Prescribed Private Funds

1
Prescribed Private Funds

• A deductible gift recipient ( DGR) which can be
  set up by private individuals, families or
  businesses

2
Introduction

• ATOs experience of the first 2 years of the PPF
  measure
• Presenter Greg Besomo
• Non Profit Centre Australian Taxation Office
  Canberra phone number
  [phone]

3
Topics of Discussion

• PPF applications what happens
• Number of PPFs approved
• Statistics
• Some issues

4
PPF applicationswhat happens ?

• PPFs approved by Government
• applications to ATO in 1st instance
• ATO submits applications to Government via
  Treasury
• Approval by the Minister responsible for taxation
  matters
• Minister for Revenue Assistant Treasurer
• Senator the Hon Helen Coonan

5
PPFs approved

• 30 June 2001
• PPFs approved 22 (all in
  last 10 days of June)
• 30 June 2002
• PPFs approved 81
• 30 June 2003
• PPFs approved 131

6
2001 - 22 PPFs

• donations received 78.6 M
• Distribution to DGRs nil
• Net income n/a
• closing balance 78.6 M

7
2002 - 81 PPFs

• donations received 52.5 M
• distribution to DGRs 7.3 M
• net income 5.2 M
• closing balance 129 .0 M

8
2003 -131 PPFs

• details not available
• information returns due 29 February 2004
• a leap year !

9
What does this mean?

• After two years
• net worth of PPFs is 129 M an impressive
  amount !
• Distributions to DGRs in 2001/2002 - 7.3 M
• based on net worth
  - not so impressive
• Why ? limited distributions allowed during
  accumulation phase

10
Responsible Person

• Must be independent of founder and/or major
  donors
• Cant be an associate or employee of founder or
  major donor
• A lot of responsibility must be able to advise
  and influence other trustees on the integrity of
  the fund
• Must not be subservient to the wishes of founders
  or major donors

11
Accumulation Plan

• After the Trust Deed- the most important document
  of a PPF
• Set down what the PPF wants to do including
  projections over at least 2 years
• It can be and should be revised on regular basis
• Government has been very amenable in allowing
  ATO to approve changes
• Very flexible but must advise ATO of changes

12
Fiduciary obligations

• Purpose of the trust
• Review investments annually
• Risks associated with current investments
• Maintain real value of capital
• Likely income return
• Length of investments

13
Fiduciary obligations

• Liquidity marketability of investments
• Affect of inflation
• Costs of investments
• Commissions
• Fees
• charges