Category: Uncategorized

Structured giving is an increasingly popular approach to philanthropy that involves strategic planning and the use of specialised financial tools to maximise the impact of charitable donations. Unlike ad-hoc contributions, structured giving is focused on creating long-term, meaningful change by aligning donations with the donor’s values, goals, and preferred causes. This comprehensive guide will explore everything you need to know about structured giving, its benefits, various methods, and how it can contribute to community well-being and social innovation.

What is Structured Giving?

Structured giving refers to a planned and strategic method of charitable giving that uses vehicles like Private Ancillary Funds (PAFs), Public Ancillary Funds (PuAFs), sub-funds, and testamentary trusts. This approach allows individuals, families, and businesses to take a more systematic and sustainable path to philanthropy, offering better control, tax efficiency, and the potential for greater social impact.

Structured giving is more than just writing a cheque; it involves thoughtful planning, collaboration with financial advisors, and the use of structured financial tools to make significant, well-directed contributions to causes that matter.

Benefits of Structured Giving

• Tax Efficiency: Donors can take advantage of tax deductions, especially when giving through vehicles like PAFs or PuAFs.
• Long-Term Impact: Structured giving focuses on sustained contributions, which can make a significant difference over time.
• Alignment with Personal Values: Allows donors to give in a way that aligns with their core values and philanthropic goals.
• Greater Control: Donors can determine how and when the funds are used, offering more flexibility and transparency.

Methods of Structured Giving

Structured giving can be carried out through a variety of financial vehicles and approaches. Here are some of the most common methods:

1. Private Ancillary Funds (PAFs)

A Private Ancillary Fund (PAF) is a charitable trust that allows individuals or families to make significant tax-deductible donations while having control over how the funds are distributed. PAFs are an excellent option for high-net-worth donors who want to engage in pro-social giving and leave a lasting legacy. They offer tax benefits and allow donors to build a strategic giving approach that aligns with their philanthropic objectives.

2. Public Ancillary Funds (PuAFs)

Public Ancillary Funds (PuAFs) are similar to PAFs but are open to contributions from the public. PuAFs pool donations from multiple contributors and distribute grants to eligible Deductible Gift Recipient (DGR) organisations. This is a great option for those who prefer a more community-based giving model, as it allows donors to collectively contribute to causes they care about.

3. Sub-Funds

Sub-funds are smaller funds within a larger charitable foundation or public ancillary fund. They provide an accessible entry point for donors who may not have the resources to set up a private fund. Sub-funds allow donors to enjoy the benefits of structured giving without the administrative burden of managing their own trust.

4. Testamentary Trusts and Legacy Trusts

Testamentary trusts and legacy trusts are established through a will, allowing donors to leave a portion of their estate to charitable causes. These trusts are an effective way of engaging in intergenerational giving, ensuring that a donor’s philanthropic vision continues beyond their lifetime.

5. Giving Circles

Giving circles are a form of community-based giving where a group of donors pool their resources to make a collective donation. This approach not only amplifies the impact of individual contributions but also fosters a sense of community and shared responsibility for charitable causes.

The Role of Structured Giving in Community Wellbeing

Structured giving plays a significant role in enhancing community wellbeing by providing a consistent flow of resources to address critical social issues. Unlike mass-market giving, which may be reactive and less strategic, structured giving focuses on targeted, high-impact donations that support sustainable development and social innovation.

Building a Giving Culture

By adopting a strategic giving approach, individuals and businesses can help build a culture of giving that prioritises long-term, meaningful impact. This approach encourages high net worth donations and corporate contributions that align with broader community goals and social outcomes.

High-Risk Charitable Grants

Structured giving often involves making high-risk charitable grants, which are aimed at addressing complex social problems that may not attract traditional funding. These grants can support innovative programs, start-ups focused on social impact, or long-term research initiatives, paving the way for social innovation.

Structured Giving Trends in Australia

Australia has seen a growing trend towards structured giving, particularly among high-net-worth individuals and corporate donors. Here are some of the key trends shaping structured giving in the country:

1. Impact Investing

Impact investing has become a popular trend in Australia’s giving landscape. It involves investing in projects or businesses that generate both financial returns and positive social or environmental outcomes. This form of structured giving allows donors to contribute to community wellbeing while growing their wealth.

