EXPLAINER: Changes to the minimum distribution for Giving Funds 

What is changing? 

The name of Public and Private ‘Ancillary Funds’ is changing to ‘Giving Funds’. 

The minimum distribution for Public and Private Giving Funds will increase to 6 per cent per year. Currently, Public and Private Giving Funds are required to distribute 4 and 5 per cent of their net assets each year respectively as grants to eligible entities.  

Giving Funds will be allowed to ‘smooth’ their distributions over a three-year period, though the manner in which this will be implemented is not yet clear. 

When will the change take effect? 

The Government’s announcement proposes that the minimum distribution will take effect from the first financial year following the amendments to the relevant Giving Fund Guidelines. Unfortunately, this does not provide clarity as to when the increased minimum distribution will start to apply. 

How long will Giving Funds have to comply with the changes? 

From when the changes take effect, existing Giving Funds will have a transitional period of two years before having to meet the new minimum distribution rate. 

Will there be further consultation? 

There is usually public consultation on draft amendments to the Giving Fund Guidelines when such changes are made. 

Although the Government has made its decision in relation to the minimum distribution, this would provide another consultation opportunity regarding how the decision is implemented, including the practical aspects of how the new option of ‘smoothing distributions’ will work. 

Are there any exemptions? 

A Giving Fund can apply to the Australian Taxation Office (ATO) to have the minimum distribution reduced a particular year. The ATO has a wide discretion about whether such an application is granted.  

More information, including the factors taken into account by the ATO when considering applications, is available on the ATO website.