What is a Prescribed Private Fund?

A Prescribed Private Fund (PPF) is a flexible, tax-effective form of charitable trust used by individuals and families to manage wealth and long-term philanthropic giving. PPFs are a relatively new form of trust resulting from federal regulatory change in 2001. These changes were implemented to create an attractive vehicle for philanthropy that would support the not-for-profit sector.

PPFs enable the consolidation and growth of a ‘corpus’ of funds that keep on giving and sustaining the good work of organisations like Musica Viva Australia.

 

How do they work?

Once the Trust deeds of the PPF are established, the Trustee/s will outline a target capital base for the PPF and an ‘accumulation plan’ for reaching that target. Upon reaching the target capital base, the net income of the fund must be disbursed every year to organisations with Deductible Gift Recipient (DGR) status. The only exception regarding disbursement is for the retention of funds (in line with CPI) to preserve the ‘real’ value of the corpus.

 

Why are PPFs gaining momentum?

Since their inception in 2001, PPFs have undergone a rapid acceleratio as a favoured entity for wealth management and philanthropy because they are flexible and tax effective.


Flexible

Whilst PPFs must comply with many of the requirements of public charitable trusts, among other concessions, there is no onus on the Trustee/s to seek additional contributions from the wider public or other sources. Therefore, an individual or family can minimise the investment of time and costs that might have previously been incurred.


Tax-effective

  • PPFs enjoy Deductible Gift Recipient (DGR) status. This means that donations of cash or property to the PPF are fully tax-deductible
  • PPFs have Income Tax Exempt Charity (ITEC) status. This means that income accumulates in a tax-free environment
  • Trustees of the PPF may apply for a refund of franking credits
  • Testamentary Gifts (bequests) made to PPFs are exempt from Capital Gains Tax
     

The above, coupled with other Commonwealth, State and Territory tax and duty concessions, means that PPFs are an attractive vehicle for accumulating a capital base whilst building a philanthropic legacy.

 

Is this for me?

If you are a regular patron of Musica Viva and other organisations that are close to your heart, you may wish to consider establishing a PPF. Witha n initial capital gift, you would consolidate and grow a private capital base in a tax effective environment. The interest generated by the PPF will then continue to support these organisations (and any others you nominate) in perpetuity.

 

Further Information

Please contact Shalini Hartog or Ken Berry for further information or click here to download the Prescribed Private Funds brochure.