• Philanthropy

    Private groups often choose to give back to the community through philanthropic ventures. You can either set up an entity specifically for this purpose or donate directly to established organisations.

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    Private ancillary funds

    When establishing a private ancillary fund, ensure that it's set up correctly under both trust and tax law. In addition, state laws may apply to your fund.

    Under tax law, ancillary funds must meet the legislative requirements and comply with the private ancillary fund guidelines. The trust deed must include certain governing rules and clauses. A model deed is available to ensure all the necessary terms are covered.

    In managing issues relating to private ancillary funds, ensure that:

    • the trustee has complied with the regulatory requirements set out in the current Private Ancillary Fund Guidelines
    • policies are in place to show that the trustee has developed and maintained a current investment strategy, and considered and managed perceived or actual material conflicts of interest in holding particular investments
    • documentary evidence shows that all financial dealings with the founder or an associated entity are made by way of an arm’s length commercial transaction
    • the trustee ensures that the donor or its associates are not provided with any benefit, other than what is allowed by the Private Ancillary Fund Guidelines
    • the trustee ensures that distributions are made only to deductible gift recipients, financial statements are audited, and the fund lodges its ancillary fund return by the due date.

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    Charities

    A registered charity must be endorsed by the ATO as a tax concession charity (TCC) to access the following tax concessions: income tax exemption, GST charity concessions, fringe benefit tax (FBT) rebate and FBT exemption.

    Charities are also subject to the rules administered by the Australian Charities and Not-for-profits Commission (ACNC) in order to maintain their entitlement to endorsement as a TCC.

    If your organisation is no longer entitled to endorsement, you must notify us. In managing risks relating to endorsement, we suggest reviewing your entitlement regularly. Regular self-reviews form part of a good tax governance model.

    The law doesn't specify the time between self-reviews, but we recommend a yearly review. You should also self-review whenever there is a change in your organisation’s structure or operations.

    Factors that can affect an organisation’s entitlement include changes to its purpose and operations, physical presence in Australia, loss of endorsement as a deductible gift recipient (DGR), and where you incur expenditure.

    You should maintain records to show that a self-review has been undertaken.

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    Gifts

    To be tax deductible, a gift must be made to an organisation that is endorsed by the ATO as a deductible gift recipient (DGR).

    To manage issues around gifts, consider including the following in your tax governance processes:

    • before making a gift or donation, check the DGR endorsement status of the organisation at www.abr.gov.au
    • ensure that you meet any special conditions that apply to the type of gift you are making
    • keep details of the tax-deductible gift including its value and who it was given to (including their ABN)
    • if the gift is made to a related party, keep documentation showing that no material benefit or advantage came back to the giver.

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    Last modified: 31 May 2016QC 49150