Schools are not entitled to DGR endorsement

As a general proposition, non-state schools can be registered with the Australian Charities and Not-for-Profit Commission (‘ACNC’) as a charity for the advancement of education. Indeed, State regulators will expect this, and this will generally be required for grant eligibility.

Registration as a charity with the ACNC entitles a school to an income tax exemption, but it does not qualify the school for endorsement as a deductible gift recipient (‘DGR’) for the issuing of tax deductible receipts to donors.

However, through careful structuring, schools can utilise both a Public Ancillary Fund and DGR endorsed Public Funds to provide donors with tax deductible giving options.

Making use of DGR endorsed Public Funds

In our experience, many schools will benefit from the establishment and operation of one or more of the following DGR endorsed Public Funds:

1. 1. School Building Fund;[1]
   2. Scholarship Fund;[2]
   3. Public Library (not technically a public fund);[3] and
   4. Necessitous Circumstances Fund[4]

Each of these funds can be established by the school for the receipt of public donations to be used for specific regulated purposes.

For example: donations made to a school’s building fund must be applied to the acquisition, construction and maintenance of school buildings. The ATO has published a detailed tax ruling setting out what the funds can and cannot be used for.[5]

We can assist your school with:

1. Understanding the ATO’s requirements for each public fund;
2. Establishing each of the public funds; and
3. Assisting with ongoing compliance.

Making use of a Public Ancillary Fund

A Public Ancillary Funds is a specific kind of DGR,[6] established by a trust deed and endorsed as a public fund which:

1. Seeks public donations on a deductible basis for the later distribution to other DGR endorsed charities or funds (excluding other ancillary funds); and
2. Can be used to invest the DGR donations to grow the corpus of fund for later distribution to DGR endorsed charities.[7]

Put another way, Public Ancillary Funds are generally used as both funnels and investment vehicles for DGR donations.

Therefore, the primary benefit of a Public Ancillary Fund to a school is that it provides a single place for public appeals for donations for its various public funds, and it allows the school to grow the corpus of those donations in the fund.

We can assist with both the establishment and ongoing compliance of your Public Ancillary Fund.

How can we help?

We can assist your school in exploring whether or not this approach to philanthropic structuring is right for your school. We can also assist with the establishment and ongoing compliance for each.

Vocare Law is well equipped to assist our charity and not-for-profit clients with a wealth of collective knowledge and over two decades experience providing insight and advice in this area. Please don’t hesitate to contact our office if you have any questions on ensuring your charity is maximising its tax concessions. Contact us on 1300-VOC-LAW / 1300-862-529 or email: enquiry@vocarelaw.com.au

This article was written by Paul Neville, Senior Associate.

**The information contained herein does not, and is not intended to, constitute legal advice and is for general informational purposes only. 

Footnotes

[1] ATO guidance available here: https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/getting-started/in-detail/types-of-dgrs/l-z/school-building-funds (accessed 10 October 2024).

[2] ATO guidance available here: https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/getting-started/in-detail/types-of-dgrs/l-z/scholarship-funds (accessed 10 October 2024).

[3] ATO guidance accessible here: https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/getting-started/in-detail/types-of-dgrs/l-z/public-libraries-public-museums-and-public-art-galleries (accessed 10 October 2024).

[4] ATO guidance available here:https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/getting-started/in-detail/types-of-dgrs/l-z/necessitous-circumstances-fund (accessed 10 October 2024).

[5] ATO TR 2013/2 Income Tax: school or college building funds accessible here: https://www.ato.gov.au/law/view/document?DocID=TXR/TR20132/NAT/ATO/00001&PiT=99991231235958 (accessed 10 October 2024).

[6] ATO Guidance available here: https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/getting-started/in-detail/types-of-dgrs/l-z/public-ancillary-funds (accessed 10 October 2024).

[7] Note, however, that there is a mandatory annual minimum distribution required for public ancillary funds.

