Private schools will typically be registered as a charity. As such, parents will sometimes treat payments to the school as a charitable donation for tax purposes.
Inland Revenue are making it clear on its interpretation on this subject through the release in October 2022 of QB 22/09 – Income Tax – Payments made by parents to private schools and donation tax credits; which may impact the approach taken by some parents.
In summary, payments will qualify as a “gift” for donation tax credit purposes when all of the following apply:
- the school is a donee organisation;
- the payment is money of $5 or more;
- the parent makes the payment voluntarily to benefit the school either generally or for a specific purpose or project; and
- the parent or child gains no material benefit or advantage in return for making the payment.
QB 22/09 includes the below examples which Inland Revenue assert will not be eligible for a donation tax credit:
- A “donation” which results in a discount on tuition fees, or the payer’s business being advertised in a school publication.
- Contributions requested by the school with reference to its operating costs, number of students and each family’s circumstances.
- A donation of a non-cash prize for the school to use in a fundraising auction.
- The purchase of a ticket for a school event (e.g. quiz night), where part of the ticket proceeds will go towards a school project.
It would be wise to assume the circumstances surrounding a payment to a school will be reviewed by Inland Revenue if it is claimed as a charitable donation.