2. Volunteering in Australia

Volunteering is an integral part of the structured giving ecosystem. Many donors not only give financially but also contribute their time and expertise, providing a more holistic approach to philanthropy. Volunteering helps create a direct connection between donors and the causes they support, enhancing the overall impact of their contributions.

3. Growth of Charitable Foundations

The establishment of charitable foundations is on the rise, driven by individuals and families looking to formalise their giving efforts. These foundations often employ a structured approach, using tools like PAFs and legacy trusts to manage donations effectively and ensure long-term community impact.

Creating a Strategic Giving Plan

If you’re considering structured giving, developing a strategic giving plan is essential. This involves defining your philanthropic goals, selecting the right financial vehicles, and working with professional advisors to ensure compliance and maximise the impact of your donations.

Key Elements of a Strategic Giving Plan

• Define Your Vision: Establish clear objectives for your philanthropic efforts.
• Choose the Right Giving Vehicle: Decide whether a PAF, PuAF, sub-fund, or trust is the best fit for your needs.
• Engage with Financial Advisors: Work with professionals to design a plan that aligns with your financial and philanthropic goals.
• Monitor and Evaluate Impact: Regularly assess the effectiveness of your giving strategy to ensure it meets your desired outcomes.

How The Giving Advisory Can Help

At The Giving Advisory, we specialise in setting up and managing PAFs, allowing you to focus on making a meaningful impact. Our comprehensive services include:

• Philanthropic Strategy Design: We help you create a strategic giving plan tailored to your values and goals.
• Setup and Management of Ancillary Funds: We provide expert guidance every step of the way when creating and maintaining a PAF.
• Investment Oversight and Reporting: Our team manages your investments and provides transparent, real-time reporting.
• Compliance and Administration: We handle all regulatory requirements, ensuring your giving vehicles remain compliant with ACNC and ATO standards.

Partner with The Giving Advisory for Your Structured Giving Journey

If you’re ready to embrace a strategic approach to philanthropy, The Giving Advisory is here to help. We bring expertise, professionalism, and a commitment to maximising the impact of your charitable efforts. Contact us today to learn how we can support your structured giving journey and help you build a legacy of positive change.

In Australia, charities serve a wide array of causes, from health promotion to environmental protection. The Australian Charities and Not-for-profits Commission (ACNC) oversees the registration of these charities, categorising them based on their primary purpose and legal structure. This classification is crucial, as it helps determine the eligibility for tax concessions and the status of Deductible Gift Recipient (DGR) endorsements by the Australian Taxation Office (ATO).

What Are Charitable Purposes?

The Charities Act 2013 defines charitable purposes broadly, allowing organisations to align their missions with specific community needs. Here are the main categories:

1. Advancing Health

Health-related charities focus on activities that promote physical and mental well-being. These include hospitals, research foundations, and Health Promotion Charities (HPCs) dedicated to preventing illness and improving public health.

2. Advancing Education

Educational charities include schools, universities, and research bodies aimed at providing learning opportunities, scholarships, and advancing academic research. Many of these entities also qualify for DGR status, making donations tax-deductible.

3. Advancing Culture

These charities support the arts, cultural heritage, and community enrichment. They may include museums, performing arts organisations, and cultural festivals that foster a greater appreciation for the arts and cultural diversity.

4. Advancing Social Welfare

Charities that focus on social welfare aim to relieve poverty, provide services to the homeless, and support vulnerable groups. Public Benevolent Institutions (PBIs) are a subtype that falls under this category, directly assisting people in need.

5. Advancing Religion

Religious charities serve the spiritual needs of communities, promoting religious education and practices. These organisations often provide additional social services and play a key role in community support systems.

6. Advancing Environmental Protection

Environmental charities are dedicated to conservation, climate action, and sustainable practices. Their efforts contribute to protecting natural habitats and advocating for policies that address environmental challenges.

7. Promoting Animal Welfare

Animal welfare organisations focus on the protection and humane treatment of animals. This subtype includes rescue shelters, conservation groups, and advocacy bodies fighting against animal cruelty.

The Role of Legal Structure in Charity Registration

The legal structure of a charity influences its governance, reporting obligations, and eligibility for tax benefits. Common structures include:

• Not-for-profit Organisations: Operate without distributing profits to members.
• Ancillary Funds: These include Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs), serving as vehicles for structured giving.

