Major changes to funding including the abolition of a $1.2 billion fund for Catholic and independent schools and introducing strong consequences for universities that don't raise ATAR requirements for teaching degrees are part of new recommendations for the next Commonwealth government.

The Grattan Institute, an independent think tank dedicated to public policy, has also backed the implementation of a model that takes parental income into account when calculating needs-based funding in a wide-ranging list of education recommendations released on Tuesday.

'Segregation among schools continues to grow in Australia,' states a new Grattan Institute report. Credit:Michele Mossop

Grattan's school education expert Peter Goss said an analysis comparing countries' total funding per student as a percentage of gross domestic product per capita debunks the notion that Australia is spending more than other similar nations on education.

"It shows that our total spend per student is lower than comparative countries and shows that we need to take the strategic direction of increasing funding and tilting it strongly towards disadvantaged schools," he said.