Is a cashed-up private school a charity case? Apparently yes, if the tax system is any guide; but state schools are missing out on some of the charity perks.
In May, the Australian Charities and Not-For-Profit Commission (ACNC) released a snapshot of the first 250 charities to have registered with the organisation since it took over from the ATO as charity regulator last December. The majority are non-government schools, with some of Australia’s wealthiest schools recognised as charitable institutions receiving GST concessions, fringe benefit tax rebates and income tax exemptions.
Recent ABS statistics show there are nearly 3000 non-government schools recognised as charitable institutions, such as wealthy Geelong Grammar and the Anglican girls’ school SCEGGS in Darlinghurst.
“The average person on the street probably thinks of a charity as something that gives to the poor,” Dr Fiona Martin from the UNSW School of Business told Crikey. “But the legal concept is much broader.”
Under the common law definition, a charity must be “not-for-profit,” have a “charitable purpose” and exist “for the public benefit”. Currently, Treasury is developing a Commonwealth, statutory definition of charity to come into force in July 2014. The Exposure Draft of the Charities Bill 2013 specifies that to have a “charitable purpose” the organisation must advance health, relief of poverty, education, religion, or other areas listed in the bill.
The ACNCS’ Sally Storier told Crikey most independent schools would “come under an entity that’s for the advancement of education. They need to have that independent factor about them,” she says. “A government-controlled school wouldn’t be charitable, because to be charitable you have to not be controlled by the government.”
Melbourne University Law School’s Mathew Harding says independent schools are granted charitable status to level the playing field with state schools. “They would otherwise be liable to income tax, and state schools wouldn’t because they’re organisations within the state,” he said.
But public education advocates say the tax system seems to favour private schools, particularly when it comes to philanthropic donations. “It’s not a level playing field when you’re trying to actually get philanthropic dollars,” CEO of the Public Education Foundation (PEF) Verity Firth told Crikey.
To attract philanthropic donations, non-government and government schools can establish building, library or scholarship funds that can be endorsed with deductible gift recipient (DGR) status. Firth says DGR tax exemptions for scholarship funds seem tailored more to non-government schools than public schools. Public schools face significant barriers to DGR status for scholarship funds, as the school must be open to at least 200,000 people. “Unlike non-government schools, most public schools are subject to local boundaries and can’t argue to be open to that many people,” Firth says.
The PEF was established as a charity that attracts donations, pools funds together and distributes them to schools of recognised need. Among others things, it provides scholarships to refugees and those in socioeconomic need. In addition to having the expertise to create philanthropic networks, the foundation is not limited by geographical boundaries, making its scholarship fund eligible for DGR.
However, that does not mean gifts to the foundation are all tax deductible. “Most of the things public schools ask us to do, we can’t get tax deductions for,” Firth said.
For example, a donor wanted to give $18,000 to support indigenous education in regional NSW, suggesting the money could help employ Aboriginal parents or do “something creative to attract interest”. But Firth had to tell the donor the gift wouldn’t be tax deductible. Others might wish to donate computers, stationary or desks — equipment public schools often lack — but “that wouldn’t attract DGR under the scholarship definition,” Firth says.
The Review of Funding for Schools (or Gonski report) acknowledges donors are more likely to provide philanthropic gifts if they are eligible for a tax deduction. The review also notes that administration and endorsement of DGR funds is a significant burden that requires resources many public schools are unable to provide:
“The current arrangements are viewed to disadvantage schools with limited capacity to allocate resources to these tasks.”
President of the Australian Council of State School Organisations Peter Garrigan concurs that private schools can make more. “No school in Australia under Gonski will lose a cent, but the problem is you’ve also got the ability of some schools to rake in more money,” he told Crikey.
Recommendation 41 of Gonki’s model advises the government to create a national fund to distribute philanthropic gifts and to “support schools in need of assistance to develop philanthropic partnerships”.
Firth supports the recommendation and says it hasn’t been addressed yet. But she also says it’s important to expand the definition of DGR status to include specific areas of need relevant to public education. “What we’ve been lobbying the government to do is to give a broader definition of education as a deductible gift recipient category,” she said. “I don’t think any public advocate would argue we should be included in the charities definition. But in terms of philanthropic giving, it is ridiculous that we don’t have categories of DGR that are just as useful.”
Oh dear! The same old clichéd garbage in the premises of the whole discussion. When will someone grown up and of independent mind write about these matters.