Charity Subtypes Explained

In addition to their primary purpose, charities can be classified into specific subtypes that dictate their operations and obligations. Here are a few key subtypes:

1. Public Benevolent Institution (PBI)

A PBI directly relieves poverty, sickness, or distress. These charities typically have DGR status, allowing donors to claim tax deductions for their contributions.

2. Health Promotion Charity (HPC)

An HPC focuses on promoting the prevention and control of diseases. They are recognised by the ATO for their contributions to public health initiatives.

3. Deductible Gift Recipient (DGR)

Charities with DGR status can receive tax-deductible donations, which can be claimed by donors when filing their tax returns. This status is often sought after as it encourages more substantial giving by providing tax incentives.

4. Environmental Organisations

Registered environmental charities aim to protect and preserve the environment, often focusing on conservation efforts and sustainable practices.

5. Animal Welfare Groups

These organisations work to safeguard animal rights and promote the humane treatment of all animals, both domestic and wild.

Tax Concessions and Compliance

Charities registered with the ACNC may be eligible for various tax concessions, including income tax exemptions and GST benefits. The ATO works alongside the ACNC to ensure compliance with the relevant legal and tax requirements.

• Annual Information Statement (AIS): Registered charities must submit an AIS to the ACNC each year, detailing their activities and financial status.
• Trust Deed Compliance: Charities structured as trusts must adhere to the terms outlined in their trust deeds, ensuring they meet their charitable obligations.

Promoting Long-Term Community Impact

The diversity of charitable purposes allows organisations to address a wide range of societal needs, from advancing health to protecting the environment. By supporting various causes, these charities play a vital role in building stronger, more resilient communities.

The Giving Advisory’s Role in Charitable Giving

The Giving Advisory specialises in assisting clients with setting up and managing Private Ancillary Funds (PAFs). PAF’s are required to donate 5% of the PAF’s assets at the start of the year to maintain it tax free status. The donations need to be made to a charity with a DGR type 1 status. Whist there are many charities, not all charities have the DGR type 1 status. It is essential to ensure that the PAF donations are being made to the correct charities to ensure the PAF remains compliant. The Giving Advisory aims to simplify the complexities involved in structured giving, helping you make a significant impact through your philanthropic efforts. With our expertise, you can navigate the legal requirements, manage compliance, and focus on creating a legacy of positive change.

If you are considering establishing a Private Ancillary Fund or need expert guidance on managing your charitable giving, contact The Giving Advisory today to learn how we can help you achieve your philanthropic goals.

Private Ancillary Funds (PAFs) have become an essential tool for individuals and families looking to make a lasting impact through structured philanthropy. This comprehensive guide will cover all aspects of PAFs, from their purpose and setup to compliance and ongoing management. If you’re interested in making a difference while ensuring your donations are managed effectively, understanding PAFs is a crucial step.

What is a Private Ancillary Fund?

A Private Ancillary Fund (PAF) is a type of charitable trust that allows individuals, families, or businesses to engage in structured giving. It is established to provide grants or donations to organisations that have Deductible Gift Recipient (DGR) status, ensuring that the funds are used for charitable purposes.

Unlike Public Ancillary Funds (PuAFs), which collect donations from the general public, PAFs are privately controlled and typically funded by a single source or a small group. PAFs are regulated by the Australian Taxation Office (ATO) and the Australian Charities and Not-for-profits Commission (ACNC), ensuring they operate in compliance with Australian laws and regulations.

Aspect	Public Ancillary Funds (PuAFs)	Private Ancillary Funds (PAFs)
Purpose	Established to pool public donations for distribution to eligible charities.	Established by individuals, families, or businesses for private charitable giving.
Funding Source	Open to contributions from the general public.	Funded exclusively by the founder(s) or a specific group (e.g., family or business).
Control and Oversight	Managed by a corporate trustee with a public governance model.	Managed by a corporate trustee but under the control of the founder(s).
Beneficiaries	Typically supports a wide range of eligible charities.	Supports charities chosen by the founder(s), allowing for personalised giving.
Compliance	Subject to specific Australian Taxation Office (ATO) rules and must maintain public accountability.	Subject to ATO compliance rules but operates privately without public accountability.
Reporting	May require public transparency and reporting.	Reporting is private, with details only provided to regulatory authorities.
Flexibility	Less flexible in terms of grant-making decisions due to broader public accountability.	Offers greater flexibility for targeted and strategic philanthropy.
Examples	Community foundations, workplace giving programs.	Family foundations or corporate charitable trusts.

