Businesses such as Jam Woman Clothing are also feeling the pain of the new rules, which came into force at state schools across NSW on Wednesday.

The predominantly formal wear Wollongong boutique expects to lose thousands of dollars because of the changes, which are aimed at stopping the outbreak of COVID-19 in schools.

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"We are down to 20 per cent of what we normally do at this time of the year. That equates to thousands of dollars a week in lost revenue," Jam Woman Clothing director Toni Carusi said.

"Usually we would have girls lined up to buy dresses for their special day. That's completely stopped."

Ms Carusi said the new government guidelines around school formals were "very confusing".

"It is very ambiguous and confusing. They said that school formals are cancelled this term. Does that mean that they are going to go ahead in Term 4?

"I'm definitely hoping they do.

"A lot of formal dress shops like mine are struggling to keep their doors open.

"If this goes ahead for too long we don't know what the future holds in the next year, in the next six months ... whether we are still going to be there or not."

Customers from as far afield as Batemans Bay in the south and western Sydney in the north drop by Jam Woman Clothing to pick up formal dresses.

"There are a lot of people hurting from this decision. It is not just our manufacturers and us, our customers are also hurting. It is a no-win situation," Ms Carusi said.

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"We are predominantly a formal wear shop. Ninety per cent of our customers are interested in formal wear and we did give the option to customers to think long and hard when they were buying because we knew COVID was here to stay.

"We have a lot of lay-by items but we have cancelled a lot of orders and we are just taking orders from customers as they walk in."

The changes announced by NSW Premier Gladys Berejiklian on Monday will especially affect Year 12 students, who finish up the year at the end of this term.

Many readers commenting on a Mercury article online, hit out at the changes.

"It sucks, I only have one child and we're never going to experience graduation. My daughter said her school had a full assembly today with 1200 students but they can't have a graduation ceremony with 100 students," one reader said.

"Like this year hasn't been hard enough for these Year 12 kids ... now they are going to miss out on the one thing they look forward to at the end of their schooling years," another wrote.

While the majority of readers were opposed to cancelling school formals, dances and graduation ceremonies, some could see the merit in the government's decision.

"It is what it is. We just need to work together to stop this virus and I'm sure these students will understand how important it is to do the right thing so the next phase of their life is COVID-free!" one said.

NSW Primary Principals Association president Phil Seymour was glad the government was still allowing Year 12 students to have some form of graduation ceremonies this term.

"Sixteen pages of guidelines delivered to schools Monday to be implemented by Wednesday is a big ask of schools," Mr Seymour said.

"Some of the changes will intensify anxiety in schools around things such as no bands, limited sport opportunities, keeping year cohorts separate, no peer support activities.

"There will also be additional pressure on schools around staff and students who aren't well being sent home and needing a negative test response before they can return. There will be parents who will refuse to do this, but their child will not be able to return without it."

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