On 13 February 2013 the Australian Taxation Office (ATO) released a new tax ruling for school (or college) building funds – Taxation Ruling TR 2013/2. This tax ruling aims to clarify the definition of a school or college to help determine whether a building is used as a school or college and to identify if a fund has been established and is being maintained solely for providing money for the acquisition, construction or maintenance of a building used as a school or college.
Broadly this ruling stipulates that the key requirements for a school or college building fund are:
- there must be a school,
- there must be a building,
- the building must be a school,
- the building must be used as a school by a qualifying body,
- there must be acquisition, construction or maintenance of a school building and
- the fund must be established and maintained for the requisite purpose.
In order for there to be a school, and there must be a 'place of assembly' where people come together in order to be instructed in an area of knowledge with "its own distinct identity" and provides regular, ongoing and systematic instruction in a course of non-recreational education.
School
The key point in the ruling is that for a building to be a school building its school use must be substantial. This is not defined in any clear terms, but rather that when taken into account with non-school use the character is still that of a school building. Things that may impact this are:
- the amount of time the building is put to school use as opposed to non-school use,
- the number of people involved in the school use of the building as opposed to its non-school use,
- the physical area put to school-use as opposed to non-school use and
- the extent to which the building has been modified in order to accommodate its school or non-school use.
Requisite Purpose
The ruling also outlines the "requisite purpose" mentioned above for a school or college building fund, that is, it must be established and maintained "solely" to provide money for the acquisition, construction or maintenance of a building used for school use.
Transitional Arrangements
Under the old ruling (Taxation Ruling TR 96/8) a building had to be used for at least 50% for school use in order to use a school or college building fund. As this no longer applies due to the new ruling, the transitional arrangements state that if a fund has committed to acquisition or construction arrangements prior to 13 February 2013 they will not be subject to the new ruling, and the school building fund will still be able to receive gifts or contributions on the basis of the old rules up to 1 July 2013.
Two examples from the Ruling
- School A provided a supervised care service before and after school for its students, with the care involving no instructions or training to those said students. The supervised care is provided in the existing school hall with its associated facilities. The use of the school hall for this purpose does not contribute materially to the halls maintenance costs.
In this case the school building fund can provide money to maintain the hall.
- A private college has constructed an indoor 25-metre swimming pool which it makes available for public use from early morning until evening, charging entry fees. The pool is also used regularly by health professionals to conduct hydrotherapy sessions and by swimming instructors to give private lessons. When the pool is required for students, lanes are cordoned off for student use.
A school building fund cannot provide money to maintain the pool building.
The extent of the building's non-school use indicates that it cannot be described as being used as a school as a matter of ordinary language. The use of the building by health professionals and others detracts from or limits its abilities to be used by the school.
The building's significant non-school use also means that it cannot be regarded as being used as a school in conjunction with other school buildings.
Further examples are given in the tax ruling.
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