PuAFs must ask for donations from the public. PAFs are restricted in their ability to receive donations from people other than their founders or relatives, associates and employees of the founders—source: Distribution guidelines for ancillary funds available on treasury.gov.au

Key Features of PAFs

• DGR Status: PAFs can only make donations to organisations with DGR status, providing tax advantages for the donor.
• Tax Deductible Donations: Contributions to a PAF are tax-deductible, allowing donors to reduce their taxable income.
• Trust Structure: PAFs are structured as trusts, governed by a trust deed outlining the objectives and rules.
• Flexibility in Grantmaking: PAFs offer flexibility, allowing donors to decide how and when to distribute funds to chosen charities.

How to Set Up a Private Ancillary Fund

Setting up a PAF requires careful planning and an understanding of the regulatory framework. Here’s a step-by-step guide to help you navigate the process:

1. Define Your Philanthropic Goals

Before establishing a PAF, consider your philanthropic objectives. What causes do you want to support? Do you want to make a long-term impact in a particular sector? Having a clear vision will help guide your decisions throughout the setup process.

2. Establish a Trust Deed

A trust deed is a legal document that sets out the purpose, structure, and rules of the PAF. It must comply with the Charities Act and include clauses about:

• Granting only to DGR organisations.
• Meeting annual minimum distribution requirements (usually 5% of the fund’s net assets).
• Following governance standards set by the ACNC.

3. Register with the ACNC

Once the trust deed is in place, the PAF must be registered with the Australian Charities and Not-for-profits Commission (ACNC). The registration process involves providing details about the PAF, its objectives, and compliance with the Governance Standards and External Conduct Standards.

4. Apply for Tax Concessions

PAFs can apply for tax exemptions, such as Income Tax Exempt Funds (ITEFs) status, through the ATO. These concessions ensure that the income generated by the PAF’s investments is tax-free, maximising the funds available for charitable activities.

5. Develop an Investment Strategy

A key element of a successful PAF is a well-defined investment strategy. The strategy should align with the PAF’s philanthropic goals and be designed to preserve and grow the fund’s assets over time. Considerations include:

• Risk tolerance and asset allocation.
• Ethical investment choices that align with the donor’s values.
• Regular reviews and adjustments to the strategy.

Compliance and Governance

PAFs are subject to stringent compliance requirements to ensure transparency and accountability. Here are some of the key obligations:

Annual Distribution Requirement

PAFs are required to distribute at least 5% of their net assets annually to eligible DGRs. This minimum distribution rule ensures that the funds are actively contributing to charitable causes.

Lodging the Annual Information Statement

PAFs must submit an Annual Information Statement to the ACNC, providing details on their activities, governance, and financial performance. The statement is publicly available, allowing donors and the public to assess the PAF’s effectiveness.

Audit and Reporting

An annual audit is required to ensure the PAF’s financial records are accurate and compliant with regulations. The auditor will review the trust’s financial statements, investment performance, and adherence to the trust deed’s requirements.

Governance and Compliance Standards

PAFs must adhere to Governance Standards set by the ACNC, which include:

• Acting with integrity and accountability.
• Managing financial affairs responsibly.
• Ensuring that the PAF is not used for personal benefit.

Additionally, PAFs operating overseas must comply with External Conduct Standards, which focus on transparency and accountability in international activities.

Benefits of Setting Up a Private Ancillary Fund

Establishing a PAF can offer numerous advantages for donors who want to engage in structured giving:

1. Control and Flexibility

PAFs allow donors to have complete control over how the funds are managed and distributed. This flexibility makes it easier to align the PAF’s activities with personal or family philanthropic goals.

2. Tax Efficiency

Contributions to a PAF are tax-deductible, reducing the donor’s taxable income. Additionally, the income earned by the PAF is generally tax-exempt, allowing the fund to grow more effectively.

3. Long-Term Impact

A PAF can be structured to provide grants over many years, ensuring a lasting impact on chosen causes. It also enables families to create a philanthropic legacy that can be passed down through generations.

4. Professional Management

With professional management and oversight, PAFs can make informed investment decisions and maintain compliance with complex regulatory requirements.

