Funding for school education in Australia should be on the basis of clear and agreed policy principles for achieving effectiveness, efficiency, equity and a socially and culturally cohesive society. On the basis of these principles a national framework for funding schools will be supported by complementary State and Commonwealth models for funding government and non-government schools. This paper presents an agreed framework of five principles for funding schools. The principles do not prescribe a funding policy for individual governments or systems. Together they represent a direction for complementary Commonwealth and State funding approaches that: (1) recognise the relative weight of different cost factors across school sectors; (2) recognise the specific needs and cost burdens of different levels of schooling; and (3) provide a basis for government support to meet the growing costs of schooling over time.