In 2024, 2 states and 2 territories signed the Better and Fairer Schools Agreement, 2025–2034 (the first agreement), committing to a replacement education agreement for the expired 2018 National School Reform Agreement (NSRA). Although intended to be a national agreement, by the end of 2024, New South Wales, Victoria, Queensland and South Australia had not accepted its terms. Disagreement centred on the Commonwealth’s share of government school funding, which the non-signatory states argued should be raised from 20% to 25% of the Schooling Resource Standard (SRS), rather than the 22.5% accepted by Western Australia, Tasmania and the ACT.  

Since eligibility for federal funding under section 22 of the Australian Education Act 2013 includes being party to a national agreement, legislation was passed in November 2024 to allow the new agreement to commence on 1 January 2025, despite not all states having signed on. An Interim Agreement authorised continued funding on the terms of the NSRA for the 4 hold-out states.

However, when agreement for an increase of Commonwealth funding to 25% was reached with South Australia and Victoria on 24 January 2025, clauses in the bilateral agreements attached to the first agreement meant that Western Australia (clause 12), Tasmania (clause 12) and the ACT (clause 11) were eligible for the same deal (arrangements for the Northern Territory differ and continue under the first agreement).

Subsequently, all states and the ACT (referred to as ‘the states’) have signed the Heads of Agreement for the Better and Fairer Schools Agreement – Full and Fair Funding 2025–2034 (the BFSA), which promises the Australian Government’s share of SRS funding for government schools will be 25% by 2034. This is contingent upon the states taking their own shares to at least 75%, meaning government schools should reach 100% of SRS funding by the end of the agreement.

Funding should, therefore, be settled for the next decade. However, until new bilateral agreements for all states are finalised, full details about the rate and cost of the Commonwealth’s funding increase will remain unknown.

What’s on the table?

The 2025–26 Budget allocated $32.2 billion to the first agreement in 2025–26, with a steady but small increase over the forward estimates (Budget Paper no. 3, p. 45). However, this does not reflect funding for the new BFSA and totals over the forward estimates are ‘not for publication’ while negotiations continue (Budget Paper no. 2, pp. 37–38). Money has been placed in the Contingency Reserve for the BFSA’s implementation, but the amount set aside is unknown (Budget Paper no. 2, p. 37).

The 2 most substantial changes in the new agreement are the increase of SRS funding and the cessation of a 4% tax provision that allowed states to write off certain costs associated with running government schools.

The first change had been sought by several states (and stakeholders) long before 2025, with many jurisdictions calling for the Australian Government to better fund public education.

The second change likely reflects wider pressure over ‘accounting tricks’ that meant government schools could technically be funded 4% below states’ requirements under the NSRA. The revenue gained from ending this provision will help fund reforms under the BFSA (Budget Paper no. 2, p. 37). Its removal, in combination with the Commonwealth’s increase to 25% and the states’ required increase to at least 75%, means government schools will be ‘fully funded’ 2 decades after the Gonski report recommended the introduction of the SRS (pp. 153–171).  

These changes have been celebrated by state and territory governments and stakeholders, despite some criticism over the speed of the funding increase and the lack of ‘transparency’ surrounding negotiations. In terms of the first complaint, the Budget suggests that the rate of increase will be gradual at first. The allocation of an additional $407.5 million over 4 years from 2025–26 to the 4 jurisdictions which have signed bilateral agreements is dwarfed by the $7.2 billion between 2029–30 and 2035–36, suggesting the increase to 25% is likely to occur during the second half of the BFSA’s cycle (Budget Paper no. 2, p. 37 and Portfolio Budget Statement, p. 12).

What’s the status of the bilateral agreements?

In February 2025, the Department of Education confirmed negotiations on the bilateral agreements for the first agreement were ongoing, but were complete for the Northern Territory, ACT and Tasmania. The next month, negotiations reopened as successive jurisdictions (excluding the Northern Territory) signed a new Heads of Agreement, terminating participation in either the first agreement or the Interim Agreement (BFSA, clause 23), and requiring revised bilateral agreements to formalise the Commonwealth’s 25% share of funding.

According to the 2025–26 Budget (p. 37), bilateral agreements under the new BFSA have been reached with New South Wales, South Australia, Tasmania and the ACT. However, these will not be released until all agreements are finalised and it is unclear how close to completion negotiations with Queensland, Victoria and Western Australia are. The Northern Territory remains the sole signatory to the first agreement, with the bilateral agreement negotiated last year in force.

Where to from here?

With funding set aside and conflict over the Commonwealth’s share of the SRS resolved, there are likely firm parameters to ongoing negotiations. Following the conclusion of these negotiations, the commitment of money through the next budget should make the Commonwealth’s path to 25% clearer. As noted by the Australian Education Union in its pre-Budget submission, full transparency requires the allocation of funding beyond the forward estimates (p. 3). While the Budget outlined total funding for 4 jurisdictions between 2029 and 2035 (Portfolio Budget Statement, p. 12), the bilateral agreements should break this total amount down in detail. A progress review due by the end of 2028 could result in ‘updates or modifications’ to arrangements (clause 35). However, unlike the first agreement (clause 24), the new BFSA indicates that once negotiated, the bilateral arrangements will be in place for the life of the national agreement (clause 25) making a 10-year funding commitment more likely.