Following forecasts of a marked decrease in community charitable giving as a consequence of the economic downturn caused by the COVID-19 crisis[1], yesterday the Hon. Zed Seselja Assistant Minister for Charities announced that the Government will be amending the ministerial guidelines to incentivise ancillary funds to increase their distributions in the short term to ensure charities continue to have access to capital whilst individual donations slow.

Currently, public ancillary funds are required to distribute at least 4% of the value of their funds annually, while private ancillary funds are required to distribute at least 5%.

The Government will amend the ministerial guidelines to provide a credit for ancillary funds that make total distributions in the 2019-20 and 2021-21 financial years that are at least four percentage points above these minimum required distributions.  The credit will be equal to half the percentage points by which the distributions exceed the minimum distribution.  Ancillary funds may then use these credits in the future to reduce the minimum distribution by up to one percentage point in the 2021-22 financial year and future financial years until the credit is exhausted.

Whilst Government’s action is expressed to be intended to ensure “charities are supported in the work they do”[2], it cuts across the position of some ancillary funds who have been hoping for a decrease in the annual minimum distribution due to their suffering significant losses to the value of their total funds as a consequence of the COVID-19 effects on the ASX.

It is likely however that the move will be welcomed broadly by charities in need of cash resources, as noted by Sarah Davies, CEO of Philanthropy Australia, who is quoted in the media release as saying “Philanthropy Australia welcomes this announcement from the Australian Government, which will encourage ancillary funds to increase their granting during this time of immense need.”

[1] The Government cites a recent report by JBWere in the media release.

[2] As quoted in the media release.

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