Case Study - NFP - Tax Problem For The Old Collegians

Situation:

The alumni association of a private school was told by the Australian Taxation Office that it had to pay tax on money set aside for scholarships and other support of the school. The Tax Office said that the alumni association was more like a social club than a school support auxiliary. The Tax Office decision had the potential to severely deplete the ability to support the school and would affect structures for investment of reserves.

Response:

Moores Legal challenged the Australian Tax Office decision on the basis that alumni associations are not social clubs but genuinely exist to perform the educational role of the school by creating a network of ambassadors, donors and volunteers. Therefore alumni associations are for the advancement of education and should have the same tax benefits as the school itself.

Outcome:

The outcome was that the Tax Office was required to endorse the alumni association as a charity and grant tax exemption status. The alumni association was not only released from tax on its income but was able to claim a refund of franking credits from its share investments thus substantially increasing its capacity to support the school.