COVID-19 charity support
On 6 May 2020, the government announced here that they will incentivise charities to provide increased support in response to the COVID-19 situation, after studies revealed that the effects of COVID-19 had already seen a decrease in charitable giving, which was only likely to further decrease in 2021.
For public and private ancillary funds, the minimum percent of the market value of a fund’s net assets that must be distributed each year is:
for private ancillary funds - 5% and;
for public ancillary funds - 4%.
Those funds that make a distribution in this financial year or the next that exceeds the above thresholds will be provided with a credit equal to that excess distribution, which can then be applied to offset the minimum distributions that must be made from the 2021/22 financial year and beyond.
Additionally, the government declared that COVID-19 is a disaster, which means that charities seeking to provide relief for COVID-19 can better access eligibility as a disaster relief fund and endorsement as a deductible gift recipient.
As funds are impacted by dropping financial markets, it is unclear whether the credit measure will provide an effective incentive to distribute more than usual. However, funds interested in assisting should factor in this option in their financial models to assist in decision-making.
For further information please contact:
Alexander Gulli
Lawyer
T: 03 5226 8573
E: agulli@ha.legal
Paul Gray
Principal
T: 03 5225 5231
E: pgray@ha.legal