Common Challenges in Managing a PAF

While PAFs offer significant benefits, they also come with certain challenges:

1. Compliance Risks

Failure to meet the annual distribution requirements or lodge the necessary reports can result in penalties or deregistration. Engaging a professional service like The Giving Advisory can help manage these risks effectively.

2. Investment Management

PAFs must balance the need to generate income with the risk of investment losses. Developing a clear investment strategy and reviewing it regularly is essential for the fund’s sustainability.

3. Administrative Burden

Managing a PAF involves significant administrative tasks, including record-keeping, compliance reporting, and audits. This can be time-consuming, especially for individuals or families unfamiliar with trust regulation.

Why Choose The Giving Advisory for Your Private Ancillary Fund?

At The Giving Advisory, we understand the complexities involved in setting up and managing a PAF. We offer a full suite of services designed to simplify the process, including:

• Setup and Strategy Design: We establish your PAF’s structure and align it with your philanthropic vision.
• Administration and Compliance: Our team handles all regulatory requirements, ensuring your PAF remains compliant with ATO and ACNC standards.
• Investment Management: We oversee the fund’s investments, focusing on sustainable growth aligned with your values.
• Online Reporting and Transparency: Access real-time updates on your fund’s performance with our online reporting tools.
• Annual Audit and Reporting: We coordinate annual audits, providing peace of mind that your PAF is managed with integrity.

By partnering with The Giving Advisory, you can focus on making a meaningful impact without worrying about the complexities of compliance and administration.

Final Thoughts

Setting up a Private Ancillary Fund is an excellent way to engage in structured giving, offering tax benefits, control, and the potential for long-term impact. However, managing a PAF requires expertise and a deep understanding of regulatory requirements. With the right guidance and support, you can maximise the benefits of your PAF and contribute to the causes you care about most.

Ready to Start Your Philanthropic Journey?

Let The Giving Advisory be your trusted partner in establishing and managing your Private Ancillary Fund. Contact us today to learn how we can help you turn your philanthropic vision into reality.

Charitable giving is a personal journey that varies from one individual to another. Whether you have a list of charities you’re passionate about supporting, are driven by specific causes, or are just beginning to explore how you can make a difference, understanding how to navigate these choices is crucial for effective philanthropy.

Establishing a Partnership Through a Private Ancillary Fund (PAF)

When establishing a Private Ancillary Fund (PAF), the connection between your fund and the chosen charity isn’t merely transactional; it’s a partnership that should powerfully enhance the charity’s capacity to meet its objectives and amplify the effects of your contributions. Ensuring alignment between a charity’s mission and your personal values, alongside their ability to effectively execute strategic goals, is key.

Conduct a Values Audit

To ensure your philanthropic impact reflect your values, consider conducting a simple values audit:

1. List your core values: Identify and write down your top five core values. These might include transparency, innovation, community, sustainability, education, health, equality, etc.
2. Prioritise your values: Order these values from most to least important. This helps in understanding which values are non-negotiable and which are more flexible.
3. Match values to charitable goals: Connect each value to a charitable goal. For instance, if education is a priority, you might aim to improve literacy rates among disadvantaged groups.

A well-matched charity partnership not only bolsters the charity’s efforts but also ensures that your philanthropic investments are realising their full potential, inspiring continuous engagement and support from all stakeholders involved. 

Compliance and Effectiveness in Donations for your PAF

To ensure compliance and the effectiveness of your donations, it’s important to know which charities are eligible to receive funds from a PAF. Only organisations classified as “Type 1 Deductible Gift Recipients” (DGRs) qualify. This classification ensures that your contributions are not only tax-effective but are also going to organisations capable of utilising these funds responsibly.

Evaluating Potential Charity Partnerships for your PAF

Consider the following when evaluating potential charities:

To ensure your PAF’s donations are used effectively and for their intended purpose, it’s essential to regularly assess the charity’s performance, impact, and how they utilise the funds. This accountability helps maintain trust and ensures that your PAF’s resources are driving meaningful change.

Selecting the right charity requires time, thorough research, and often, strategic advice from experts familiar with both the philanthropic landscape and PAF operations. At The Giving Advisory, we provide comprehensive support to help you find and partner with charities that can turn your vision into impactful reality.

