ATO Releases Decision Impact Statement on The Buddhist Society of WA v Commissioner of Taxation (No 2)

Case: The Buddhist Society of Western Australia Inc v Commissioner of Taxation (No 2) [2021] FCA 1363

Full text of the Decision Impact Statement is available here.


The Purpose of Decision Impact Statements 

Decision Impact statements are the response of a government entity to a change in the law that overturns that entity’s prior position on the point. In such cases, government entities need to ensure that their approach to implementing the law remains consistent with judicial reasoning and legislative intentions, whilst also being sufficiently transparent to allow prediction of what might constitute permissible versus impermissible activity.

One method of achieving such çonsistency is by the delivery of a Decision Impact Statement – a statement identifying how a decision in a case will affect a government department’s approach to implementation of the relevant law. Such a landmark case has arisen, with the ATO recently releasing its Decision Impact Statement in relation to the decision in Buddhist Society of Western Australia Inc v Commissioner of Taxation (No 2) [2021] FCA 1363 (hereafter referred to as “BSWA v The Commissioner”).


Context: The Facts

The Buddhist Society of WA (“the Society”) was an entity with designated deductible gift recipient (“DGR”) status for the purposes of running the Dhammaloka Buddhist Centre Building Fund (“the Fund”). Specifically, the Fund was, under the Income Tax Assessment Act 1997 (Cth) (“ITAA Act”), to be “a public fund, established and maintained solely for providing money for the acquisition, construction, or maintenance of a building used, or to be used, as a school or college”. These types of funds are commonly referred to as “School Building Funds”.

However, in late 2019, the Commissioner of Taxation revoked the DGR status of the Society to operate the fund, perceiving that the buildings the subject of the fund were not being used as either a “school” or “college” as required by the ITAA Act. The Society appealed the decision of the Minister and, importantly, sought that the decision be judicially reviewed. The review was based on whether the Commissioner had applied the correct definition of the word “school” in undertaking the assessment of whether the buildings were being used for purposes compliant with the Tax Act.

Ultimately, it was held that the Commissioner had in fact erred in his understanding of the definition of “school”, and hence had made an error of law by applying an incorrect definition in his assessment of whether the buildings were operating as a “school”. Accordingly, the Commissioner was required to remake the decision according to the correct definition.


The ATO’s Response

The ATO’s assessed how the above decision would affect its approaches to School Building Fund DGR applications and accordingly issued its Decision Impact Statement – highlighting a variety of changes to its future approach.


1. Definition of “School” for the purposes of School/College Building Funds

Previously, the Commissioner’s approach to determining whether a building operated as a “school” involved a multi-element approach – involving both assessment of the common law’s definitions of the word, and consideration of Taxation Ruling 2013/2. The ATO considered:

    • Whether the ‘school’ fell within the ordinary meaning of the word “school” (as established by the leading cases of Cromer Golf; Commissioner of Taxation v The Leeuwin Sail Training Foundation Ltd; and Commissioner of Taxation v Australian Airlines Ltd) )(the “ordinary meaning test”); and
    • Whether the School had any of the relevant characteristics as identified in Taxation Ruling 2013/2, being that it had (hereinafter referred to as “the Taxation Ruling Factors”):
      • a set curriculum, instruction or training provided by suitably qualified persons;
      • the enrolment of students;
      • some form of assessment and correction; and/or
      • the creation of a qualification or status that is recognised outside of the organisation.

This approach was held to be incorrect, with the Judge in BSWA v The Commissioner identifying:

a. that neither Cromer Golf, nor other later cases which considered the definition of “school”, imposed on the definition of “school” any additional requirements beyond the word’s ordinary definition. Therefore, the definition of “school” was only to be determined by the ordinary meaning test;

b. the presence (or absence) of regular, ongoing and systematic instruction did not conclusively establish whether or not the entity was a school (the Commissioner had argued that the Society’s use of the building was not predominantly for regular/ongoing/systematic instruction, and this had contributed to the assessment that the Society’s buildings were not being used as a “school”); and

c. assessment of whether the Taxation Ruling Factors are present is not part of the test to establish whether a “school” exists (but can be considered by the Commissioner as part of applying the ordinary meaning test).

The ATO now adopts the Court’s views that the education provided by a “school” does not have to be “vocational as opposed to recreational”, and will accordingly shift its attention to the activities undertaken and whether it can be demonstrated that “instruction is being given in an activity or area of knowledge”.


2. Simplification of the meaning of “school”

The Court identified Cromer Golf as one of the key authorities (amongst others) in determining the ordinary meaning of “school” – a critical extract from the case outlining:

… that a school is ‘a place where people, whether young, adolescent or adult, assemble for the purpose of being instructed in some area of knowledge or of activity’ … [A] school is ‘an institution in which instruction of any kind is given’. [Barwick CJ in Cromer Golf]

The ATO has committed to updating Taxation Ruling 2013/2 in relation to the established meaning of “school”, and to consider Cromer when assessing both future applications and rejected applications to which Cromer may have applied.


3. ‘Overall Purpose’ approach to “use as a school”

The Commissioner also erred in its interpretation that for a building being “used, or to be used as a School” this hinged on an analysis of the total amount of time the building was used for school activities as opposed to non-school activities and for DGR status to be denied where non-school activity hours were predominant.

The Court, however, identified that the Commissioner should have turned its mind to a much wider set of principles, such as:

    • the overall purpose(s) for which the building was being established and maintained;
    • the importance of each activity carried out in the building with reference to the purpose of the building as a school;
    • connections between school and non-school activities; and
    • the extent to which both school and non-school activities support the purpose of the building as a school.

The ATO, in considering an application for DGR status for a School Building Fund, will now assess the overall purpose(s) for which the building was established and maintained, and the nature of the activities that support the overall purpose(s). The Commissioner will further consider the extent of school versus non-school related activities and how each may support these overall purpose(s).

If you have had an application for a School Building Fund been rejected, and you believe that this Decision Impact Statement may be beneficial to your chances of receiving a favourable outcome, the ATO has identified that you can lodge a request for review of your application via email to The friendly and experienced team at Corney & Lind Lawyers can also assist you in navigating this process. Give us a call on (07) 3252 0011 or email us at to see how we can help you.

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This article was written by Jackson Litzow, Simon Mason and Jessica Lipsett.