Bill d’Apice
1 January 2011

Regulation of Public  Ancillary Funds

Bill d’Apice


Tel: 02 9233 9013

Mob : 0411 825 814



Charities and Not-For-Profits


Corporate and Commercial

Pro Bono and Corporate Social Responsibility

In late 2010 the Assistant Treasurer and Minister for Financial Services and Superannuation, the Honourable Bill Shorten MP, released a discussion paper on proposed new regulatory arrangements for public ancillary funds.  The Minister indicated that proposed changes “will improve the accountability of those funds and give Australians more certainty that their donations are being used wisely“.

The essence of the proposal is that guidelines similar to those which are currently in use in respect of private ancillary funds will apply to public ancillary funds.  There are other changes that have been mooted in the discussion paper.

A public ancillary fund is an ancillary fund to which the public can make tax deductible donations, for the purpose of disbursing funds to a range of non-ancillary or ‘active’ deductible gift recipients.  Many large charitable institutions which operate a number of deductible gift recipient funds commonly establish a single public ancillary fund for the purpose of attracting donations from the community and then distribute those donations between the various deductible gift recipients within the organisation’s structure.

Some of the issues which are being considered by the Government to ‘improve the integrity of public ancillary funds’ include:

  • The class of entities that funds may donate to;
  • The permitted investment strategies of the fund
  • Audit requirements;
  • Governance issues, for example the inclusion of a power in the Commissioner to remove or appoint trustees;
  • The requirement that trustees be corporate trustees;
  • The introduction of administrative penalties for breaches of the proposed guidelines (rather than the ‘all or nothing’ penalty system – i.e. loss of endorsement – currently applying to public ancillary funds);
  • Restrictions on the accumulation of income with minimum distribution requirements.  These are likely to require a higher distribution than the 5% of market value rule which applies to private ancillary funds;
  • The requirement to lodge an annual ‘income tax return’;
  • The requirement for an investment strategy.

It is expected that any new guidelines will apply with effect from 1 July 2011.

The proposals, if accepted, may have profound implications for existing public ancillary funds. 

Whilst the catch cries of ‘greater public disclosure’ and ‘transparency’ have been employed by the Government in promoting the proposed guidelines, it is important that information about the activities of public ancillary funds and particularly the identity of donors remain confidential.

There is no evidence in the discussion paper that the community has developed a lack of confidence about the activities of public ancillary funds nor that there are significant breaches of the current rules by trustees of public ancillary funds. Hopefully, the Government will give due consideration to the additional administrative burden that would be placed on the trustees of public ancillary funds in determining what guidelines it issues for their activities.

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