Wills & Estates Law Update - new legislation on prescribed private funds & family provision

Private Charitable Giving - Important Changes to the Rules for Prescribed Private Funds One Step Closer

Proposed amendments to the rules for Prescribed Private Funds (PPFs) were announced in the May 2008 Federal Budget.  In late November 2008, the Treasury released a Discussion Paper titled "Improving the Integrity of Prescribed Private Funds" where it outlined proposed changes to the rules for PPFs and invited the public to comment on those proposed changes.  There were about 137 submissions received in response to the Discussion Paper.

On 14 May 2009 the Assistant Treasurer released an exposure draft of the legislation (but not the Guidelines) that gives effect to the Government's commitment to improve the integrity of PPFs.  The proposed changes are contained in the Tax Laws Amendment (Prescribed Private Funds) Bill 2009 (Bill).  Interested parties are encouraged to provide their comments on the Bill by 29 May 2009.  The changes proposed by the Bill are planned to have effect from 1 October 2009 (except for the requirement of a single corporate trustee as discussed below).

Tax Laws Amendment (Prescribed Private Funds) Bill 2009

The Bill proposes amendments to the A New System (Australian Business Number) Act 1999, the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953 to improve the integrity of PPFs.   The proposed amendments include:

• renaming PPFs as private ancillary funds;
• having the full administration of those funds come under the authority of the Commissioner of Taxation (Tax Commissioner);
• giving the Treasurer the power to make legislative Guidelines about the establishment and maintenance of private ancillary funds; and
• giving the Tax Commissioner the power to impose administrative penalties on trustees that fail to comply with the Guidelines and to remove or suspend trustees of non-complying funds.

It is proposed that existing PPFs will become private ancillary funds on 1 October 2009.  In order to overcome Constitutional limitations so that the Tax Commissioner is provided with the necessary regulatory powers to protect the charitable funds of PPFs, all PPFs (to be called private ancillary funds) will be required to have a single corporate trustee.  Existing PPFs that do not have a single corporate trustee will have until 1 July 2011 to alter their existing arrangements.

The proposed amendments to the A New System (Australian Business Number) Act 1999 will bring about changes to the Australian Business Register (ABR).  The ABR will be required to include a statement on the ABR indicating that the fund is a private ancillary fund.  This and other changes to the ABR will assist ancillary funds to determine which deductible gift recipients can receive donations from them.

The proposed amendments to the Income Tax Assessment Act 1997 include repealing the definition of PPF and including a definition of private ancillary fund by reference to the meaning given by proposed section 426-105 in proposed Schedule 1 to the Taxation Administration Act 1953.

The proposed amendments to the Taxation Administration Act 1953 include a definition of private ancillary fund, the provision for guidelines and the provision for administrative penalties.  Importantly, proposed section 426-107 will provide that the Minister (Treasurer) may, by legislative instrument, make guidelines (private ancillary fund guidelines) about the establishment and maintenance of private ancillary funds.

The Guidelines will contain important information about the establishment and operation of private ancillary funds including any required yearly minimum distributions as well as minimum size requirements for such funds.  As indicated in our Bartier Bulletin of February 2009, there will be further consultation on the proposed new Guidelines.  An exposure draft of the new Guidelines is expected to be released later this month.

Probate and Family Provision - New Court Rules and Forms

The Supreme Court Rules (Amendment No. 416) 2009 will amend the existing Supreme Court Rules from 1 June 2009.  The amended Rules will impact on probate applications and family provision claims.

From 1 June 2009, all applications for a grant of probate, letters of administration or a reseal will be required to include additional documents.  The required documents will include Uniform Civil Form 111 and two copies of Uniform Civil Form 112 (Form 112 is the proposed form of the grant of probate or administration or reseal).  If the application is in order and a grant can be made, the Court will post the sealed grant usually within five clear working days of receipt.  This new procedure should greatly reduce the present long delays in the grant document being received from the Court.

The Rules also amend Schedule J of the Supreme Court Rules to provide for some of the revised family provision procedures under the NSW Succession Act 2006.

Author: Gerard Basha