Income Tax Exempt Fund

From PhilanthropyWiki

Contents 1 Income Tax Exempt Fund Definition 1.1 Tax concessions 1.2 Characteristics of an ITEF 1.3 Funding and grantmaking 1.4 Sources

Income Tax Exempt Fund Definition

An Income Tax Exempt Fund (ITEF) is a non-charitable fund which has been endorsed by the Tax Office to access income tax exemption.

Tax concessions

If an ITEF is endorsed as income tax exempt, it will be entitled to a refund of franking credits on dividends it receives from 1 July 2005.

If an ITEF is endorsed as a DGR, it is entitled to access charity and gift deductible entity goods and services tax (GST) concessions.

Characteristics of an ITEF

To be an ITEF, a fund must have an Australian business number (ABN) and:

• not be a charitable fund
• be established and maintained under a will or instrument of trust solely for:
  • the purpose of providing money, property or benefits to deductible gift recipients (DGRs), or
  • the establishment of DGRs.
• not provide for, or establish, DGRs that are ancillary funds or prescribed private funds (PPFs)
• be applied for the purposes for which it is established
• distribute solely, and have at all times since 1 July 2005, distributed solely to income tax exempt funds that are DGRs, and
• apply to the Tax Office for endorsement as an income tax exempt fund.

Both Prescribed Private Funds and Public Funds can be endorsed as ITEFs.

Funding and grantmaking

• An ITEF must only distribute to DGRs that are income tax exempt entities, whether or not the DGRs are charitable.
• An ITEF cannot be used to establish or distribute to DGRs which are ancillary funds or PPFs.
• An ITEF may benefit DGRs that are charities and/or DGRs that are not charities (such as government organisations) provided that those DGRs are income tax exempt.

Sources

• ATO website, Is your fund an income tax exempt fund?, accessed 30/06/2008.