Australia: Not-For-Profit Newsletter: March 2013

Last Updated: 21 March 2013
Article by Patricia Monemvasitis

School Building Fund New Taxation Ruling

Tax Ruling 2013/2 was published in mid February 2013.

It defines the way Item 2.1.10 of the table in s.30-25(1) of the Income Tax Assessment Act 1997 (the Act) applies to funds set up as school and college building funds.

This ruling replaces the old percentage test, which allowed tax deductible donations to a fund which was used to acquire, build or maintain a school building, provided at least half of the building was used for school purposes : but then tightened to restrict 'other use' very narrowly.

After a case involving a community church which was using a school hall for its church services on weekends, the ATO wished to clarify the circumstances where that type of mixed use would disqualify a school building fund from being applied to such uses.

In summary the ruling now requires that funds collected must be applied towards the construction, maintenance or acquisition of a school building and the fund must have this sole purpose.

The following tests must be satisfied:

  1. that the organisation operating the fund carries on the school;
  2. that the organisation controls the use of the building where the school is conducted;
  3. that the use of the building is for the delivery of instruction in an area of knowledgeprovided regularly in an ongoing and systematic way as a course of non-recreation education; and
  4. that the school :
  • has its own distinct identity,(ordinarily it would have its own name) have a quality of permanence and have a governing body which controls its affairs;
  • has a set curriculum and offers instruction or training by suitably qualified persons;
  • enrols students;
  • conducts a form of assessment and correction; and
  • creates a qualification or status which is recognised outside the school.

School and recreational purposes can often be confused. A school and television school where systemic training and instruction is provided in film and television operations would qualify as "school" provided any recreational access is merely incidental. Likewise schools for opera, ballet and drama do qualify provided there are regular curriculum and examinations and the primary function is to systemically impart a course of knowledge, recreation being a byproduct only.

Some non-school use is permitted in buildings provided the substantial use is for school purposes.

Matters to consider are:

  • the amount of time the building is put to school use relative to the amount it is put to non-school use;
  • the number of people involved in the school use relative to the non-school use;
  • the physical area of the building for school use relative to the physical area of the non-school use; and
  • the extent to which the building has been adapted in order to accommodate the school or non-school use.

The tax ruling offers extensive examples of fact situations where school buildings have been used for various purposes. Some of these examples include:

  • A junior primary school operates a child care centre from a stand alone building on the school grounds for before and after school care of the school students and other students: the school building fund cannot provide money to maintain the centre.
  • The council of a church intends to use the classrooms and office of a new building for a "school of ministries" where students will study for a Bachelor of Theology: this use is for school purposes.
  • The council also wishes to use the hall and the kitchen for church services, functions and events and the council and board of the school enter into an agreement with:
    • priority access to the classrooms for the school with the church able to use them for bible study and youth meetings outside school hours;
    • priority of access to the hall and the kitchen for the church;
    • equal access to the storeroom.

The school building fund can only be used to acquire, construct or maintain the classrooms and the office.

  • A college is affiliated with a church. The college wishes to have an auditorium large enough to accommodate the school students, their families and invited guests for religious services involving students and other school events and to provide lectures to students on a regular basis. An auditorium is built to seat 5,000 people, 2.500 of whom could include school students. The auditorium is equipped with extensive lighting and stage fitout to accommodate public church services and functions on weekends: a school building fund cannot provide money to acquire, construct or maintain the auditorium. School building funds are not to be mistaken for ancillary funds which must be set up separately if a school wishes to raise money for other income tax deductible purposes. An ancillary fund must distribute to other DGR entities, so, the ancillary fund could be the initial recipient of monies raised from the public and then distribute them to a school building fund, library fund, scholarship fund or any other deductible gift recipient charity which the school wished to support.

Update on the Federal Government's proposed Human Rights and Anti-Discrimination Bill 2012

The debate with whether religious organisations should be allowed to discriminate against their employees has reignited with the Federal Government's proposed Human Rights and Anti-Discrimination Bill. The Bill can be viewed online at this link.

This Bill will consolidate and reform Australia's five federal anti-discrimination Acts. Under the current federal law, there are exemptions in place that allow "faith based" organisations to refuse employment on the grounds of religious sensitivity or principle. The exposure draft of the Bill proposes a uniform federal Anti-Discrimination Law which maintains the status quo, except for Commonwealth funded religious aged care providers.

The Government was steadfast in its view that the exemptions would remain in place for religious organisations but this has been questioned by the Senate Legal and Constitutional Affairs Legislation Committee who suggested that "no organisation should enjoy a blanket exception from anti-discrimination law when they are involved in service delivery to the general community."

