If your Public Ancillary Fund has not already received a letter from the ATO requesting that it furnish a Public Ancillary Fund Return ("PAF Return") for the year ended 30 June 2012 it will receive one shortly.
Refer to this page on the ATO's website.
The preparation of this PAF Return should be undertaken with caution, as the ATO will use the information in this PAF Return to assess the Public Ancillary Fund's compliance with its obligations. The ATO may impose penalties and in certain situations the Public Ancillary Fund may even lose its deductible gift recipient and income tax exempt status if it's responses are not satisfactory.
By way of background. From 1 January 2012, according to section 426-103 in Schedule 1 to the TAA 1953, public ancillary funds have to comply with the 'public ancillary fund guidelines' formulated by the Minister, these can be found at the following link: http://www.comlaw.gov.au/Details/F2011L02758.
The guidelines require the public ancillary fund to:
- Make minimum distributions:
- distribute at least 4 per cent of the *market value of the fund's net assets (as at the end of the previous *financial year).
- distribute at least $8,800 (or the remainder of the fund if that is worth less than $8,800) during that *financial year if:
- the 4 per cent is less than $8,800; and
- any of the expenses of the fund in relation to that financial year are paid directly or indirectly from the fund's assets or income.
- No distribution is required during the *financial year in which the fund is established or during the next 4 financial years.
The penalty for a contravention of this guideline is 30 penalty units if the shortfall is greater than $1,000.
If the Commissioner requests the trustee to rectify a shortfall in the distribution for a *financial year, the trustee must comply with the request within 60 days. If the trustee does not the penalty is 10 per cent of the shortfall as at the end of the 60 days reduced by any penalty (but not below nil) under guideline 19.4.
- estimate the *market value of the fund's assets (other than land) at least annually
- keep, or cause to be kept, proper accounts in respect of all receipts and payments of the fund and all financial dealings connected with the fund, and retain those accounts for a period of at least 5 years after the completion of the transactions or acts to which they relate
- prepare financial statements showing the financial position of the fund at the end of each *financial year
- arrange for an auditor to audit the financial statements of the fund and the compliance by the fund with the Guidelines (unless the assets are less than $1m, in which case a review may be sufficient).
A number of Public Ancillary Funds have year ends other than 30 June and have never had a need to apply to the ATO for a substituted accounting period (as they have never fallen within the tax system previously). Therefore, we have provided some Q&As regarding substituted accounting periods below:
Questions: What does the Public Ancillary Fund do if it's accounting year end is 31 December and not 30 June?
Answer: Apply for a Substituted Accounting Period at least 28 days prior to the due date for lodgement of the return (which is generally 28 February 2013). Wait for the ATO's response before starting to complete the PAF Return as it will impact on the information required to be furnished.
Question: for 31 December balancers the ATO only allows the adoption of an early balance date (i.e. 31 December 2012 is required to be an early balancing entity for 30 June 2013 Form). Therefore, this would ordinarily mean that the ATO would request 2 PAF Returns to be completed one for the year ended 30 June 2012 and another for the 6 months ended 31 December 2012. Will the ATO provide some transitional relief to ensure one PAF Return is required for the period from 1 January 2012 to 31 December 2012?
Answer: The ATO's application for SAP form was not designed to cover people entering the system for the first time. However, we have requested the ATO provide this transitional relief due to the exceptional circumstances. The ATO have advised that they will consider this and let us know in due course.
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