To establish a private ancillary fund (AF) with deductible gift recipient status, you need to:
- Create a trust that is a private ancillary fund (private AF)
- Obtain an Australian business number (ABN)
- Get endorsement as a deductible gift recipient (DGR).
You can use our model deed to establish an acceptable form of trust for private AFs. It must be edited according to your individual circumstances.
We may update the model deed from time to time. You must ensure you are using the current version available on our website at the time your trust is created.
To show the trust is a private AF, all of the following must apply:
- its deed complies with the requirements of item 2 of the table in section 30-15 of the Income Tax Assessment Act 1997
- each trustee of the trust is a constitutional corporation
- each trustee has agreed to comply with the rules in the private ancillary fund guidelines, and none of them have revoked that agreement.
- each of the trustees is a constitutional corporation.
To obtain an ABN you can apply:
- electronically through
- the Australian Business Register at abr.gov.auExternal Link
- the Australian Government business website business.gov.auExternal Link
- through a tax agent, who will lodge an application onlineExternal Link.
When completing the application for ABN registration:
- Question 1 – Type of entity: place X in the box for 'Discretionary trust – investment (includes charitable trusts)'.
- Question 16 – From what date does the entity require its ABN? The date should be the date of establishment of the trust.
If you are applying to have the private AF registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC), you can use the ACNC's registration application form to apply for endorsement as a DGR. The ACNC will send the DGR application information to us automatically for our consideration.
If you are already a registered charity, or are not required to apply to the ACNC, you can apply for endorsement of the private AF using the application for endorsement as a deductible gift recipient. You must provide all of the following:
- a completed private ancillary fund – schedule for deductible gift recipient applicants
- a copy of the executed deed of trust
- an agreement to comply with the private ancillary fund guidelines.
- Application for endorsement as a deductible gift recipient
- Private ancillary fund – schedule for deductible gift recipient applicants
- Agreement to comply with the private ancillary fund guidelines
The Taxation Administration (Private Ancillary Fund) Guidelines 2019External Link are available online. An explanatory statement is also available.
If a private ancillary fund is a financial institution for the purposes of the common reporting standard (CRS), it will need to report to us all of its reportable accounts (that is, accounts held or controlled by foreign residents).
To determine if an ancillary fund has obligations under the CRS see Not-for-profits and the common reporting standard.
Private AF guidelines 2019 section 27 allows a private AF to amend its governing rules to convert to a public ancillary fund with the agreement of the Commissioner of Taxation.
The transfer of all the property of a private AF to another AF can occur only in limited circumstances. Private AF guidelines 2019 section 28 allows a private AF, with the agreement of the Commissioner, to transfer its assets to another ancillary fund if certain requirements are satisfied.
Individuals with a degree of responsibility to the Australian community are generally known as 'responsible persons'. These people would generally include:
- school principals
- religious practitioners
- doctors and other professional persons
- town clerks
- members of parliament
- an individual before whom a statutory declaration may be made.
Private AF guidelines 2019 section 12 requires that at all times at least one of the individuals involved in the decision making of a private AF be an individual with a degree of responsibility to the Australian community as a whole. The individual cannot be a founder, a donor to the fund who has contributed more than $10,000, or an associate of a founder or such a donor.
Responsible person on board of trustees
If you are establishing a company to be the trustee, you need a responsible person on the board of the trustee company. The ATO does not have any special requirements for the other members of the board.
The only requirements for other directors are those under Corporations law. The Corporations Act 2001 details the circumstances under which an individual will be automatically disqualified from managing corporations.
These include where the person has:
- a conviction on indictment of an offence in relation to decisions that affect the business of a corporation or its financial standing
- an offence involving a contravention of the Corporations Act 2001 punishable by imprisonment for 12 months or more
- an offence involving dishonesty punishable by more than three months imprisonment
- conviction for an offence against the law of a foreign country punishable by more than 12 months imprisonment
- has been declared an undischarged bankrupt.
Private AF guidelines 2019 section 12(3) requires the responsible person to be 'an active director of the trustee'. This wording is used to emphasise the expectation that a responsible person will actively fulfil their role as a director recognising, for example the fiduciary duties involved with doing so, and the potential personal liability on the director. The responsible person should be able to provide evidence they have actively fulfilled their role as a director of the board.
The directors must, as a board, make decisions on matters of fundamental importance. This includes, but is not limited to, investments, distributions, and significant decisions concerning the market value of the fund's assets. The responsible person is expected to actively participate in those decisions. They are not expected to agree with each decision of the board.
The directors need not make every investment or distribution decision. The board may decide that investment strategies or distribution policies are to be implemented by a person who is not a member of the board, such as an appropriate third party or employee. The investment strategy or distribution policy should be sufficiently detailed to provide clear guidance to the third party or employee.
The directors may seek advice from, and may delegate administrative functions to, a person who is not a member of the board. For example, directors may seek advice from investment advisers on investment decisions and may delegate administrative matters or functions to an employee. The responsible person is expected to participate in almost all meetings of the directors and attend meetings at which decisions on matters of fundamental importance will be made. This includes, but is not limited to, investment strategy and distribution policy and significant decisions concerning the market value of the fund's assets.
The following requirements apply to trustees:
- If your private AF has a constitutional corporation as the trustee but the TAA says that each trustee must be a constitutional corporation, the private AF doesn't need another trustee. If the fund has only one trustee which is a constitutional corporation, the requirement that each trustee of the trust is a constitutional corporation has been met.
- Private AF guidelines 2019 section 13 requires the trustee to notify the Commissioner in the approved form of any change to the fund's governing rules. The approved form is at Notification of change to the governing rules of an endorsed private ancillary fund.
- If a former PPF has an individual as the only trustee and they are to be replaced, the replacement doesn't have to be a constitutional corporation. It is accepted that the replacement of the individual may be another individual.
- If a private AF has two or more corporate trustees, section 12 of the private AF guidelines 2019 doesn't require each trustee to have at least one responsible person on its board. If there is more than one corporate trustee, and they are required by the deed to make all decisions jointly, only one responsible person is needed.
- There is no public website for accessing the names of trustees and/or founders of private AFs, including private AF those that were formerly PPFs. The Australian Business Register (ABR) displays an entity's name, trading name and Australian business number (ABN).
- If you are the person who put in the original capital to set up a private AF, you can prescribe in your will that your estate be given to your private AF. You can make a gift in your will to a private AF. Gifts made under a will are not deductible, but gifts of property are exempt from capital gains tax if the DGR endorsement is effective before the death of the giver.
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