Effective today, the ATO withdrew the existing School Building Fund Tax Ruling (TR 96/8). Taxation Ruling TR 96/8 sets out the Commissioner's views on when a school or college building fund qualifies as an eligible gift recipient.   The withdrawal of this ruling can have a significant impact on schools sharing the use of their buildings.

The ATO has at the time of withdrawal also announced that:

“Draft Taxation Ruling TR 2011/D5, which will issue on 5 December 2011, rewrites TR 96/8 to provide greater guidance and more examples to organisations seeking to establish or maintain a school or college building fund that is eligible to receive income tax deductible gifts under Item 2.1.10 of the table in subsection 30-25(1) of the ITAA 1997. The ‘more than 50% rule’ provided as an administrative rule of thumb in TR 96/8 has been removed from the draft ruling as incorrect.”

A significant change relates to buildings used both as a school and for other purposes.  Any other use of the building must be either:

•  integral to its use as a school; or
• minor or occasional.

School boards or others in control of eligible school building  funds who have relied on the ‘more than 50% rule’ in TR 96/8 now need to swiftly consider and take advice on the application of the new ruling (albeit only draft ruling as it is intended to apply from today once later finalised).

Comments on the draft ruling are invited by 2 March 2012. 

The Draft ruling provides only the preliminary view of the ATO and so, while not law, it gives an indication of the direction that the ATO intends to take in interpreting the law.

A copy of the draft ruling can be found here.

Schools with any questions regarding the operations of their school building fund should not hesitate to contact our office.