Setting up a Private Ancillary Fund (PAF) involves navigating a complex range of compliance requirements. For those aiming to make a significant and lasting impact through philanthropy, understanding who can assist in establishing and managing a PAF is crucial. This guide outlines the key partners who can support you in this process.

Role of a Responsible Person: A ‘responsible person’ plays a critical governance role within a PAF. Typically from a professional background with a duty of care to the community—such as a lawyer or an accountant—this individual ensures the PAF’s operations are transparent and adhere to governance standards. Their oversight is vital in maintaining public trust and fulfilling regulatory obligations, with at least one ‘responsible person’ required on the board to enhance the fund’s accountability and integrity.

Your Full Service Partner

While setting up a Private Ancillary Fund involves multiple stakeholders, partnering with a full-service firm like The Giving Advisory can simplify this complex process. We provide end-to-end support, integrating financial and compliance expertise under one roof. Our team not only helps establish your PAF but also ensures its ongoing management aligns with both your philanthropic vision and regulatory requirements. 

This approach allows you to focus on what truly matters—making a significant impact through your charitable goals.

Explore our services and see how we can help you achieve your charitable goals with ease and confidence.

Private Ancillary Funds are unique giving structures that offer individuals and families the opportunity to create a lasting legacy, ensuring their charitable efforts have a profound and enduring impact. They not only foster significant charitable impacts but also offer substantial tax advantages and strategic flexibility.

The Key Benefits of Private Ancillary Funds:

1. Sustainable Giving: PAFs enable you to grow the fund’s value over time, surpassing your annual donations to ensure continuous support for the causes you care about. This approach to giving helps you contribute indefinitely, supporting your causes with a lasting impact.
2. Expert Investment Management: PAFs benefit from professional financial guidance, allowing for the strategic investment of resources. This maximises returns and promotes the financial health of the fund, translating into larger charitable contributions.
3. Control Over Donations: Unlike one-time gifts, a PAF provides the flexibility to manage how and when your donations are distributed. This control allows you to respond to evolving charitable needs and align your giving with your personal philanthropic goals.
4. Significant Tax Benefits: As a tax-exempt entity, a PAF does not pay income tax on its investment earnings. Additionally, donors can benefit from a refund on franking credits and receive immediate tax deductions for contributions, significantly enhancing the fund’s capacity to give.
5. Flexibility in Fund Distribution: Donors can take immediate tax deductions upon contributing to a PAF and have the flexibility to decide how the funds are distributed in future years. This allows for thoughtful, impactful giving aligned with changing community needs.
6. Legacy and Family Involvement: Establishing a PAF is an opportunity to pass on a philanthropic legacy to future generations. It allows family members to get involved in the management and decision-making processes, instilling values of generosity and social responsibility.
7. Enhanced Community Impact: PAFs facilitate strategic grant-making by allowing donors to plan for multi-year engagements and adapt their giving strategies as community needs change. This can lead to more significant and effective philanthropic outcomes.

Private Ancillary Funds represent a powerful tool for anyone looking to make a substantial, lasting difference through their charitable work. Whether you’re aiming to support immediate community needs or establish a multi-generational legacy of giving, a PAF offers the structure, tax benefits, and flexibility to achieve your philanthropic vision.

Have more questions about PAFs?
Explore our FAQs blog or get in contact with our team today. 

11 Common Pitfalls That Can Catch You Out If You Don’t Follow PAF Guidelines

Private Ancillary Funds (PAFs) offer a structured way to contribute to charitable causes with significant tax benefits. However, their strict regulatory requirements can make them more complex than other trusts. Understanding what not to do when managing a PAF is crucial to ensuring compliance and maximising the effectiveness of your philanthropic efforts.

1. Getting your Timing Right:

• What to Avoid: Failing to allocate sufficient time for the setup of the fund and ensuring that tax-deductible donations are made by the 30 June deadline.
• Impact: Rushing the setup process can lead to errors and oversight, potentially compromising the fund’s structure and your tax benefits. Proper planning ensures all legal and compliance measures are met in time for fiscal year tax deductions.

2. Distribution Errors:

• What to Avoid: Distributing funds to non-compliant organisations. PAFs must distribute to type 1 DGRs exclusively, despite the broader range of DGRs available.
• Impact: Incorrect distributions can lead to penalties and jeopardise the PAF’s compliant status.

