Category:Prescribed Private Funds

From PhilanthropyWiki

1 PPF Definition
2 Latest PPF Statistics
3 Advantages
4 Compliance requirements
5 Restrictions on grants
6 Activities and investments
7 Establishing a PPF

PPF Definition

A Prescribed Private Fund (PPF) is a legal structure which is often used by families, individuals or companies to establish grantmaking foundations. A PPF must only make grants and is not permitted to carry out charitable programs.

Prescribed Private Funds (PPF) are a relatively new category of private foundation - the first PPFs were approved in June 2001.

A PPF is subject to the same requirements applying to ancillary funds (sometimes known as public funds), with two exceptions:

A PPF is not required to seek donations from the public
A PPF does not need to be controlled by a committee of which a majority are considered Responsible Persons according to the ATO definition. A PPF can be controlled by a Responsible Person, by two persons at least one of whom is a Responsible Person, or by a body corporate whose board includes at least one Responsible Person.

PPFs cannot make grants to ancillary funds, other PPFs or political parties. The sole purpose of a PPF must be the giving away of funds to other deductible gift recipients; it cannot carry out other activities.

There are limits on the capital growth of a PPF. A PPF cannot accumulate capital indefinitely beyond the sum nominated in its accumulation plan; after reaching its target, it is limited to growing in line with CPI in order to maintain the real value of the capital. However, trustees can write to the Australian Taxation Office requesting a change to its accumulation plan to increase the target.

PPFs are a popular structure, as they allow individuals, families and companies to establish a private foundation which they can control and receive a tax deduction for. They are also relatively simple to establish and maintain, with guidelines and a model trust deed available for download from the non-profit section of the Australian Taxation Office's web site.

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Latest PPF Statistics

As of 1 July 2008, 769 Prescribed Private Funds have been approved or are awaiting formal notification of approval. List of current PPFs.

The latest PPF aggregate statistics are available from The Australian Centre for Philanthropy and Nonprofit Studies at QUT. CPNS Current Issues Sheet 2008/6 Prescribed Private Funds.

The following is a summary of key statistics:

$471.7M was donated to PPFs in the year ending 30 June 2007
The combined value of PPFs' assets was $1.2B at 30 June 2007. Given that 170 new PPFs have been formed since that date, it is probable that there is currently over $1.5B in PPF funds.
$117M was distributed to DGRs from PPFs in the year ending 30 June 2007; this is an increase of 58% over the previous year.

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Advantages

A PPF is an attractive structure to many people because it is a deductible gift recipient (DGR), meaning that the foundation can receive tax deductible gifts, and is also usually income tax exempt.
A PPF can be controlled by a particular family, business or group of individuals.
PPFs are relatively simple and inexpensive to establish, and trustees may manage their own investments if they wish.

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Compliance requirements

PPFs must comply with government requirements, which include the requirement that they lodge an annual information return for each financial year with the Australian Taxation Office.

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Restrictions on grants

PPFs may not make grants to:
- other PPFs
- ancillary funds (a common structure for community foundations and fundraising foundations)
- political parties
- Artbank
Most PPFs are also endorsed charities, and must therefore only make grants to other endorsed charities.
PPFs cannot make grants to individuals.

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Activities and investments

A PPF cannot operate a business; its sole purpose must be the giving away of funds to DGRs.
A PPF cannot carry out charitable programs, such as carrying out scientific research or providing counselling services.
A PPF can, however, carry out activities for the purpose of assessing appropriate activities and DGRs to receive gifts.
There are limits on the capital growth of PPFs. A PPF must lodge an accumulation plan, which must be approved by the Australian Taxation Office (ATO), and cannot accumulate capital indefinitely beyond the sum nominated in its accumulation plan; after reaching its target, it is limited to growing in line with CPI in order to maintain the real value of the capital. However, trustees can write to the ATO requesting a change to its accumulation plan to increase the target.

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Establishing a PPF

Guidelines for Prescribed Private Funds, including a model trust deed, can be downloaded from the Australian Taxation Office (ATO). Model Trust Deed and Guidelines
The ATO receives applications for approval, and after assessing them, will make recommendation to the Minister for Revenue and Assistant Treasurer, who makes the approval.
After receiving notice from the Minister that a PPF has been approved, the ATO will advise the applicant of that approval.
The Government is not authorised to approve PPFs that do not meet the statutory requirements.
If there are aspects of a proposed PPF which differ markedly from the model trust deed and example accumulation plans, enquiries should be made of the ATO to ascertain their view.

List of current PPFs (November 2006)