The Federal Assistant Treasurer, Bill Shorten, has released new draft guidelines for Public Ancillary Funds (often known as PAFS and usually given the deductible gift recipient designation of DGR2). The Australian Tax Office describes Public Ancillary Funds as “public funds established and maintained under a will or instrument of trust solely for the purpose of providing money, property or benefits to DGRs or the establishment of DGRs.
An ancillary fund must be exclusively for these purposes. It must not carry on any other activities. It is like a conduit or temporary repository for channelling gifts to other DGRs. An ancillary fund must not provide for or establish other ancillary funds.”
A major change is the requirement to distribute funds based on assets, rather than income. The suggested figure will be 4% (or at least $11,0000 with qualifications) which is apparently a win for the sector – as previously Treasury had been discussing a larger percentage. At the moment the requirement is to distribute a minimum of 80% of income earned.
Another change is the requirement for all PAFS to have a corporate rather than individual trustees.
Interested parties are invited to make submissions to Treasury -see their “exposure draft“. Submissions are due by 1 August for comments on the Exposure Draft, and 30 August for comments on the draft guidelines. The Exposure Draft is the intended changes to the wording in the relevant legislation – which is the A New Tax System (Australian Business Number) Act 1999, the Income Tax Assessment Act 1997, and the Taxation Administration Act 1953.
Both Philanthropy Australia and the Australian Communities Foundation (previously known as the Melbourne Community Foundation) have been making representations to the Treasurer on behalf of the sector, and I understand that their views have been mostly taken into account for this new draft. The Treasurer has also allowed a delay in the compliance date – previously 1 July 2011 – now 1 Jan 2012 and with a four year period for new PAFs to build up their corpus before making a distribution.
How does this potential change affect your not for profit?
What do you think about these amendments which seem to bring Private and Public Ancillary funds more in line with each other?