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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051443495982

Date of advice: 22 October 2018

Ruling

Subject: Payment of reasonable administrative costs for a public ancillary fund

Question and answer

Can the Foundation, a Deductible Gift Recipient subject to Item 2 in the table in subsection 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997), use the Foundation’s income and capital to pay reasonable costs of administration for the Foundation?

Yes

This ruling applies for the following period

1 July 2018 to 30 June 2023

The scheme commences on:

1 July 2018

Relevant facts and circumstances

Relevant legislative provisions

Section 30-15 of the Income Tax Assessment Act 1997

Section 50-1 of the Income Tax Assessment Act 1997

Section 50-105 of the Income Tax Assessment Act 1997

Subsection 78(4) of the Income Tax Assessment Act 1936

Subsection 78(5) of the Income Tax Assessment Act 1936

Section 426-102 of the Tax Administration Act 1953

Reasons for Decision

Summary

Reasonable costs of administering the Foundation for its purpose are costs ancillary to that purpose. Therefore, subject to Guideline 43 the trustee is able to pay such costs without contravening the Guidelines.

Detailed reasoning

Section 30-125 sets out the requirements for an entity to be entitled to endorsement as a Deductible Gift Recipient (DGR). One of the requirements is that the entity must be described in item 1, 2 or 4 of the table in section 30-15.

Item 2 in the table of section 30-15 sets out the requirements for private and public ancillary funds.

Item 2 states that the recipient of deductible gifts or contributions in this class is:

Under section 426-102 public ancillary funds must comply with the Public Ancillary Fund Guidelines 2011 (the Guidelines). Guideline 43 allows the trustee of a public ancillary fund to apply trust funds:

Further the note to Guideline 43 states:

Taxation Ruling TR 95/27 Income tax: Public funds (TR 95/27), describes how ancillary funds can meet their proper administrative costs in paragraphs 30 and 47. Although TR 95/27 refers to repealed provisions in subsections 78(4) and 78(5) of the Income Tax Assessment Act 1936 (ITAA 1936), the current provisions in Division 50 of the ITAA 1997 are similarly worded and TR 95/27 can still be applied.

Reasonable expenses paid by the Trustee for the Foundation from the Foundation’s income and capital to meet the Foundation’s purpose will not breach the Guidelines.


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