Philanthropy Australia's Submission on Review of PPFs
5 February 2009 at 2:03 pm
Philanthropy Australia has called for the minimum distribution rate of Prescribed Private Funds (PPFs) to be set at 5% in its submission to a Federal Government review of PPF regulations.
The Federal Government released a discussion paper in 2008 to provide a point of reference for public submissions on the Government’s 2008 Budget commitment to improve the integrity of Prescribed Private Funds (PPFs).
The Treasurer announced in the Budget that the Government will legislate guidelines to improve the integrity of PPFs and to provide the trustees of PPFs with greater certainty as to their philanthropic obligations.
Philanthropy Australia considers a mandatory minimum distribution rate, if properly set, has a substantial advantage in reducing the administrative complexity which currently exists around accumulation plans, target sizes and methods of calculating expected distribution levels.
It says while a rate of approximately 15% has been the historical average distribution rate to date the PPF list includes a considerable number of “pass-through” foundation which grant 100% of their capital each year, particularly corporate PPFs which generate their income from workplace giving schemes.
PPFs would be required to value their assets at 30 June every year and distribute a minimum 5% of total assets within the next financial year.
Philanthropy Australia says while this is a mandatory minimum, it would expect many PPFs to continue to give at much higher rates. It would be administratively inefficient and dilute level of potential funds flowing to the community sector for the solution to existing accumulation plan issues to be the establishment of a second PPF.
PA says the consequences of a mandatory distribution rate higher than 5% will be a fundamental disincentive for the creation of PPFs. Philanthropists will be disinclined to establish a foundation which will ultimately lose its real value and its potential as a force for good. A major incentive for the establishment of PPFs is the opportunity for family engagement and for instilling philanthropic values in younger generations; with a PPF which weakens with time this opportunity is lost.
Since their inception PPFs have received donations of over $1.3 billion, and made distributions of over $300 million.
Philanthropy Australia concludes it submission saying it is willing to work with Treasury and the Australian Taxation Office to ensure not only an increase in private investment for long term community benefit, but to ensure transparency, efficiency, and flexibility, to ensure the maximum long term benefits flow to the community.
However, it says any new regulatory framework must be consistent with a viable and vibrant philanthropic sector, which implies any new regulations allow as a minimum the maintenance of the real value of foundations and provide appropriate transition mechanisms.
Philanthropy Australia’s submission can be found at: http://www.philanthropy.org.au/pdfs/advocacy/PA_PPF_Submission.pdf
