What is the Direct Measure of Income?

Download the fact sheet: What is the Direct Measure of Income?

To ensure 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 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 DMI does not affect other Schooling Resource Standard (SRS) loadings.

Under current arrangements capacity to contribute is calculated using the socio-economic status (SES) score of the area(s) where the students reside. 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. Accordingly, from 2020, a direct measure of income will be introduced. This more accurate approach will ensure more funding flows to the schools that need it the most.

The impact of the use of the DMI will vary school by school and for this reason implementation arrangements introduce change gradually. The 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 is introducing a new 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 current arrangements to the direct measure, schools will receive the financial benefit of the 2011 Census SES score, 2016 Census SES score or the DMI. The new direct measure will apply to all schools by 2022. The Department of Education, Skills and Employment will advise approved authorities whether a school would financially benefit from the use of DMI arrangements in 2020, 2021 or 2022.

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).

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 three 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 two 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 both parents or guardians;
  • identifying the median (middle) family income from those individual students’ family income within the school; and
  • converting it into a score by comparing that median family income against the median family income of other schools.

Technical Working Group

Following the Government’s decision to implement the new measure from 2020, the Department of Education and Training established a Technical Working Group to undertake work on the implementation of the new direct measure of income. The Technical Working Group met on a regular basis and consisted of representatives from the non-government schools sector, the Australian Government, and state and territory governments.

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