Minister for Financial Services & Superannuation
14 September 2010 - 1 July 2013
Changes to the Way Philanthropic Funds are Managed
A commonly used financial structure for philanthropic organisations – public ancillary funds – will be reformed to improve their governance and accountability, as part of the Gillard Government's on-going efforts to strengthen the not-for-profit sector.
Assistant Treasurer Bill Shorten today released for consultation an exposure draft of legislation and draft guidelines for a new regulatory framework for public ancillary funds.
The approximately 1,600 public ancillary funds in Australia solicit tax deductible donations from the public to distribute to deductible gift recipients (DGRs) and are a commonly used structure for community philanthropy.
"These reforms have been much anticipated by the sector and I am pleased to consult on changes that will bring the standards of accountability and governance of public ancillary funds in line with private ancillary funds," Mr Shorten said.
Under the reforms the Treasurer will have the power to make legislative guidelines to establish and maintain public ancillary funds. The changes also give the Commissioner of Taxation the power to impose administrative penalties on trustees who fail to comply with the guidelines and to remove or suspend trustees of non-complying funds. This function may later move to the new Australian Charities and not-for-profits Commission once it is up and running.
The Deputy Prime Minister's Special Adviser on Corporate Philanthropy and the Not-for-Profit Sector, Michael Danby MP, said "Philanthropy is an important part of Australia's culture – one the Gillard Government wants to encourage – so it is important for these reforms to improve accountability and trust in the sector."
"These reforms will encourage corporate philanthropy and community giving to our very deserving charities and not-for-profit organisations. They build on the Government's major reforms to the not-for-profit sector announced in the Budget," Mr Danby said.
The legislation also defers the previously announced start date of 1 July 2011 until 1 January 2012. Trustees of existing funds will be given a choice whether apply the minimum distribution requirements in the new guidelines immediately or wait until 1 July 2012.
"The Government has taken on board stakeholders' views as part of the initial consultation process and we've made some changes to the guidelines to take account of the differences with private ancillary funds," Mr Shorten said.
The guidelines will require funds to distribute four per cent of their net assets each year and will also allow new funds four years to build an appropriate level of funding before they are legally required to make a distribution.
"A minimum distribution rate of four per cent was set after looking closely at the average costs and returns of both private ancillary funds and public ancillary funds. The changes recognise the higher costs faced by many public ancillary funds," Mr Shorten said.
Consultation on the exposure draft closes on Monday 1 August 2011 and closes on Wednesday 31 August 2011 for the draft guidelines.
14 July 2011