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Edited version of your written advice
Authorisation Number: 1013005439451
Date of advice: 2 May 2016
Ruling
Subject: School building fund
Question 1
Is the Building a 'building used, or to be used, as a school or college' for the purposes of item 2.1.10 of the table in subsection 30-25(1) of the Income Tax Assessment Act 1997?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on:
1 July 2015.
Relevant facts and circumstances
Religious Institution (RI) operates a school building fund which is endorsed as a deductible gift recipient under section 30-120 of the Income Tax Assessment Act 1997.
RI wants to use its school building fund to pay for the cost of residential accommodation (the Building).
The Building is occupied by an employee of RI who provides instruction in a school run by RI, and undertakes other activities for RI.
Relevant legislative provisions
Section 30-25 of the Income Tax Assessment Act 1997
Reasons for decision
Item 2.1.10 of the table in subsection 30-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997) describes a school building fund as:
a public fund 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…
Taxation Ruling TR 2013/2 Income Tax: school or college building funds sets out the Commissioner's view about school building funds, and provides the following on whether a building is 'used as a school or college':
25. In order for Item 2.1.10 to apply there must be a building used as a school or an objective intention for a building to be used as a school.
26. A building is 'used as a school' for the purposes of Item 2.1.10 where:
• it is used to provide instruction of the kind described in paragraphs 13 to 19 of this Ruling; and
• the extent and character of that use is such that the building can be described as 'used as a school' as a matter of ordinary language.
27. A building is also 'used as a school' for the purposes of Item 2.1.10 where its use is incidental to the provision of instruction in a building which satisfies paragraph 26 of this Ruling; …
Incidental buildings
42. A building which is not used to provide instruction of the kind described in paragraphs 13 to 19 of this Ruling is also used or to be used as a school where:
• its actual or intended use is incidental to the provision of instruction in one or more school buildings; and
• it can be regarded as being 'used as a school' as a matter of ordinary language when considered in conjunction with those buildings.
43. A building's use is incidental to the provision of instruction in a school building where it is used together with the school building, but in a manner which is ancillary or subordinate to it.
44. In determining whether a building's use is incidental to the provision of instruction in a school building, regard is had to the nature and scale of the uses to which the building is or will be put, as well as its physical characteristics.
45. In determining whether a building of this kind can be characterised as a school building when considered in conjunction with one or more other buildings, it is necessary to have regard to the extent of its non-school use. Such a building is not a school building where its non-school use prevents it from being regarded as being used as a school as a matter of ordinary language.
…
196. Further examples of buildings which may be used for purposes which are incidental to the provision of instruction in a school building include:
• facilities for students or staff of the school
• a school administration office
• a school assembly hall
• residential accommodation of a boarding school; and
• residential accommodation for teachers.
The Building is not used to provide systematic instruction in a course of education, and will not be 'used as a school' unless its use is incidental to the provision of instruction in a school building.
The Building was constructed to enable RI to provide accommodation to its employees. The Building is intended to house RI staff.
The Building is currently housing an RI employee. The functions of the employee include providing instruction in the school, and other activities of RI.
A building that is used to provide residential accommodation for teachers at a school will generally be considered incidental to the provision of instruction in a school building.
The evidence shows the Building is provided to the RI employee in their capacity as an employee of RI.
Use of the Building is considered incidental to the provision of religious activities in religious buildings, and not incidental to the provision of instruction in a school building.
The Building is not a building 'used as a school or college' for the purposes of item 2.1.10 of the table in subsection 30-25(1) of the ITAA 1997. RI cannot pay for the construction cost of the Building using funds from its endorsed school building fund.