EXPLANATORY STATEMENT

Select Legislative Instrument 2010 No. 9

Income Tax Assessment Act 1997

Income Tax Assessment Amendment Regulations 2010 (No. 2)

Section 909-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the Governor‑General may make regulations prescribing matters that the ITAA 1997 requires or permits to be prescribed, or are necessary or convenient to prescribe for carrying out or giving effect to the ITAA 1997.

The Regulations remove redundant provisions from the Income Tax Assessment Regulations 1997 (the Principal Regulations) that define and list funds by name as ‘prescribed private funds’ (PPFs), which were a type of tax‑advantaged private philanthropic trust fund with the ability to collect tax deductible donations.

On 1 October 2009, reforms of the regulatory framework applying to private philanthropic trusts commenced. As part of those reforms, funds are now endorsed by the Commissioner of Taxation (the Commissioner), removing the need for prescription in the Principal Regulations.

Up to 1 October 2009, the Governor-General was responsible for prescribing trust funds as PPFs. The date a fund is prescribed was usually backdated to the day that a Treasury portfolio minister agreed to recommend prescription to the Governor‑General.

Funds prescribed as PPFs were able to collect tax deductible donations.

However, responsibility for the administration of PPFs has been moved to the Commissioner. From 1 October 2009, PPFs (now called private ancillary funds, or PAFs) are no longer prescribed in the Principal Regulations. Rather, the Commissioner is responsible for determining whether a trust fund is a PAF (according to a legislative definition) and determining whether that fund is entitled to be endorsed as a deductible gift recipient (DGR). This brings the treatment of PAFs into line with other organisations that qualify to be DGRs.

Tax Laws Amendment (2009 Measures No. 4) Act 2009 contained transitional provisions deeming existing PPFs to be PAFs.

As part of the regulatory reforms Treasury consulted with the organisations concerned, in conjunction with the Australian Taxation Office. Further consultation is not required as these Regulations are minor and machinery in nature.

The ITAA 1997 specifies no conditions that need to be satisfied before the power to make Regulations is exercised.

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.