The Senate report on the Bill (dated 21 February 2013) has made 12 recommendations including:

  • the removal of the exception allowing religious organisations to discriminate against individuals in the provision of services, where that discrimination would otherwise be unlawful (and in this respect the Bill should be redrafted using the approach in the Tasmanian Anti-Discrimination Act 1998), and
  • the alteration of Clause 33 (which deals with exceptions for religious bodies and educational institutions) so that any organisation providing services to the public, and which intends to rely on the exceptions in that clause, is required to:
    • make its intentions publicly available,
    • provide a copy of that document recording these intentions to any prospective employees;
    • and
    • provide access to that document, free of charge, to any other users of their service or member of the public who requests it.

The Senate report can be viewed online at this link.
The public has been unsurprisingly split over the treatment of the religious exemptions.

The Greens party has adopted the position of certain organisations working with religious entities and has stated, "We therefore recommend that the permanent religious exception contained in clause 33 of the Draft Bill (which deals with exceptions for religious bodies and educational institutions) be removed, in favour of reliance on the general exception for justifiable conduct." The Greens party accepts that the general exception for justifiable conduct would, when 'used in the right way.... allow a more thorough examination of human rights in conflict and consideration of how they might be balanced." (NACLC/KLS, Submission).

The balance between freedom of religious thought and practice in contrast with the idea of equal treatment of all individuals is seemingly a very fine line and it seems apparent that the making of the Bill may be delayed for quite a while to allow for proper debate of these issues.

Good news

1. Apple's share price might be heading in the wrong direction but it's not all doom and gloom for the Tech Giant with sources saying that an "amicable" resolution to a trade mark dispute is apparently not far away.

Forget Samsung, this case centres upon a small café named 'Apfelkind' in Bonn, Germany. The owner of the café, Mrs Christine Romer, designed and registered the logo 'Apfelkind' (loosely translated as 'child of the apple') but it was soon met by opposition in the form of the Silicon Valley powerhouse. The café is adorned with cups, plates, mugs sporting 'Apfelkind.'

Apple requested that Ms Romer remove registration in multiple categories, however word on the street is that Apple will accept a compromise whereby the logo will not appear on Tech related paraphernalia only; such as phone holders, pouches and so forth. Ms Romer has offered as a compromise a deal whereby she would withdraw some classes of her registration if Apple starts a larger project for children, however it is unlikely that they will agree to this.

With Apple's ongoing legal dispute against Samsung and falling share prices it appears that there are bigger fish to fry.

2. Guide Dogs Australia got more than they bargained for when they checked their donation jar at the local IGA store in Caloundra.

The organisation was astonished to find a mint condition 1937 Australian coin hidden amongst the donations. The coin, originally worth five shillings, was found by the collectors for the organisation who were amazed at the sight of a rare piece of Australian history, valued between $100-200.

Spokeswoman for the Guide Dogs Queensland Maroochydore branch, Olwyn Kerr, remarked that "this little silver coin is worth so much to us and it will make an enormous difference."

3. Restoration of the Balibo fort in East Timor has been approved with concern that a major hotel complex would be built on the site turning out as unfounded. Balibo fort is the site where five Australian journalists, known as the 'Balibo Five', were murdered by Indonesian forces during the invasion of East Timor in 1975.

As the brainchild of the Bailbo House Trust, a not-for-profit based in Australia, the redevelopment will include eight rooms of accommodation for tourists and an updating of the learning centre and library. The Trust has a 30 year lease over the cultural and heritage sensitive site and chairman, Rob Hudson, ensured that the development would not interfere with the historical aspects of the fort stating "the Balibo Trust, is, and always will be, a not-for-profit organisation."

4. The results of the NAB Women's Agenda Women's Leadership Awards Event were announced on March 7. The awards have a focus on recognising the works of emerging female leaders, and the men and women who help these women achieve. Special mention must go to Alison Page and Dr Kimberley Clayfield.

Alison Page was the winner of the Entrepreneur or Manager of the Year Award (Regional/Rural). She is the founder and executive officer of Saltwater Freshwater Arts Alliance. Alison launched the Alliance in 2008 as a social enterprise that could facilitate the employment of hundreds of Aboriginal contractors, and strengthen the cultural identity of artists and their communities. Alison has recently been appointed a non-parliamentary member on the expert panel for Constitutional Recognition of Aboriginal and Torres Strait Islander People

Dr Kimberley Clayfield is the Executive Manager of Space Sciences and Technology at CSIRO and won the award for the emerging Leader in the Public or Not-for-Profit Sector. Dr Clayfield is an emerging leader in an industry where women represent less than 10% of the national engineering workforce. She played a crucial role in the creation of a four year, $40 million dollar Australian space research program, and dedicates her personal time to inspiring high school students to pursue science and engineering.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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