NESA Not-for-Profit Guidelines for NSW Schools

The NSW Education Standards Authority (NESA) has released the NSW Non-government Schools Not‑for‑Profit Guidelines – April 2026 (the guidelines), providing expanded clarity on how non‑government schools must operate to remain eligible for NSW Government funding. These guidelines sit under Part 7, Division 3 of the Education Act 1990 (NSW) and help assist schools to understand and meet their obligations under the Education Act and Education Regulation.

This guide follows the recent review of Section 83C of the Education Act 1990 by the NSW Government and subsequent changes made to the Education Regulations 2017 (NSW). See our article on the changes here: New Rules for NSW Non-Government Schools: Are You Fully Compliant? – Saward Dawson

What is Section 83C?

Section 83C of the Education Act 1990 (NSW) ensures that government funding goes to schools that operate for educational and are not for profit. Schools must demonstrate that:

• Income and assets are used to support educational purposes, and
• Any surplus is reinvested into the school or approved charitable purposes.

The guidelines help provide clarification on how schools apply Section 83C in everyday school operations, reducing uncertainty around common activities.

Key practical guidance outlined in the not-for-profit guidelines:

1. Examples of permitted activities and transactions

Activity	Example
Joint use of facilities	Enter joint-use arrangements with third parties to share facilities, provided benefits are proportionate to costs, Make payments toward future-use facilities they have an entitlement to use, Make school facilities available at no cost or below market value to community groups, councils, and not-for-profit organisations, Operate recognised education and care programs (such as long day care, out-of-school hours care, preschool program, playgroup and transition to school programs) using school assets and income, provided government funding is not used for these programs.
Donations and fundraising	Donate depreciated or redundant equipment to other schools, charities, or local councils, Fundraise for external charitable causes using school assets, provided this doesn’t disrupt school operations and school income is not donated.
National Redress Scheme	Payments made directly to the National Redress Scheme, Payments made directly to individuals whose redress applications have been approved.
Scholarships, prizes and awards	Scholarships, Academic, sporting, or cultural prizes, Other student‑related activities.

2. Payments that may breach Section 83C

Activity	Example
Payments Not Required for the Operation of the School	Payment for private benefit, Expenditure unrelated to school operations, Use of school assets by external parties without proper arrangements.
Payments Above Reasonable Market Value	Reasonable market value is defined as the price a knowledgeable and willing third party would pay in an arm’s length transaction. All payments above market value including asset purchases, rent, salaries etc. are treated as a potential compliance concern.
Payments That Are Otherwise Unreasonable	Payments that are otherwise unreasonable may be defined as: excessive for the school’s needs those that do not support the school’s educational purpose, non-arm’s length related party transactions.
Payments to Governing Body Members	Whilst reimbursements of expenses as well as salary for employment roles are permitted, other payments to your school governing body will raise concerns.

Our advice for school leaders

Compliance with Section 83C requires active governance, documented decision‑making, and disciplined financial management. Below is a practical guide for how school boards, executives and administrators can demonstrate compliance:

1. Document arrangements:
   Payments must directly support school operations, be at arm’s length, no more than market value and be supported by quotes, valuations or procurement records.
2. Ensure policies and registers are up to date:
   Especially where assets, facilities and fundraising are involved, it is important that arrangements are supported by current policies, clear documentation and up‑to‑date registers to demonstrate compliance with the not‑for‑profit requirements.
3. Train staff and leaders on their responsibilities:
   Ensure all relevant staff understand the requirements of Section 83C so they know when to escalate a transaction for review and how to apply the school’s policies in practice.
4.  Conduct Regular Internal Reviews and Seek External Advice when required:
   Compliance is not as simple as ‘set and forget.’ Policies, registers and arrangements must be monitored, updated and periodically reviewed to ensure they remain current and effective.

Final thoughts

Our experts work with Education Sector clients to interpret regulatory updates and embed compliant systems that support both operational agility and funding eligibility.

Keep an eye out for changes in other States too.