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ATO School Building Fund Ruling

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The Australian Tax Office (ATO) released its final ruling on school building funds on 13 February 2013.

It had released a draft ruling on this topic in December 2011. The draft ruling stated that a school building fund could receive tax deductible gifts if it was constructing or maintaining buildings which were used solely as a school - any other use of the building could only be minor or occasional. This “principal purpose test” was in contrast to the “more than 50% test” which was in place prior to the issue of the draft ruling. Under this rule, a fund could receive tax deductible gifts if it was constructing or maintaining buildings which were used as a school at least 50% of the time.

The ATO received many submissions from the public in response to its draft ruling. Its final ruling, named TR 2013/2, incorporates many of the issues and ideas which were raised in the public submissions, and departs from the “principal purpose test”.

The new test described in TR 2013/2 is as follows:

  1. there must be a school organisation;
  2.  there must be a building used as a school;
  3. a building’s use as a school must be:
    a.   substantial;
    b.   non-school use must not be of a kind, frequency or relative magnitude as to
          preclude the characterisation as a school;
    c.    non-school use must not materially limit, detract from or otherwise be incompatible
          with school use; and
    d.   where a church carries on a school it is relevant the extent to which the school is
          able to control the use of the building.

The ATO also included transitional provisions which will apply to funds which existed prior to 13 February 2013.

if you would like more information on how this ruling will impact your organisation or fund.
 


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