No.66 Australian Government announces Incentives for Philanthropic Funds to provide more support to donation recipients

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.