Private ruling: School Building Fund
Published: March 2014
Ruling period: 1 July 2012 to 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Does the School Building Fund continue to be entitled to endorsement as a deductible gift recipient pursuant to section 30-120 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: The organisation is endorsed as a tax concession charity. The organisation operates the School Building Fund which is endorsed as a deductible gift recipient (DGR). The organisation operates campsites for educational school camping programs. The sites contain buildings which are places of assembly in which persons come together to be instructed in an area of knowledge. The organisation provides an educational program. As part of the organisation's suite of programs, the client operates school campsites where it delivers educational programs. The organisation has established a local committee of management who oversee the operations of the Camps, and who have authority to determine the use of the sites as predominantly school camping sites. The Camps are used by the organisation to provide an education program. The organisation provides ongoing and systematic instruction in a course of non-recreational education. The education program operated on the Camps is staffed with qualified and experiences personnel with a range of qualifications including Outdoor Education and Teaching. The program for the camp is determined in consultation with the schools which send their students to camps operated by the organisation. The program for each school is settled by the organisation's staff in conjunction with teachers of the respective schools to fit the educational and curriculum objectives of the schools involved. During this pre-camp consultation process the key themes, structure and program elements to accomplish the schools' educational objectives are determined. Teachers from each school develop the linkages between the education offered at the Camps and the broader students' curriculum. Once the curriculum is settled, the vast majority of the teaching program (approximately X%) is delivered by the staff and interns of the organisation. The staff of the respective schools assist with the management of the group. An important part of the educational program delivered by the Camps is environmental studies. In addition, the organisation offers education on leadership development, water craft, navigation training, life-saving, archery, training in camping skills, painting and drama. The program offered by the organisation on the Camps forms a component of each school's respective overall sport and wellbeing program. The performance of the students is assessed by the school as a component of their annual reporting process. As a component of that assessment process, the staff of the organisation supply feedback to school teachers on the performance of student attendees. During school vacations, the organisation operates a program of camping. This is aimed at providing worthwhile activity for young people and training in a variety of practical leadership skills in the context of a thoroughly enjoyable holiday. Non-school usage of the Camps is modest and would account for around Y% of the usage of the Camps. The organisation also conducts an Internships program on the site. The organisation outsources the theoretical component of the studies to a Registered Training Organisation (RTO), and provides the supervision and practical placements for each of the interns. The organisation contributes to the assessment of the interns by providing feedback to the RTO on the performance of the interns. The School Building Fund is governed by a set of rules. The applicant has also advised the ATO will be notified of any changes to the Fund rules.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 30-25(1) | Income Tax Assessment Act 1997 section 30-120 | Income Tax Assessment Act 1997 section 30-125

Reasons for decision: Summary: Section 30-125 of the Income Tax Assessment Act 1997 (ITAA 1997) lists the requirements for entitlement to endorsement as a deductible gift recipient. Subsection 30-125(2) of the ITAA 1997 states: | Detailed Reasoning - 30-125(2): An entity is entitled to be endorsed as a * deductible gift recipient for the operation of a fund, authority or institution that is described (but not by name) in item 1, 2 or 4 of the table in section 30-15 and is not described by name in Subdivision 30-B if: (a) the entity has an * ABN; and (b) the entity: (i) legally owns the fund; or (ii) includes the authority or institution; and (c) the fund, authority or institution meets the relevant conditions (if any) identified in the column headed "Special conditions" of that item; and (d) the entity meets the requirements of subsection (6), unless: (i) the entity is established by an Act; and (ii) the Act (or another Act) does not provide for the winding up or termination of the entity; and (e) the entity meets the requirements of section 30-130, unless the entity is endorsed as a deductible gift recipient under paragraph 30-120(a). A school building fund is defined at item 2.1.10 of the table in subsection 30-25(1) of the ITAA 1997 as follows: 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 Subject to the special conditions in column 3 the public fund must: (a) be registered under the Australian Charities and Not-for-profits Commission Act 2012; or (b) not be an *ACNC type of entity Taxation Ruling 2013/2 Income tax: school or college building funds (TR 2013/2) provides further guidance on what a school or college is for the purposes of Item 2.1.10. Paragraph 10 of TR 2013/2 states: 10. The key requirements of Item 2.1.10 considered in this Ruling are as follows: • there must be a school (see paragraphs 11 to 19 of this Ruling); • there must be a building (see paragraphs 20 to 24 of this Ruling); • the building must be used as a school (see paragraphs 25 to 45 of this Ruling); • the building must be used as a school by a qualifying body (see paragraphs 46 to 52 of this Ruling); • there must be acquisition, construction or maintenance (see paragraphs 53 to 56 of this Ruling); and • the fund must be established and maintained for the requisite purpose (see paragraphs 57 to 73 and paragraphs 75 to 89 of this Ruling). | Detailed Reasoning - There must be a school: Paragraph 12 of TR 2013/2 states: A school must be both a place of assembly and an educational organisation. The