“a cashed-up private school”
and
“some of Australia’s wealthiest schools”
and
“wealthy Geelong Grammar and the Anglican girls’ school SCEGGS in Darlinghurst.”
In America there are indeed “wealthy” private schools. Many of them, like hugely well-endowed private universities such as Harvard and Stanford, have such large endowments that a very high proportion of their student bodies are there on scholarship, possibly to the chagrin of would be legacy entrants whose forebears went to the same school. In the UK Trinity College, Cambridge, with an endowment of about £800 million, was able to bail out some of the other colleges when the then Chancellor of the Exchequer, the future PM, Gordon Brown, tried to bully Oxford and Cambridge Colleges and denied them the right to charge “top up fees”. Anyone ever heard of such a thing in Australia?
St Peters College, in Adelaide, once – many years ago – had the reputation of being quite well endowed? But are there any schools which can now sensibly be called “wealthy”? Before you again use such expressions as I quote above you should do your homework and show that they are well endowed with wealth that could, for example, allow them to get by with lower fees while still maintaining their assets.
The slightest experience of handling money would make it obvious that a magnificent chapel and a large heated swimming pool that a school can’t sell or indeed make any significant amount of money out of by allowing neighbours to use it in the summer holidays, just create expense. They are not part of “wealth” in any sense relevant to discussion of school funding.
So Geelong Grammar has pretty good facilities as one would expect of a school which charges high fees and ties to provide a safe and welcoming environment for Hong Kong Chinese, Thais, and other foreign students whose families are obviously used to pretty comfortable living. Schools, especially boarding schools (for which there is a real demand and real need for some families for various reasons) have to try and provide something not too startlingly different from home as a place to study and, as Australia, and its neighbours, have become richer over the last few decades, such schools have had to try and add amenities that wouldn’t have been imagined in the 1930s, 40s or 50s. And, apart from building funds – which do not create endowments – they have to do it by charging high fees.
Just get it now and keep it in your mind whenever some lefty with brain only half turned on parrots “wealthy schools”: there’s no such thing in Australia.
Better to turn your mind to why we shouldn’t go further in making it possible for the educated woman who aims to get three degrees and make a professional, academic or business career to have three or for children while paying off a mortgage and not having to try and buy a house where the government schools might provide what she would be inclined to look to an independent school to provide. The point is not to look after schools but parents and children. So stop talking rubbish about “wealthy schools” as if they didn’t have to charge fees to cover the costs of maintaining their facilities. And, why shouldn’t someone who prefers to give up overseas holidays so their children can go to one of the high-fee charging schools (for whatever reason) instead of one of the low fee Christian schools in the outer suburbs be given exactly the same support for a child without special needs as every other parent?
Mind you if one is going to let one’s own personal moralising, about who deserves what, wealth or anything else into the discussion I’ll opt for discrimination against those who send their children to Islamic schools, or Catholic ones where they still seriously teach that old-fashioned idea that the Pope is always right…. (After all he did bless the Armada dinne?)
I remember walking around Adelaide some time ago with somebody “in the know”. They pointed out the buildings owned by St Peters College. I was impressed because I had no idea at the time a school could be sitting on that much wealth.
But, please, Adam Larner, consider what you mean by “wealth” and whether its use in discussion of school finance makes sense. Can St Peters College turn all that visible “wealth” – all those buildings on what, even in Adelaide, would be expensive land if it could be sold for development of something commercial or apartments – into spending power? Can it even use them to keep down the fees it charges?
And if it does have endowments, i.e. invested income earning funds, what are they used for after they have kept the buildings in good order? A lefty might see a problem in the fees being kept down for a clientele which was almost all old boys and their families. Fair enough, but what if it made sure that boys (girls now too???) with ability who might not be able to get the education that would make best use of their abilities were educated with no fees charged or much reduced fees? But that’s all speculative as I doubt that it has endowments sufficient even to maintain its buildings. Why do I think that? Because, with examples like the Church of England in the UK and the Vatican’s financial scandals it is hard to believe that the difficult task of maintaining capital has been achieved by the worthies who look after St Peters’ money. Maybe if they had Don Bradman doing it, because the Adelaide based listed investment company Argo of which he was a director has done pretty well but Adelaide isn’t exactly central to funds management in Australia.
Warren: you’re parroting the same old clichéd plutocratic garbage.
