Non-Profit News Service No. 0349 - Public ancillary funds: legislation passed
On 29 November 2011, the Tax Laws Amendment (2011 Measures No. 7) Bill 2011 received royal assent.
Schedule 8 of the bill amends the income tax law to improve the integrity of public ancillary funds. These amendments include:
- renaming this type of ancillary fund as a public ancillary fund, which is the more commonly used name
- giving the Treasurer the power to make legislative guidelines about the establishment and maintenance of public ancillary funds
- giving the Commissioner of Taxation the power to
- impose administrative penalties on trustees that fail to comply with the guidelines
- remove or suspend trustees of non-complying funds.
We will issue further news service articles to advise of new publications we release, or existing publications we update, as a result of the amendments.
The following table provides a comparison of the key features of the new law and the current law.
However, these funds are renamed as public ancillary funds in the taxation laws.
To be a deductible gift recipient (DGR), a public ancillary fund must be endorsed by the Commissioner.
A public ancillary fund (a 'public fund') must meet the requirements in item 2 in the table in subsection 30-15(2) of the ITAA 1997. The public fund requirements are described in Taxation Ruling TR 95/27.
The Commissioner's decision is reviewable by the Administrative Appeals Tribunal and the courts.
The Treasurer will have the power to make binding guidelines about the establishment and maintenance of public ancillary funds.
The guidelines are a legislative instrument and are subject to review or disallowance by the parliament.
The guidelines are enforced through a tailored system of administrative penalties.
No equivalent. The ATO must revoke the DGR status of non-complying funds.
The Commissioner will have the power to suspend or remove the corporate trustees of public ancillary funds that consistently breach the guidelines or other relevant Australian laws.
For constitutional reasons, all of the trustees of public ancillary funds must be corporate trustees. This requirement will not apply where the trustee is the Public Trustee of a state or territory or where the trustee is prescribed by regulation.
Trustees of public ancillary funds can be either individuals or corporations.
Portability of funds between ancillary fund types will be permitted in limited circumstances to provide additional flexibility in the management of funds.
Ancillary funds are not able to transfer their assets to another ancillary fund.
The Australian Business Register (ABR) will identify if an entity is a public ancillary fund.
The ABR currently only identifies if an entity is a DGR and if it is an ancillary fund.
We previously advised of this measure in:
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