school camps would be recognised as a place of assembly. Paragraph 14 of TR 2013/2 states: An educational organisation has a distinct identity and provides regular, ongoing and systematic instruction in a course of non-recreational education. The organisation operates school camps which provide education in such areas as environmental studies, geography, biology and physical education. The instruction is provided by fully qualified teachers and the curriculum is worked out with the participating schools. The performance of the students is assessed by the participating schools. The Camps would qualify as an educational organisation. | Detailed Reasoning - There must be a building: Paragraph 21 of TR 2013/2 states: For the purposes of Item 2.1.10 the word 'building' carries its ordinary meaning. A building is a permanent structure, roofed and usually with walls and flooring, that provides protection from the elements. The Camps contain permanent buildings. The Camps would meet the 'building' requirement. | Detailed Reasoning - The building must be used as a school: Paragraph 25 of TR 2013/2 states: 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. Paragraph 29 of TR 2013/2 states: • The school use of a building refers to the use of the building to provide instruction of the kind described in paragraphs 13 to 19 of this Ruling or for purposes which are incidental to that use; and • The non-school use of a building refers to use of a building which is not school use. Paragraphs 30 to 34 of TR 2013/2 states: 30. A weighing of various factors is required to determine whether a building has the character of a school building. 31. In order for a building to be a school building its school use must be substantial. 32. A building will not be regarded as a school building where its non-school use is of such kind, frequency or relative magnitude as to preclude the conclusion that the building has the character of a school building. 33. In characterising a building as one that is 'used as a school', any other use must not materially limit, detract from or otherwise be incompatible with the provision of instruction of the kind described in paragraphs 13 to 19 of this Ruling. 34. Other factors which are relevant to determining whether a building is used as a school include: • the amount of time the building is put to school use relative to the amount of time it is put to non-school use; • the number of people involved in the school use of the building relative to the number involved in its non-school use; • the physical area of the building put to school use relative to the physical area put to non-school use; and • the extent to which the building has been adapted or modified in order to accommodate its school or non-school use. Non usage of the school camps is approximately Y%. The school camp buildings are used substantially for 'school use'. The organisation's school camps would meet 'the building must be used as a school' requirement. | Detailed Reasoning - The building must be used as a school by a qualifying body: Paragraph 49 of TR 2013/2 states: 49. In order for a qualifying body to use a building as a school the body must: • carry on the school as an organisation; • control the use of the building; and • use the building in the provision of instruction of the kind described in paragraphs 13 to 19 of this Ruling. The organisation has established a local committee of management who oversee the operations of the Camps, and who have authority to determine the use of the sites as predominantly school camping sites. The organisation operates the school camps as a school. The organisation will meet 'the building must be used as a school by a qualifying body' requirement. | Detailed Reasoning - There must be acquisition, construction or maintenance: Paragraphs 53 and 56 of TR 2013/2 states: 53. In order for Item 2.1.10 to apply an entity must acquire, construct or maintain a building or have an objective intention to do so. 56. A building is maintained for the purposes of Item 2.1.10 where action is taken to keep it in proper or good condition. The organisation will maintain the school buildings. This requirement is satisfied. | Detailed Reasoning - The fund must be established and maintained for the requisite purpose: Paragraphs 57 to 62 of TR 2013/2 states: 57. Item 2.1.10 requires a school building fund to be established and maintained solely in order to provide money for particular purposes. This requirement is referred to as the ' sole purpose test' in this Ruling. | Detailed Reasoning - Requisite purpose: 58. The sole purpose test requires a school building fund to be established and maintained solely to provide money for the acquisition, construction or maintenance of a building used as a school by a qualifying body. 59. The word 'solely' refers to the purposes or objects for which the fund is established and maintained. It is a question of fact whether a fund is established and maintained solely to provide money for the requisite purpose. 60. A fund will not satisfy the sole purpose test if it is established or maintained for the purpose of, or for purposes which include, providing money to acquire, construct, or maintain a building: • that is not used or objectively intended to be used as a school to any extent; or • that is not used or objectively intended to be used by a qualifying body. 61. A fund will only satisfy the sole purpose test where it is established and maintained to provide money for the purpose of both: • acquiring, constructing or maintaining a building which is a school building for the purposes of paragraphs 26 to 28 of this Ruling; and • putting that building to school use. 62. Accordingly, a fund will not satisfy the sole purpose test where it is established or maintained to provide money for the purpose, or for purposes which include, the non-school use of a building. This is the case, even though the building may be a school building. The School Building Fund is governed by a set of Rules. The Rules state the sole purpose of the fund will be for the acquisition, construction or maintenance of a school building which meets the 'sole purpose test'. This requirement is satisfied. | Detailed Reasoning - Conclusion: The School Building Fund continues to satisfy the requirements for endorsement as a deductible gift recipient under subsection 30-125(2) of the ITAA 1997 and continues to be endorsed pursuant to section 30-120 of the ITAA 1997.