On 14 June 2024, the Respect at Work and Other Matters Amendment Bill 2024 (the Bill) was introduced into the Queensland Parliament. Among other sweeping changes, the Bill, seeks to amend the Anti-Discrimination Act 1991 (Qld) (the Act) to:

1. introduce a positive duty to eliminate all forms of unlawful discrimination, vilification and other associated objectionable conduct as far as possible;
2. empower the Commission to conduct investigations in respect of this; and
3. update and expand the attributes protected by the Act.

The proposed amendments represent the Queensland government’s initial legislative response to key recommendations of the Queensland Human Rights Commission (QHRC) in its report, Building Belonging – Review of Queensland’s Anti-Discrimination Act 1991.

There is some suggestion that the further recommendations of the Building Belonging Report will be pursued after the October State Election.

In this article we summarise the most pertinent amendments for educational institutions.

The Bill

Positive Duty

The Bill introduces a broad positive duty on certain persons to eliminate, as far as possible, discrimination, sexual harassment, harassment on the basis of sex and certain other objectionable conduct.

The positive duty will apply to all persons—including individuals, corporations and the state—who have an obligation not to engage in discrimination, sexual harassment, harassment on the basis of sex and other unlawful conduct.

However, with respect to individuals, it will only apply in the context of an individual conducting a business or undertaking, a concept which is presently used in work health and safety laws.

In practical terms, the positive duty will mean that, rather than merely waiting for complaints to be made, duty holders will be required to take proactive steps to prevent conduct that would be discrimination, sexual harassment, harassment on the basis of sex or other objectionable conduct in the first place.

What does this look like for educational institutions?

1. ensuring there are organisational policies in place that address the importance of respectful behaviour in the workplace;
2. ensuring easily accessible information is available;
3. conducting workplace surveys to measure knowledge and awareness of unlawful conduct like discrimination or sexual harassment and the extent to which such conduct may have been experienced by members of the workforce;
4. engaging in informal or formal disciplinary discussions with members of the organisation who are displaying conduct that may be disrespectful and unlawful under the AD Act; and
5. members of the senior leadership team clearly and regularly articulating expectations of respectful behaviour.

In determining what measures are reasonable and proportionate in the circumstances, the Act prescribes the following factors that must be considered:

• the size, nature and circumstances of the business operations;
• the resources of the person, whether financial or otherwise;
• the practicability and the cost of the measure;
• the person’s operational priorities; and
• any other relevant matter.

Accordingly, the extent to which the positive duty is imposed will differ significantly between a Prep to 12 school of 1500 pupils situated in an affluent area, and a small primary school comprised predominately of students from low socioeconomic households.

Compliance and Enforcement

The Bill also introduces new compliance and enforcement functions for the Queensland Human Rights Commission to allow the positive duty to be enforced.

The Bill amends the Act to allow the Commissioner to conduct investigations into person’s compliance with the positive duty if the commissioner suspects that the person is not complying with this duty.

After conducting an investigation, the Commissioner may:

1. decide to take no further action;
2. issue a compliance notice; or
3. help a person prepare and/or accept an undertaking.

Expanding on this final point, where an investigation reveals the person has contravened, is contravening or is likely to contravene the positive duty, the commissioner may enter into a written undertaking with the person that details the actions the person will take to comply with the duty.

If the non-compliance continues, the Commissioner may withdraw acceptance of the undertaking and issue a compliance notice, which requires the person to take specified actions to comply with their obligations.

Failure to comply with a compliance notice may result in the commissioner applying to the Queensland Civil and Administrative Tribunal or the Queensland Industrial Relations Commission for an appropriate order to enforce that compliance.

Review of Compliance Notice

A person who is served with a compliance notice by the Commissioner may apply to the Tribunal (QCAT) or Queensland Industrial Relations Commission for a review of the issuing of the compliance notice or any of the terms of the notice:

• within 28 days after receiving the notice; and
• as provided under the relevant tribunal Act and/or Industrial Relations Act 2016.

