2016 Annual Reporting for Public and Private Ancillary Funds

By Michael Hay - October 11, 2016

The Australian Charities and Not-for-profit Commission (ACNC) and the Australian Taxation Office (ATO) are working together to make reporting easier for both Public and Private Ancillary Funds (Ancillary Funds).

Continuing with their goal to minimise compliance costs, the regulatory bodies have announced that Ancillary Funds who are registered with the ACNC will no longer be required to report annually to the ATO.

The annual reporting requirements for the ACNC and ATO will be contained solely within the Annual Information Statement (AIS) lodged with the ACNC. A new section has been added to the AIS for 2016 which will enable the ACNC to collect relevant data for the benefit of the ATO.

Reporting Due Dates

In addition to the change in reporting requirements, the ACNC also announced a concessional lodgement date for Ancillary Funds to align with the existing ATO lodgement due date.  Ancillary Funds reporting either to the ATO, or to the ACNC, will have a lodgement due date of 28 February 2017 for the 2016 financial year. However, all other charities registered with the ACNC will be required to report to the ACNC within 6 months of their year-end (31 December 2016 for the financial year ended 30 June 2016).

Non-ACNC Registered Ancillary Funds

Ancillary Funds that are not endorsed as a charity with the ACNC will still have to complete an Ancillary Fund Return for the 2016 financial year.  The return is required to be lodged with the ATO by 28 February 2017.

Important Reporting Reminders

Each year Ancillary Funds have to ensure that they have complied with either the Public Ancillary Fund Guidelines 2011 or the Private Ancillary Fund Guidelines 2009 (Guidelines). These Guidelines provide for specific requirements which must be complied with to ensure that the Ancillary Funds maintain their Deductible Gift Recipient and tax exempt status.

Key Annual Guideline Requirements

Whilst it is important for Ancillary Funds to ensure they have complied with all relevant guidelines, the following are common mistakes we regularly encounter:

  • Ancillary Funds must make an annual minimum distribution (as a percentage of the prior year’s net assets market value):
    • Public Ancillary Funds must distribute at least 4% but not less than a minimum of $8,800 (outside the first 4 years of operation); and
    • Private Ancillary Funds must distribute at least 5% but not less than a minimum of $11,000 (outside the first year of operation)
  • Ancillary Funds must only distribute to Item 1 Deductible Gift Recipients
    • Ancillary funds cannot distribute to other Ancillary Funds; and
    • All recipients must be registered as Deductible Gift Recipients under Item 1 of the table in section 30-15 of the Income Tax Assessment Act 1997.
    • It is not uncommon for large charities to have multiple ABN’s with varying registration types. Ensuring that correct tax invoices have been received for distributions is imperative as this ensures that the distribution has been made to an eligible entity. 
  • The Trustee must implement an investment strategy and must ensure that all investment decisions are made in accordance with it.

For any questions regarding this or any other matters pertaining to charities and not-for-profit entities, please contact Michael Hay on 03 8610 5138 or Mark Harrison on 03 8610 5136.

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