The Australian Government has announced an incentive for Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs) to provide more support to donation recipients during the COVID-19 pandemic period.
According to the Government’s media release on 6 May 2020, a recent report by JB Were estimates that COVID-19 may have impacted charitable giving, seeing donations decrease by 7.1% in 2020, and by a further 11.9% in 2021. This is at a time when demand for charitable services is increasing.
In response, the Government has announced a “credit” incentive. PAFs and PuAFs that make total distributions in 2019/20 and 2020/21 of at least four percentage points above the minimum required distribution, will be provided a credit. The credit – equal to half the percentage points by which the distributions exceed the minimum – may be used to reduce the minimum distribution by up to one percentage point in 2021-22 and future financial years until the credit is exhausted.
The minimum distribution required for PAFs is 5% of the net assets of the PAF (4% for PuAFs) or $11,000, whichever is higher.
As an example, a PAF makes an annual distribution of 6% prior to 30 June 2020 and then an annual distribution of 8% in the 2021 financial year. This is 4 percentage points above the minimum 10% (5% x 2 years) over the two financial years. The PAF would then be entitled to 2% percentage point credits. The PAF may then reduce the minimum annual distribution from 5% to 4% in the 2022 year and then again in the 2023 year.
If you have any questions about your eligibility, please contact your Blaze Acumen advisor.