23 May 2014

Private schools' tax loophole exposed

7:21 pm on 23 May 2014

Inland Revenue has issued an alert over the growing number of parents of private school students making false tax claims for their school fees. Some of the schools are also under investigation.

Inland Revenue has said the fees as being re-characterisied as donations to charitable trusts, enabling parents or caregivers to falsely claim them back as donation tax credits.

It said less than 20 private schools and childcare centres were involved.

The department's group tax counsel, Graham Tubb, said it also meant schools were not paying GST on the fees. He described it as incorrect practice, rather than a tax rort.

"It's a little bit of a double-whammy isn't it. The Crown misses out on the GST on what would normally be the school fees and we pay a donation tax credit out to the parents."

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Mr Tubb would not name the schools involved, but said some parents could potentially claim back $20,000 in fees for each child.

He said it was hard to say whether tens of thousands or hundreds of thousands of dollars had been wrongly claimed.

Inland Revenue is treating the false tax claims as a misunderstanding and says it has no plans to prosecute.

The principal of Ficino School in Auckland, Peter Crompton, said he's surprised and says private schools make it clear that the payments are not donations.

Inland Revenue has set up an email address where people can repay overclaimed tax rebates: