Inland Revenue has released a draft Public Ruling on the GST treatment of payments by parents to state schools.
This is a re-issue of previous rulings with just a few changes to reflect recent developments in GST law.
If you want to comment on the draft ruling you have until 8 August.
The draft is pretty much in line with what you’d expect. It essentially distinguishes between payments which are true “donations” (not subject to GST) and payments for extra goods and services not covered by compulsory State funded education (subject to GST).
Schools won’t always find it easy to work out exactly where the line is drawn so caution is required particularly if changes to payment structures are being considered. There are some subtle complexities to come to grips with.
You need to read it yourselves but here’s a taste:
1. Not subject to GST:
– General donations intended to be used for general school costs i.e. not earmarked for a particular purpose.
– Payments for materials necessary for delivering the statutory curriculum (eg materials in a clothing class) unless the payment is for ownership of the completed item which the student can then take home.
– Photocopying charges for material which is necessary for teaching the statutory curriculum unless the payment is for the purchase of an additional item such as a school magazine.
– School camp payments where the camp is a compulsory part of the statutory curriculum.
– Charges for reading recovery programmes and special education services mandated as part of the school’s charter.
2. Subject to GST
– Stationery packs and optional workbooks students are entitled to keep.
– A fee to attend a performance by a visiting group for which attendance is optional.
– Goods supplied where there is a clear (and optional) take home component.
– Charges to attend or participate in activities which are optional.
There is a lot of detail in the ruling which anyone handling GST for a school should study.
And, in case you thought you had it all covered, Labour has just announced that if elected they will end “voluntary” school donations. That could mean schools account for GST on a much greater propoertion of the payments they receive from parents, and potentially all payments depending on how exactly the policy is implemented.
Barrister, Director and Consultant specialising in tax, family enterprise governance and succession, helping start ups and entrepreneurial enterprises grow safely and international expert on value added tax policy and implementation.