Tax Deductible Giving for Non-State Schools

As a general proposition, non-state schools can be registered with the Australian Charities and Not-for-Profit Commission (‘ACNC’) as a charity for the advancement of education. Indeed, State regulators will expect this, and this will generally be required for grant eligibility.

Registration as a charity with the ACNC entitles a school to an income tax exemption, but it does not qualify the school for endorsement as a deductible gift recipient (‘DGR’) for the issuing of tax deductible receipts to donors.

However, through careful structuring, schools can utilise both a Public Ancillary Fund and DGR endorsed Public Funds to provide donors with tax deductible giving options.

Making use of DGR endorsed Public Funds

In our experience, many schools will benefit from the establishment and operation of one or more of the following DGR endorsed Public Funds:

1. School Building Fund;[1]
2. Scholarship Fund;[2]
3. Public Library (not technically a public fund);[3] and
4. Necessitous Circumstances Fund[4]

Each of these funds can be established by the school for the receipt of public donations to be used for specific regulated purposes.

For example: donations made to a school’s building fund must be applied to the acquisition, construction and maintenance of school buildings. The ATO has published a detailed tax ruling setting out what the funds can and cannot be used for.[5]

We can assist your school with:

Understanding the ATO’s requirements for each public fund;
Establishing each of the public funds; and
Assisting with ongoing compliance.

Making use of a Public Ancillary Fund

A Public Ancillary Funds is a specific kind of DGR,[6] established by a trust deed and endorsed as a public fund which:

Seeks public donations on a deductible basis for the later distribution to other DGR endorsed charities or funds (excluding other ancillary funds); and
Can be used to invest the DGR donations to grow the corpus of fund for later distribution to DGR endorsed charities.[7]

Put another way, Public Ancillary Funds are generally used as both funnels and investment vehicles for DGR donations.

Therefore, the primary benefit of a Public Ancillary Fund to a school is that it provides a single place for public appeals for donations for its various public funds, and it allows the school to grow the corpus of those donations in the fund.

We can assist with both the establishment and ongoing compliance of your Public Ancillary Fund.

How can we help?

We can assist your school in exploring whether or not this approach to philanthropic structuring is right for your school. We can also assist with the establishment and ongoing compliance for each.

Vocare Law is well equipped to assist our charity and not-for-profit clients with a wealth of collective knowledge and over two decades experience providing insight and advice in this area. Please don’t hesitate to contact our office if you have any questions on ensuring your charity is maximising its tax concessions. Contact us on 1300-VOC-LAW / 1300-862-529 or email: enquiry@vocarelaw.com.au

This article was written by Paul Neville, Senior Associate.

**The information contained herein does not, and is not intended to, constitute legal advice and is for general informational purposes only.