Private ruling: Whether Smartboards can be purchased by a school building fund
Date of advice: 27 June 2017
Published: October 2017
Ruling period: 1 July 2017 – 30 June 2018 | 1 July 2018 – 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Can the funds donated to the school building fund for the purposes of item 2.1.10 in section 30-25 of the Income Tax Assessment Act 1997 (ITAA 1997) be used for the purchase of fixed Smartboards? | A1: Yes

Relevant facts and circumstances: 1. The Entity is considering establishing a school building fund. 2. The funds will go towards maintaining school buildings at the School. 3. The funds will also go towards replacing fixed Smartboards in each classroom at the School. 4. Smartboards are fixed to a wall by means of a screwed in wall bracket. 5. Smartboards require electrical sockets to be wired into place next to them. 6. The Smartboards are a permanent feature of the classrooms at the School. 7. Removal of the Smartboards would cause damage to the building. 8. The Entity is registered as a charity.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 30-15 and | Income Tax Assessment Act 1997 Section 30-25.

Reasons for decision: Summary: Section 30-15 of the ITAA 1997 provides that a gift or contribution to funds, authorities or institutions covered in Subdivision 30-B of the ITAA 1997 can be deductible if they meet the specified requirements. Section 30-25(1), under Subdivision 30-B of the ITAA 1977, sets out a table of categories of education recipients that tax-deductible donations can be made to in accordance with section 30-15 of the ITAA 1997. Item 2.1.10 of this table provides for the following category: 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 by: a. a government; or b. a public authority; or c. a society or association which is carried on otherwise than for the purposes of profit or gain to the individual members of the society or association Further, column 3 of item 2.1.10 requires that the public fund must be either registered under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act), or must not be an ACNC type of entity. 'ACNC type of entity’ is defined under section 995-1 of the ITAA 1997 as an 'entity that meets the description of a type of entity in column 1 of the table in subsection 25-5(5) of the ACNC Act’. The relevant entity under the ACNC Act is a charity. Taxation Ruling TR 2013/2 Income Tax: School or college building funds (TR 2013/2) sets out the requirements of item 2.1.10 at paragraph 122. These requirements are: ● There must be a school ● There must be a building ● The building must be used as a school ● The building must be used as a school by a qualifying body ● There must be acquisition, construction or maintenance ● The fund must be established for and maintained for the requisite purpose TR 2013/2 states at paragraph 12 that the word 'school’ carries its ordinary meaning and that it must be both a place of assembly and an educational organisation. Paragraph 156 of TR 2013/2 provides that a 'building’ under item 2.1.10 of section 30-25 of the ITAA 1997 is considered to include fixtures to the building. Paragraph 157 of TR 2013/2 quotes Sir Frederick Jordan in the case of Australian Provincial Assurance Co. Ltd. v. Coroneo (1938) 38 S.R. (N.S.W.) 700, at 712: The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture;... the test of whether a chattel which has been to some extent fixed to land as a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period... or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose... Paragraphs 158-160 of TR 2013/2 provide for a number of considerations when determining whether an item is a fixture. Factors that indicate it will be a fixture include if it is attached to a building permanently or for an indefinite or substantial period of time, whether the intention of the party attaching the item is for it to be a permanent fixture of the building, and the fact that it cannot be detached from the building without causing substantial damage to the item or to the building. Paragraphs 160 and 161 of TR 2013/2 further provide examples of items that will and will not be considered fixtures. Ducted heating systems, fixed air conditioning systems and carpets permanently fixed to the floor will be fixtures. Items such as computers, furniture, training equipment and laboratory equipment will ordinarily not be fixtures. The building must be used as a school. Paragraph 26 of TR 2013/2 provides that a building will be used as a school if it is used to provide instruction in an area of knowledge 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. The building must also be used as a school by a qualifying body. A qualifying body is a government, a public authority, or a society or association which is carried on otherwise than for the purposes of profit or gain to its members. An entity must acquire, construct or maintain a building or have an objective intention to do so. Paragraphs 54-56 of TR 2013/2 explain when a building is acquired, constructed or maintained. A building will be acquired when an entity obtains ownership of a legal or equitable interest in the building. A building is constructed where it is formed or put together, and where the entity has sufficient control over the building’s use. A building is maintained where action is taken to keep it in proper or good condition. The fund must be established and maintained for the purpose of providing money for the acquisition, construction or maintenance of a building used as a school by a qualifying body. | Detailed Reasoning - School: The requirement for there to be a school is satisfied as the building fund is for the School, which is within the ordinary definition of a school. | Detailed Reasoning - Building: The Entity is intending on using the funds raised to purchase Smartboards for the classrooms. The Smartboards will be a permanent feature of the classrooms. They will be fixed to the walls of the classrooms by means of a wall bracket. Further, they also require electrical sockets to be wired in next to them. If the Smartboards were to be removed, they would also cause a level of damage to the walls they were fixed to. Given that they are intended to be a permanent fixture, they are fixed to the building by means other than their weight and that removal of the Smartboards would cause damage to the buildings, Smartboards are considered to be fixtures and therefore fall within the meaning of a 'building’ for the purposes of item 2.1.10 in section 30-25 of the ITAA 1997. | Detailed Reasoning - Building used as a school: The Smartboards will be used in the classrooms of the school and therefore the requirement that the building be used as a school is satisfied. | Detailed Reasoning - Building used as a school by a qualifying body: As established, the building will be used as a school. As it is a government school, the requirement for it to be used as a school by a qualifying body is established as a qualifying body includes a government. | Detailed Reasoning - Acquisition, construction or maintenance: The intent of the building fund is that it will be used for maintaining school buildings. Further, it is to be used to acquire Smartboards for the classrooms, thus satisfying this requirement. | Detailed Reasoning - Fund established for and maintained for the requisite purpose: The fund is being established for the sole purpose of maintaining school buildings, including replacing Smartboards in the classrooms. Therefore, it is being established and will be maintained for the requisite purpose. | Detailed Reasoning - Special condition under column 3 of item 2.1.10: The school building fund will be established by the Entity but will not itself be a separate entity. As it is not an entity, it cannot be registered under the ACNC Act. Therefore it is not an ACNC type of entity. It will be the Entity itself that is endorsed, which is registered under the ACNC Act. Therefore, this special condition is satisfied. | Detailed Reasoning - Conclusion: Smartboards can be considered fixtures and therefore come within the meaning of a 'building’ for the purposes of item 2.1.10 in section 30-25 of the ITAA 1997. Therefore a school building fund can use funds which are donated for the purchased of Smartboards.