Latest developments in the Charities and Not For Profit sector
04 April 2022
04 April 2022
The Department of Treasury (Treasury) is canvassing the possibility of relaxing minimum distribution rates for public ancillary funds (PuAFs) and private ancillary funds (PAFs) in an effort to expand the scope of how ancillary funds support deductible gift recipients (DGRs) undertaking charitable work.
Currently PuAFs must distribute the greater amount of $8,800 or 4% of net assets to DGRs. Likewise, PAFs must distribute the greater of $11,000 or 5% of net assets.
The Commissioner has a discretion to reduce this rate and impose conditions on such a reduction.
Nonetheless, Treasury has identified that a blanket application of these rules would prevent ancillary funds accumulating enough cash to be able to contribute to capital intensive philanthropic projects.
Currently, both PAFs and PuAFs cannot distribute to entities that are not DGRs endorsed by the Australian Taxation Office.
Narrow exceptions apply to this general rule:
Treasury has identified that these restrictions largely prevent PAFs distributing to PuAFs, which may be better placed to support particular DGRs or have knowledge about making effective distributions in a philanthropic area. It also prevents a PAF that is being wound up from distributing to a PuAF.
Treasury is considering adding to the Commissioner's power to grant a lower distribution rate. The proposed addition is to allow the Commissioner to approve a lower minimum annual distribution rate for up to five years if the ancillary fund identifies a particular project for which it needs to accumulate funds. The Commissioner would need to consider:
Treasury is concerned that allowing the transfer of some assets between ancillary funds broadly does not reduce the amount given to DGRs. The proposed change is to allow ancillary funds to transfer some of their assets to another ancillary fund. However, it must first meet its minimum annual distribution rate.
Another proposed alternative would be to allow the transfer between ancillary funds to count towards the benefactor ancillary fund's minimum distribution rate. But the recipient ancillary fund would be required to transfer the amount received to DGRs within 12 months. This distribution would not count towards the recipient fund's minimum distribution rate.
You can make submissions on these changes and the questions posed in the Consultation Paper directly to Treasury by emailing charitiesconsultation@treasury.gov.au. Submissions are open until 6 May 2022.
Alternatively, Ashurst is drafting a submission on behalf of our clients. If you would like to be involved in our submission, please direct any comments on these changes to Geoff Mann at geoffrey.mann@ashurst.com by no later than 26 April 2022.
The Australian Charities and Not-for-profits Commission (ACNC) is seeking testers for two new e-learning courses for those involved in charity governance. The new courses cover how the ACNC helps charities and how to register a charity.
Testers will be asked to complete the courses and give feedback on the clarity of language and video content, ease of use, appropriateness of the images used, and the overall effectiveness of the learning experience.
To register for being a course tester, email Rachel.smith@acnc.gov.au with the following information:
The ACNC previously tested an e-learning course in 2021 and relied on industry feedback to improve the course. The ACNC has plans to develop a further nine courses.
Authors: Geoffrey Mann, Partner; Bronwyn Kirkwood, Counsel; and Charlie McMillan Summons, Graduate.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.