What is the Direct Measure of Income?

Fact sheet

For most non‑government schools, calculation of the base amount of funding includes a reduction for the anticipated capacity of the school community to financially contribute to the school's operating costs.

To ensure Australian Government funding is allocated fairly, a direct measure of income will be applied based on the median income of parents or guardians of students at a non-government school. The school’s median income is used to rank schools and distribute funding according to need by converting this median family income into a capacity to contribute (CTC) score. This more targeted and accurate measure will ensure that more Commonwealth funding goes to those schools that need it the most.

The Direct Measure of Income (DMI) is based on findings from the National School Resourcing Board’s review of the socio-economic status (SES) score methodology and applies to the base funding component only for non‑government schools. The CTC discount is not applied to other Schooling Resource Standard (SRS) loadings.

The settings for the DMI were developed in consultation with non-government sector stakeholders including the National Catholic Education Commission, Independent Schools Australia, state and territory officials, small non-government school systems, parent and principal associations, and other interested groups.

Under previous arrangements capacity to contribute was calculated using the SES score of the area(s) where the students resided. This was the best available data when the measure was implemented in 2001. Recent innovations mean that a more direct measure of a school community’s capacity to contribute is now available.

The impact of the use of DMI will vary school by school and for this reason, implementation of this arrangement will introduce change gradually. The Australian Government’s implementation of the more accurate DMI measure will provide an estimated additional $3.4 billion in funding for the non-government sector during the transition from 2020 to 2029.

To complement the needs-based recurrent funding arrangements, the government has introduced the Choice and Affordability Fund (the Fund) in 2020. The Fund will provide the non-government sector with a flexible means of driving other government priorities, including supporting parental choice and affordability, assisting schools during the transition to the new DMI, assisting schools in regional and remote areas and in drought affected areas, enhancing student wellbeing and supporting initiatives and lifting outcomes in underperforming schools.

When will the direct measure of income start?

Over 2020 to 2021, to support a smooth change from the previous SES area-based measure to the DMI, schools will receive the most financially beneficial score of their 2011 Census SES score, 2016 Census SES score or DMI score. The DMI will apply to all schools by 2022. The Department of Education, Skills and Employment (the department) has advised approved school authorities whether a school would financially benefit from the use of 2011 Census SES, 2016 Census SES or DMI arrangements in 2020 2021. The first payments to non-government schools using DMI were made in May 2020.

In recognition that systems are best placed to understand the needs of their schools, approved authorities will continue to have the flexibility to distribute funding to schools according to their needs-based funding arrangements that comply with section 78(5) of the Australian Education Act 2013 (the Act).

What score does the department use to inform school funding?

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Diagram explaining What score does the department use to inform school funding

Do schools need to apply for this funding?

Schools and approved authorities do not need to apply to commence the use of the DMI. The department will automatically calculate the funding amounts for non-government schools and determine whether there is a financial benefit to commencing in 2020, 2021 or 2022.

How will a score be calculated?

A school’s capacity to contribute (CTC) score is the rounded average of the DMI scores for 3 years immediately preceding that year. For example, a school’s CTC score that applies to 2023 is the average of the DMI scores for the school worked out for 2020, 2021 and 2022. In 2020, a school’s CTC score will use a 2-year rolling average.

The department has published details of the methodology for the DMI. In brief, a school’s DMI score is based on the median family income for a year and is worked out by:

  • calculating the family income for each student at the school by adding the income of parents and/or guardians
  • identifying the median (middle) family income from those individual students’ family income within the school
  • converting it into a score by comparing that median family income against the median family income of other schools.

How will a CTC score be validated and quality assured?

The department, in partnership with the Australian Bureau of Statistics (ABS), developed the Data Quality and Validation Framework (the Framework). The Framework will be used annually to assess whether data are fit for purpose, reliable and robust. This new comprehensive quality assurance process was not used previously to validate SES scores.

Under the new Framework, data, calculations and results undergo a rigorous assessment in line with the ABS’s 7 dimensions of quality – institutional environment, relevance, timeliness, accuracy, coherence, interpretability and accessibility.

The Framework was used by the department in 2020 to decide whether it was appropriate to use the 2018 and 2019 DMI scores to calculate funding for a school in 2020.

For more information