Fees vs Donations GST & Income Tax

An exposure draft PUB00341 was recently issued by the IRD in relation to payments made by parents to private schools. Whilst this is still a discussion document the submissions are due by 26^th September.

The exposure draft in essence states the following:

Most payments that parents make to their children’s private schools are fees that are subject to GST, as these are generally made in return for the supply of education or related goods and services provided by the school.
Whilst most fees will be subject to a GST at standard rate of 15%, some schools in particular those offering boarding services will charge the lower rate for the supply of domestic goods.
Parents may be entitled to claim a donations tax credit, where the school is a Donee Organisation and where the parent makes a genuine donation (i.e. payment is made voluntarily to benefit the school with nothing expected to be received in return). Where a donation is made it is exempt from GST.

Where the school provides boarding services special rules apply for the purposes of GST.

Where a student stays in a boarding facility for 4 weeks or more a lower GST rate of 9% will be charged provided that the boarding fee is for the supply of domestic goods or services. This will include a boarding fee including power, internet, etc)
Supply of non-domestic goods and services such as laundry, meals or pastoral care are always subject to GST at 15%.

August 2022