After a review, the Tribunal or QIRC may either confirm the compliance notice or withdraw the compliance notice. In situations where the compliance notice is confirmed, the Tribunal or QIRC will consider whether the time for compliance should be amended.

Expanding Protected Attributes

Finally, the Bill includes amendments to introduce new attributes on the basis of which discrimination is prohibited and updates some of the existing attributes. With respect to the latter, the attribute ‘sexuality’ has been updated to ‘sexual orientation’, which is defined as:

[a] person’s capacity, or lack of capacity, for emotional, affectional and sexual attraction to, or intimate or sexual relations with, persons of a different gender or the same gender or more than one gender.

What’s Next?

Interested parties have until 2 July 2024 to make a submission to the parliamentary committee, which will table its report on 2 August 2024.  It is anticipated that the Bill will progress through parliament before the October election.

This article was written by Jonas Whincop, Courtney Linton & Alistair Macpherson.

When can notice terms in School Enrolment Contracts be unenforceable?

Simply because a parent has signed a school enrolment contract does not mean the terms of the contract are always enforceable upon that person. Schools must take care to ensure that the terms of their enrolment contracts are reasonable, and do not breach the Australian Consumer Law consumer protections.

The ACAT case of Brindabella Christian Education v Respondent XD 561 of 2021 (Civil Dispute) [2022] ACAT 37 (5 May 2022) exhibits this principle in action – where specific terms in a school’s enrolment contract were deemed unfair and unenforceable against the student’s parents, despite the parents having read and signed the enrolment contract.

Facts

The parents (Respondents) of a child signed an enrolment contract with Brindabella Christian Education (“the School”) for the provision of educational services and schooling. The enrolment contract relevantly stated ( “the notice term”): (emphasis added)

One full College term’s notice in writing to the Principal is required for the intended withdrawal of the child, otherwise a full term’s fees will be charged. The written notice must be received at the College by the first day of term. Any notice received after the first day of term will render parents/carers liable for the fees for that term and the subsequent term in lieu of notice.

In 2019, the parents withdrew their child from the School without providing the required written notice. Instead, they claimed they had informed the teachers of their intention to withdraw at the end of year meeting, filled out an online withdrawal form, and emailed the administration and enrolments department of the School.

The School pursued the parents for one full term’s worth of fees relying on the notice term to ground the action. The parents claimed the notice term was unfair under the Australian Consumer Law’s (“ACL”) consumer protections, and sought to have the Tribunal declare the term as being void and unenforceable against the parents.

Issue

The Tribunal considered:

1. Whether the parents had admitted to partial liability in the amount of $1,900.00 during the course of the proceedings; and
2. Whether the notice term in the enrolment contract was void and unenforceable against the parents in accordance with s 23(1) of the ACL;

Unfairness

In assessing unfairness, the Tribunal considered the elements of ACL s 23(1):

• Whether the contract was a “consumer contract”;
• Whether the contract was in “standard form”; and
• Whether the term was “unfair”.

Consumer Contract

ACL consumer protections only applied to standard form contracts. These are “a contract for the supply of goods or services…[1] to an individual whose acquisition of the goods [or] services… is wholly or predominantly for personal, domestic or household use or consumption.”[2] Relevantly, “services” was defined in the ACL as “any rights,…benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce…”[3]

Although the School claimed that whether the ‘provision of educational services’ could be considered as occurring ‘in trade or commerce’ for the purposes of the ACL was unsettled law, the Tribunal drew its conclusion from decisions in Hearn v O’Rourke and Wright v Christ College Trust. As the conduct occurred in circumstances that had a trading or commercial character,[4] and recent decisions recognized that providing education in exchange for fees was itself of a commercial nature,[5] the contract occurred in trade and commerce, was for services, and was therefore a consumer contract.

