On 5 December 2011, the Australian Taxation Office (ATO) released Draft Taxation Ruling TR 2011/D5 - Income tax: school or college building funds for public comment.
The new draft ruling replaces Taxation Ruling TR 96/8 - Income tax: school and college building funds.
Draft ruling TR 2011/D5 applies when establishing or maintaining a school or college building fund that is eligible to receive income tax-deductible gifts.
We expect the impact of the draft ruling to be minimal with most school building funds operated for primary and secondary school buildings and college buildings continuing to be regarded as school or college building funds, which can be endorsed for gift deductibility.
The main change between the draft ruling and TR 96/8 is the 'more than 50% rule' provided as an administrative rule of thumb in TR 96/8 has been removed as it is not considered correct in law. This is explained in additional discussion and examples in the draft ruling and will not impact most school or college building funds.
In general, the draft ruling provides greater guidance with expanded discussion and more practical examples on:
- what is a building
- what is a school
- what is use of a building as a school?
The discussion about administration costs has also been expanded to clarify that, in certain circumstances, reasonable expenditure incurred to administer the fund can be disbursed from the fund.
The draft ruling explains specifically that community use of primary school facilities funded as part of the Australian Government's Building the Education Revolution (BER) program is unlikely to be more than minor or occasional use (even if that use is regular).
The community's use of those facilities will not prevent a school or college building fund from being a fund that is established and maintained solely for providing money for the acquisition, construction or maintenance of a building used, or to be used, as a school or college.
We invite you to comment on this draft ruling by 2 March 2012.
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Last Modified: Thursday, 8 December 2011