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  • Minimum annual distribution requirements

    Each financial year, public ancillary funds must distribute at least 4% of the market value of their net assets (as at the end of the previous financial year). A newly established fund is not required to make a distribution in its first four years of operation.

    The fund must distribute at least $8,800 (or the remainder of the fund if that is worth less than $8,800) during that financial year, if both of the following applies:

    • the 4% is less than $8,800
    • any of the expenses of the fund in relation to that financial year are paid directly or indirectly from the fund's assets or income.

    A distribution includes the provision of money, property or benefits.

    Penalties may apply for not meeting the minimum annual distribution requirements, but funds can apply to reduce the minimum annual distribution rate.

    See also:

    How to confirm endorsement details

    Public AFs endorsed as DGRs should receive a notice of Endorsement as a deductible gift recipient stating:

    Endorsement as a deductible gift recipient under Subdivision 30-BA of the Income Tax Assessment Act 1997 is provided as detailed below.

    You can also confirm your endorsement details by visiting the ABR look for the term 'Item 2' in the 'Deductible gift recipient status' section of the 'Current details' screen.

    You should phone us on 1300 130 248 if any of the following apply:

    • you need to change your fund's contact details
    • the name of the fund on the notice or the ABR is incorrect
    • your fund is no longer entitled to endorsement
    • you cannot confirm your fund's DGR endorsement as explained above and you believe that your fund should be endorsed, including where      
      • your fund's notice of endorsement states 'Endorsement as a deductible gift recipient under Subdivision 30-BA of the Income Tax Assessment Act 1997 is provided for the operation of a fund, authority or institution'
    • the ABR indicates that your fund is covered by 'item 2', but your fund is listed as a fund, authority or institution operated by another entity.

    When you phone us, you will need to meet proof of identity requirements, including quoting your organisation's ABN.

    Once we confirm your fund's details, we will send you a replacement notice of endorsement if required. The 'Endorsement date of effect' on the replacement notice will show the date from which your fund was entitled to endorsement. The date will not be changed to 1 January 2012 as a result of the changes to public AF DGR category.

    Amended guidelines for COVID-19 response

    The guidelines have been amended to encourage increased distributions to deductible gift recipients (DGRs) as a result of the COVID-19 pandemic.

    Public ancillary funds that exceed their minimum annual distribution rate for the 2019–20 and 2020–21 financial years, by a total of five percentage points or more, will have a lower minimum annual distribution rate of 3% in future years.

    To determine if a public ancillary fund is eligible, they will need to work through the following steps:

    Step 1

    Add together the ancillary fund's annual distribution rate for the 2019–20 and 2020–21 financial years (rounding each year's rate to the nearest whole number).

    Step 2

    Reduce the combined rate from step 1 by 8% which is the minimum required annual distribution rate for the two years. The balance is the fund's credit amount.

    Step 3

    If the credit amount at step 2 is 5% or more, the fund is eligible for the reduced distribution rate at step 4.

    Step 4

    For every 2% of the fund's credit, their minimum annual distribution rate will reduce to 3% for one financial year. This applies from the 2021–22 financial year until the fund's credit is less than 2%. The fund can still choose to exceed the minimum annual distribution rate in those financial years.

    This means that eligible public ancillary funds will have a 3% minimum annual distribution rate for at least the 2021–22 and 2022–23 financial years.

    Example 1

    Public Giving Foundation, a public ancillary fund, decides to increase distributions to a number of DGRs providing community support during the COVID-19 pandemic.

    Public Giving Foundation makes an annual distribution of 7% (rounded) in 2019–20 and 6% in 2020–21. This is a total of 13% distributed over the two financial years.

    After reducing the amount by 8%, which is the usual required minimum annual distribution for the two years, they have a credit amount of 5%. They are therefore eligible for the reduced minimum annual distribution rate for 2 years.

    Public Giving Foundation will have a 3% minimum annual distribution rate for the:

    • 2021–22 financial year (reducing their credit to 3%)
    • 2022–23 financial year (reducing their credit to 1%).

    As the remaining unused credit is less than 2%, the reduced minimum distribution rate no longer applies. From the 2023–24 financial year their minimum annual distribution rate will return to 4%.

    End of example

     

    Example 2

    Community in Need Foundation, a public ancillary fund, increases their annual distributions to several DGRs supporting the community during the COVID-19 pandemic.

    Community in Need Foundation makes an annual distribution of 8% (rounded) in 2019–20 and 8% in 2020–21. This is a total of 16% distributed over the two financial years.

    After reducing the amount by 8%, which is the usual required minimum annual distribution for the two years, they have a credit amount of 8%. They are therefore eligible for the reduced minimum annual distribution rate for 4 years.

    Community in Need Foundation will have a 3% minimum annual distribution rate for the:

    • 2021–22 financial year (reducing their credit to 6%)
    • 2022–23 financial year (reducing their credit to 4%)
    • 2023–24 financial year (reducing their credit to 2%)
    • 2024–25 financial year (reducing their credit to nil).

    From the 2025–26 financial year their minimum annual distribution rate will return to 4%.

    End of example

    Closing your fund

    If you choose to wind up your fund, you will need to provide us with a final audit report which includes financial statements indicating a zero balance in the fund.

      Last modified: 23 Jul 2020QC 25252