The Tribunal rejected the School’s alternative argument that since the parents were not the ones using the educational services (which were for the benefit of their children), the parents were not entitled to ACL protection. If that argument was allowed, anyone who acquired services for their kids would not be entitled to the consumer protections, which was not the ACL’s intent.

Standard Form

A contract must be a standard form contract within the meaning of ACL s 27 to attract consumer protections. Whilst no party made formal submissions on this point, the Tribunal inferred it was standard form by the parents’ reference to the contract as “stock standard” and that the parents had no chances to negotiate the contract’s terms.

The Tribunal also considered mandatory considerations under ACL s 27(2), finding the parents would not have had a say in the contractual terms[6] and that the contract was offered to the parents on a take-it-or-leave-it basis.

Unfairness

To be “unfair”, the notice term:[7]

• Would need to cause significant imbalance in the parties’ rights and obligations arising under the contract;
• Would not be reasonably necessary to protect the legitimate interests of the School (who was advantaged by the term); and
• Would cause the parents detriment if the School was permitted to rely upon the term.

The Tribunal considered various factors under ACL ss 24(2) – 24(4).

Significant Imbalance?

The Tribunal found that a number of terms in relation to the enrolment policy, curriculum, acceptance of the Fee Schedule, and the notice term evidenced significant imbalance to the parties’ rights in the School’s favour. The School could unilaterally vary contractual terms and change the upfront price payable under the contract without providing the parents’ complimentary termination rights without incurring financial loss (a term expressly considered as unfair ACL s 25),[8] and the contract did not state this clearly. The Tribunal also found the contract was not sufficiently clear as to its intentions to remain as an ongoing contract. Whether the parents should have eventually deduced the contract was an ongoing one, or whether the parents’ decision to withdraw stemmed from the School varying the enrolment contract, was irrelevant as fairness and transparency is assessed at the time of contract formation.

Reasonably Necessary to Protect Legitimate Interests?

The School was required to prove the notice term was reasonably necessary to protect its legitimate interests. If the notice term was not a genuine pre-estimate the loss the school would suffer from unexpected student withdrawal, it would be considered a penalty and therefore enforceable.

The School tried to rationalize the full-term fee by outlining that the school budgeted all classes and set teacher numbers and class alignments in Term 4, and there was potential inability for the school to find a replacement student without incurring financial burden for the leaving student.

However, the Tribunal stated that, in the context of the notice term’s operation within the contract as a whole, the notice term had to be both “reasonable” and “necessary”. The term allowed the school to unilaterally vary contractual terms without allowing the parents the ability to terminate, and therefore this term was not reasonable or necessary to protect the School’s interests. Further, the Tribunal indicated that these rights could be better balanced and the School validly protected from unexpected financial loss if the contract required the School to let parents know in advance of any proposed contractual amendments and the parents to notify the School by a particular date in term 4 whether the child would return the following year. The School could not sufficiently show that the notice term was reasonable.

Detriment Suffered

The “Detriment” criterion of the claim was easily applied, as the parents would suffer loss in the form of paying school fees if the School was allowed to rely on the notice term.

Conclusion and Takeaway

The Tribunal found the notice term satisfied the elements of ACL s 24(1) and was an unfair term that could not be enforced against the parents. Therefore, the Application by the School was dismissed.

This case shows the importance for schools to ensure the terms of their enrolment contracts are fair and therefore enforceable, or they risk incurring unexpected, and potentially unrecoverable, financial liability.

Would you like a School Enrolment Contract review?

We offer a fixed fee for school enrolment contract reviews. Call our office today on (07) 3252 0011 and speak with our education team to find out more.

This article was written by Jackson Litzow & Jessica Lipsett.

Footnotes

[1] ACL s 23(3)(a)

[2] ACL s 23(3).

[3] ACL s 2(1).

[4] Hearn v O’Rourke

[5] Wright v Christ College Trust

[6] ACL s 27(2)(d).

[7] ACL s 24(1).

[8] ACL ss 25(d), (f).