3. Investment Strategy Shortcomings:

• What to Avoid: Operating without a robust, actively managed Investment strategy that ensures that the investments are aligned to your giving goals.
• Impact: Poorly managed assets can limit the fund’s ability to support charitable activities effectively and attract regulatory concern.

4. Lodging your Franking Credits Return:

• What to Avoid: Delaying the submission of your refund of franking credits application.
• Impact: Franking credit refunds are paid as cash and are investment returns. Postponing this process can delay refunds, affecting the liquidity and financial efficiency of your fund, potentially limiting immediate charitable distributions.

5. Documentation and Record-Keeping:

• What to Avoid: Neglecting to maintain thorough records of all decisions and trustee meetings.
• Impact: Inadequate documentation can complicate audits, lead to governance issues, and increase the risk of disputes or non-compliance fines.

6. Managing reasonable expenses:

• What to avoid:  Incurring disproportionate or unjustified expenses, particular in payments made to directors and related expenses
• Impact: Excessive or non-transparent expenses can draw regulatory scrutiny and undermine trust among stakeholders. It’s vital to align expenses with industry standards to support the fund’s charitable objectives without compromising its reputation or operational status.

7. Timely Reporting:

• What to Avoid:  Missing the deadline for the annual information returns. If required, align these submissions with the ACNC’s annual information statement dates. For more details, visit the ACNC website.
• Impact: Late submissions can result in fines and increased attention from the ACNC, ATO and other regulatory bodies. 

8. Compliance Audits:

• What to Avoid: Neglecting the requirement for an audit of compliance with the PAF Guidelines.
• Impact: Failure to demonstrate compliance can attract scrutiny from regulatory bodies and potential legal challenges.

9. Legal Don’ts:

• What to Avoid: Soliciting public donations, accepting excessive contributions, carrying on a business, or engaging in non-arm’s length transactions.
• Impact: Violations of these restrictions can lead to severe penalties, including the revocation of the PAF’s status.

10. Operation and Meetings

• What to Avoid: Failing to appoint the correct responsible person to chair and oversee regular meetings.
• Impact: This role is crucial for ensuring adherence to the PAF Guidelines and making informed, compliant decisions. 

11. Succession Planning:

• What to Avoid: Failing to plan for the future management and control of the PAF.
• Impact: Lack of succession planning can lead to operational disruptions and challenges in maintaining the fund’s goals.

While managing a Private Ancillary Fund comes with its challenges, being aware of what not to do can help trustees avoid common pitfalls and ensure that their philanthropic goals are achieved effectively and compliantly. 

Need Assistance? If you’re considering establishing a PAF or require guidance on managing an existing fund, contact our team for expert advice that ensures compliance and enhances your philanthropic impact.

Your Frequently Asked Questions about Private Ancillary Funds, Answered

Private Ancillary Funds (PAFs) are a powerful tool for structured giving, enabling donors to make a lasting impact through their charitable contributions. Designed to offer individuals and families the opportunity to create a sustainable philanthropic legacy, PAFs come with specific guidelines, restrictions, and opportunities.

Here are the most common questions about PAFs, answered to help you decide if they are right for you.

1. What’s the Difference Between a Private Ancillary Fund, a Public Ancillary Fund and a charitable trust? 

While all three are established to support charitable giving, each has unique legal and operational characteristics. 

Private Ancillary Fund (PAF):

• A PAF is a specific type of private charitable trust designed to distribute funds exclusively to other deductible gift recipients (DGRs). It operates under strict operational guidelines established by the Australian Taxation Office (ATO). This structure ensures that PAFs focus solely on distributing funds rather than raising them.

Public Ancillary Fund (PuAF):

• A PuAF can receive donations from the public but must also distribute funds only to DGRs. It is subject to specific ATO guidelines but has slightly different requirements due to its ability to fundraise publicly.

Charitable Trust:

• A charitable trust can be either private or public and has broader fundraising capabilities, including the ability to solicit funds from the public. While it must comply with general trust law and charitable trust requirements, it is subject to less stringent ATO rules compared to PAFs and PuAFs.

