tested in accordance with the requirements of the Australian Education Act (2013 and later amendments). This is called a school’s “capacity to contribute”. Government schools are exempt from capacity to contribute and are not required to make any private contribution to base funding.
How is the Capacity to Contribute calculated?
Previously, each Catholic and independent school’s Capacity to Contribute (CTC) was estimated using socio-economic information from the ABS 2011 Census calculated for areas where students live. These area-based estimates (called SES scores) were replaced in 2020 with a Direct Measure of Income (DMI) based on the actual financial data of the parents and guardians of students at a school. Financial information used in the calculation includes Australian Tax Office records and other income-related records such as PAYG and concession cards.
The new DMI measure was developed on a recommendation of the National School Resourcing Board’s review of the
socio-economic status (SES) score methodology. Replacing area-based SES scores with a direct measure of family incomes enables a fairer and more accurate distribution of government funding to the students that need it most.
To create school DMI scores, the Australian Bureau of Statistics:
- Calculates family income for each student enrolled at a school by adding all of the income information available for that student’s parents and/or guardians
- Identifies the median (middle) family income from the set of all family incomes within the school
- Ranks all the median incomes calculated for all non-government schools
- Converts the ranked median income values into a set of DMI scores.
The Department of Education, Skills and Employment uses school DMI scores to determine each school’s capacity to contribute (it’s CTC score). A school’s CTC score is the rounded average of its annual DMI scores for the three most recent years. For example, a school’s DMI-based CTC score that applies to 2022 is the average of the annual DMI scores for the school worked out for 2019, 2020 and 2021.
CTC scores determine each non-government school’s private contributions to base funding, ranging from a 10% contribution for schools with CTC scores of 93 and lower, to 80% for schools with CTC scores of 125 or higher. Governments’ responsibility for base funding is reduced by the same amount, in accordance with the CTC schedule set out in the Australian Education Act (2020 amendment).
Example: Government contributions to base funding – secondary schools
While a change from the previous SES area-based score to the DMI score improves assessment of need, some non-government schools will face substantial reductions in government funding. To assist these schools to adjust, government funding for 2020 and 2021 was based on the most financially beneficial of three CTC scores: 2011 Census SES score, 2016 Census SES score or DMI score. The DMI will apply to all schools by 2022.
The Australian Government Department of Education, Skills and Training has published details of the methodology for the DMI. The Department, in partnership with the Australian Bureau of Statistics (ABS), will also apply a new Data Quality and Validation Framework to assess whether the data used to calculate annual DMI scores are fit for purpose. For a small number of schools where data does not pass the validation process, the Department will use a refined area-based SES score to calculate that school’s private contribution.
RELATED PAGE: SCHOOL FUNDING