There are cashed up private schools – the gonski report established that and the fact that schools like Geelong Grammar still get thousands a year from the government to go on the pile is something which should not be happening when we have a growing disparity.
What would happen if some of these private schools that charge 15-30 grand a year lost a bit of their government funding? What hardship would they suffer? Oh, that’s right – NONE.
Yet that 5 grand could pay for a few months of extra counselling time in a remote school with students suffering behaviour disorders. It could pay for air conditioning in a public school that has kids sweating through summer. Or it could replace some books in a library that haven’t been updated since the cold war ended.
If you looked into the stats – the “independent” sector has most money available per student and LEAST needy students. The catholic system also has less than their fair share of high needs kids and it internally diverts money away from need to over fund the richest schools.
Fact is we are funding privilege at the expense of genuine need. We are funding fee-charging schools that have discrimination exemption so they can take billions in government funding and use their employment services to punish “sinners” by excluding them from roles in their government funded facilities.
Every child should have a right to a public education – beyond that I see no reason to be in the business of subsidising private choice of the most privileged to spend money on an education that is poor value for money and pushing discrimination.
We should not be segregating our children by religion any more than we should segregate them on skin colour – and private education in practice is both of these.
@ Nathan Lee
We know you are offensive and inclined to put ideologically based rhetoric ahead of careful reasoning. The only slightly intriguing thing is whether this flinger of the “plutocratic” gibe is talking his own book. I wonder where your self-interest in the matter stands.
You seem to have overlooked the point that I was principally dealing with, indeed almost exclusively. And that is whether the false notion of wealth of a school can be part of the premises of any argument about funding of education if one is concerned to have true and factual premises. However, also…
Why can’t you see that one valid way to view the issues is to ask what needs to be done in the public interest while, at the same time, ensuring that no child is deprived of a sound educational start in life by its parents failings of any kind, financial or personal, and also seeing that parents of school age children need help whether by way of tax deductions or fee subsidies or whatever to make up for the fact that these producers of our next generation of scientists, doctors, inventors and just plain taxpayers (not a large majority) are likely to be paying off mortgages, paying a high tax rate if they are the most useful members of our community, and generally under pressure in the way that those with rich parents might not be. If the 30 year old woman who has just qualified as a medical specialist or become a partner in a big law firm feels contrained by her other obligations to have only two children instead of three WE ALL LOSE. If we and our children are old, infirm, dumb or lazy we benefit from there being more smart people with a good work ethic which, as a matter of probability (and I credit you with the intelligence to know that it is the probabilities that are all important in these discussions) will produce more of the taxpaying, inventive, productive, creative people with strong work ethics of the next generation than we will.
And if we are smart and successful we will want more like us to share the taxpaying load and the provision of professional and other highly skilled services. OK, Australia is very lucky that it has lots of smart Chinese and Indians still coming here to make up for our approach to the civilisation destroying birth rates per woman of child bearing age of Italy, Spain and Germany.
My short answer to all your quibbling about detail that I didn’t invite or provoke comment on is that a bigger pot of money, well spent, could do much good but none of that bears on my argument that “wealthy schools” is just misleading and a diversion from clear thinking on what a fair and effective policy might be. “What hardship would they [high fee paying private schools] suffer?} Of course none and that is my point which, in your ideological frenzy, you seem to have overlooked. Schools don’t suffer hardship any more than they are (absent large income earning endowments) “wealthy”. What would happen if high fee charging schools received less government money is that they would simply charge higher fees and/or cease to provide or provide less of something hitherto provided. That would often mean that, at the margin, some students who would do well at the school and whose families might have been able to afford the fees, or who might have received a bursary or scholarship to help with them, could not attend the school. Only by luck could that not turn out to be a bad thing, if not, normally a great tragedy. It might also mean that some child with a special musical talent was now not going to be able to learn the cello as well as the clarinet (or whatever).
The point is that it is not the school that would suffer but children and families. Would it be fair? Surely not if the reason for the shortfall is that parents at that school are receiving only 50 cents subsidy for every $1 taxpayer subsidy for those families whose children are at Melbourne High, Macrobertson’s Girls High, University High or their equivalents in other states.
I presume you don’t think that anything, ever, in Australia, is going to mix children from never employed families anything like uniformly or randomly with the children of parents who live in the Eastern Suburbs of Sydney or inner East of Melbourne – or who buy a flat in Parkville so their kids can go to University High. So, can we forget social engineering and start with Australian reality?