Prescribed private fund exposure draft released
Increased role for the ATO as private businesses affectedDOWNLOAD
The Assistant Treasurer has released an exposure draft of legislation that gives effect to the Government's 2008 Budget commitment to improve the integrity of prescribed private funds (PPFs). A PPF is a trust to which businesses, families and individuals can make tax deductible donations.
Craig Holland, tax partner at Deloitte Private, says that the exposure draft (ED), which proposes that the Treasurer have the ability to make legally enforceable guidelines for PPFs, is a significant change given that the existing guidelines are unlegislated and have no legal status.
“The ED also proposes to increase the Australian Taxation Office's regulatory power over PPFs which will result in PPF’s being subject to greater review. Most PPFs already have a corporate trustee but those that do not have a single corporate trustee will have until 1 July 2011 to comply.”
The ED does not address the minimum distribution requirement (as mentioned in the November 2008 discussion paper) other than to state that these will be considered by the Government before the new guidelines are released.
According to Mr Holland, the issue of minimum distribution is one of the most fundamental aspects concerning PPFs. “The Government needs to consider the minimum distribution matter very carefully so as not to discourage the creation of new PPFs or significantly impact existing PPFs,” added Mr Holland.
Another proposed change is the introduction of an administrative penalty regime should the PPF fail to comply with the guidelines. In addition the Commissioner of Taxation will also be given the power to suspend or remove trustees that continually breach the guidelines.
“In the case of administrative penalties the trustee and the directors are joint and severally liable to any penalty. People who become directors of the trustee company will need to be aware of their obligations as a director which will include an understanding of PPFs and the guidelines,” concluded Mr Holland.