The Catholic and independent school sectors have secured $4.5 billion in extra funding under major changes to the way non-government schools are funded.

Key points: Catholic and independent schools to receive extra $4.5 billion from Commonwealth over 10 years

Catholic and independent schools to receive extra $4.5 billion from Commonwealth over 10 years New funding model will take into account parents' income, rather than census data

New funding model will take into account parents' income, rather than census data Package represents major win for Catholic sector, which had revolted over changes announced in Gonski legislation last year

The Federal Government will move from a widely criticised funding model that is based on census data, to a new model that uses parental tax data to calculate a school's wealth.

The package, announced by Prime Minister Scott Morrison on Thursday, represents a major win for the Catholic sector, which had revolted over funding changes announced in new Gonski legislation last year.

"For students, this will mean the opportunity to get the best results from school. For parents, it will mean that choice remains affordable," Mr Morrison said.

"For teachers, it will mean certainty of funding so they can get on with the job."

The new funding calculations will be phased in from 2020 in line with a recent review by the National School Resourcing Board.

The move towards a personal tax model will cost the Government $3.2 billion over the medium term.

On top of this, there is a new $1.2 billion "choice and affordability fund", which will prop up Catholic and low-fee independent schools that otherwise would have had to significantly raise fees to stay viable under the new funding system.

The Government said the $1.2 billion fund would also target schools in rural and remote locations, as well as underperforming schools.

Catholic schools the big winner in funding package

The shift to an income test will mean the Catholic sector will be able to keep fees low across its system — even at schools located in wealthier suburbs.

Increases in funding to Catholic and low-fee independent schools make up the bulk of the extra $3.2 billion, but Catholic schools nationwide will actually be getting significantly more than that.

That is because wealthy independent schools stand to lose under the personal tax model, with their socio-economic status (SES) score predicted to rise, especially for elite schools in regional areas or top-end city schools that accept country boarders.

There is also a change to the transition arrangements of overfunded Catholic schools, who will now have 10 years to transition down to new funding arrangements.

The $3.2 billion funding package was arrived at after the Government modelled scenarios based on an initial collection of tax data of parents at private schools.

They matched student addresses with Australian Tax Office data and census records, but the Government was only able to match the records for around two-thirds of parents at private schools.

Parents of private school children will now be asked to provide current addresses to their school.

Catholic Schools NSW (CSNSW) said the changes meant families would continue to have the choice of an affordable non-government school for their children.

"Faced with such a massive fee hike from kindergarten to Year 6, most parents would have withdrawn their children and enrolled them in the free government school nearby. This has now been averted," CSNSW chief executive officer Dallas McInerney said in a statement.

"It would have put more pressure on government schools and increased the cost to taxpayers who must fully fund government school students and only partly fund non-government school students."

The Independent Schools Council of Australia also welcomed the announcement, saying in a statement the new model created "the foundation for a fair and reasonable resolution of the current funding issues".

The National School Resourcing Board completed a review earlier this year into the current SES system and recommended a shift to a parental means test.

The SES method had been criticised as outdated, and the Catholic system argued its students tended to be from families of lesser means, even in wealthy suburbs.

The new funding package also includes transition arrangements that will give overfunded Catholic schools more time to move towards lower funding, in line with the 10-year timeframe offered to overfunded independent schools.

Many wealthy schools in the independent sector will be worse off under the changes, especially those in regional areas and those who take in country boarders.

Labor questions 'private school slush fund'

Federal Labor's education spokeswoman Tanya Plibersek described the choice and affordability package as extraordinary, and questioned why public schools got nothing.

"The Prime Minister has turned his back on the 2.5 million children that go to public schools around Australia. He has said to the 5 million parents of those children, we don't care about your kid," Ms Plibersek said.

"It looks very much [like] the Liberals have done a special deal to set up a $1.2 billion slush fund for private schools.

"They need to explain exactly why they've done that."

Education Minister Dan Tehan said the new arrangement built on the work of his predecessor, Simon Birmingham.

"This package today [Thursday] makes sure that affordable choice for parents continues," he said.