Organisers say more than 3000 people gathered in Sydney's Darling Harbour on Sunday to protest against sweeping education cuts in NSW, which will affect the state's public and private schools as well as TAFE colleges.

Similar events were staged in towns around the state.

The sun came out for the fair-style protest in Sydney and children clapped along to performances from public school students and local singers.

Some of the loudest applause was reserved for NSW Teachers Federation president Maurie Mulheron, who was given a standing ovation as he promised to fight the government's cuts.

"While ever we've got fight within us, we will fight this for as long as it takes," he told reporters earlier on Sunday.

"The community of NSW will not stand by idly and allow them to rip jobs and courses out of our TAFE colleges and schools."

Providers of ethics classes will be given the same tax deductions as for scripture classes, alleviating the threat of the lessons becoming financially unviable.

The federal government will announce on Monday that it has reversed its decision not to grant deductible gift recipient status to ethics providers, which means they will now be able to collect tax deductible donations.

Primary Ethics, which provides the classes in NSW schools, said the decision would enable it to train more volunteers and reach more students.

Last month Fairfax Media reported that the Labor government had rejected Primary Ethics' request for gift recipient status and the organisation warned that lack of funds threatened the future of its program.

The decision was criticised by the NSW Greens and Verity Firth, who, as Labor education minister, introduced the classes in 2010. But in a surprising turnaround, the government said it will expand the gift recipient categories to include organisations approved by state or territory governments to provide ethics classes in public schools.

The present tax laws allow deductions for special religious education class providers but not for ethics class providers.

Primary Ethics chairman Bruce Hogan said that if the situation had not changed, his organisation was heading towards a financial ''cliff edge'' by the middle of next year.

The organisation is the only approved provider of ethics classes in Australia and its 800 volunteers teach about 8000 students in 200 NSW schools.

But, as revealed this year, many students are turned away because there are not enough trained volunteers to meet the demand.

Mr Hogan said Primary Ethics, which receives no government funding, would now be in a position to train some of the 350 volunteers who had registered interest on their website. ''We will be able to continue to grow towards our target of 4000 volunteers and build the infrastructure needed to implement our strategy to extend Primary Ethics' reach into western and south-western Sydney and across regional NSW,'' he said.

Assistant federal Treasurer David Bradbury said the earlier request from Primary Ethics was rejected because amending tax laws to name individual organisations would be a time-consuming and uncertain process.

"The Gillard government wants to support ethics classes in government schools through the provision of the … tax concession but making individual organisations jump through hoops to be specifically named in the tax laws is not the right approach,'' he said.

"Expanding the … categories … to providers of ethics classes is a better and more principled way.''

A spokesman for the Parents4Ethics lobby group, David Hill, said parents would be grateful to Mr Bradbury for finding a solution that would allow the teaching of ethics to continue.

The amendment is expected to be presented to Parliament in the winter session.

Ethics Come In From The Cold After Labor U-turn