2. How to Establish a PAF?

To establish and register a PAF, you’ll need to undertake several crucial steps:

• Draft a Trust Deed: Ensure it adheres to the PAF guidelines and the Income Tax Assessment Act 1997.
• Appoint Trustees: All trustees must be constitutional corporations and commit to following PAF guidelines.
• Obtain an ABN: Apply via the Australian Business Register or a tax agent, classifying the trust as a ‘Discretionary trust – investment.’
• Seek DGR Status: Apply through the Australian Charities and Not-for-profits Commission (ACNC) or directly with the Australian Taxation Office (ATO), providing all required documentation.
• Initial Funding: Commit a specific amount of financial resources to establish the fund’s assets.

You can manage this process independently or work with partners like The Giving Advisory to navigate the operational complexities effectively.

3. How Much Does It Cost to Set Up a PAF?

The cost of setting up a PAF can vary but generally includes fees for drafting the trust deed, registration fees, and initial administrative expenses.

4. What’s the Minimum Distribution for a PAF?

PAFs are required to distribute at least 5% of the market value of the fund’s net assets (as valued at the end of the previous financial year) each year to eligible charities. This ensures that funds actively contribute to their charitable purposes on an ongoing basis.

5. Who Can Contribute to a PAF?

Contributions to a PAF can generally be made by the founding members and associated parties. 

6. Does a PAF Need to Lodge a Tax Return?

Yes, however PAFs are only required to lodge an annual information return with the ATO which is less disclosure than a full tax return. 

Most PAFs are structured to achieve tax-exempt status, ensuring that income is tax free and more funds are available for distribution. In addition to this, a PAF can file a refund of franking credits return with the ATO to receive a refund on any franking credits it has accrued from its investment income over the year.

The PAF needs to be audited annually and lodge an Annual Information Statement with the ACNC.

7. Can a PAF Support International Causes?

While PAFs primarily support Australian DGRs, they can fund international causes if those organisations have Australian DGR status, allowing for global philanthropic efforts.

8. Is a PAF Right for You?

A PAF is suitable for you, if you:

• Aim to provide sustainable support to a cause that matters to you 
• Want control over investment and grant-making decisions that shape the future
• Can commit at least $1 million initially to provide the PAF with enough earnings to support the minimum donation and running costs each year. This should allow the PAF to donate into perpetuity and provide a long lasting impact from the initial donation. 
• Benefit from significant tax deductions for your donations.

Private Ancillary Funds offer a unique opportunity for donors to create lasting legacies through structured giving. Interested in learning more about how to establish your own Private Ancillary Fund?

Contact us today for guidance on how to start your philanthropic legacy.

In recent years, Australia has seen a concerning decline in community engagement.

 “Australians have become less likely to join community groups, less likely to volunteer, less likely to play organised sport, less likely to attend religious services, and less likely to know their neighbours. Declining social capital has broad implications for wellbeing, health and social connectedness”*.

Trends in Philanthropic Giving

A draft report from the Productivity Commission has unveiled a troubling trend: while the total amount of tax-deductible donations has increased, the number of individuals making these donations is on a decline. This paradox suggests that while the wealthy are giving more, fewer people are participating in the philanthropic process overall.

Wealth Growth and Philanthropic Potential

According to research from the Australian National University (ANU) in 2021, the percentage of adults qualifying as sophisticated investors has surged from 1.9% in 2002 to an impressive 16.2% in 2018. 

This growth in wealth presents a unique opportunity for philanthropy, especially if these capable individuals are engaged effectively.

The Role of PAFs as a solution re-engagement 

Private Ancillary Funds (PAFs) are uniquely positioned to leverage this wealth for the greater good. By allowing individuals to set up their own charitable funds, PAFs provide a structured way to contribute significantly and sustainably to societal wellbeing. 

These funds not only offer tax benefits but also allow donors to have ongoing involvement that can transform charitable intentions into a powerful and enduring force for good, sustaining a philanthropic impact year after year.

Take Action Towards a Sustainable Legacy

By channelling your resources into structured philanthropy, you can play a critical role in reversing the trend of declining community participation. Contact us today to discover how a Private Ancillary Fund can support your philanthropic ambitions.

^{*The Hon Dr Andrew Leigh MP, Assistant Minister for Competition, Charities and Treasury, Assistant Minister for Employment https://ministers.treasury.gov.au/ministers/andrew-leigh-2022/media-releases/harnessing-generosity-boosting-philanthropy}

Imagine freeing up a million dollars to donate to top-tier Australian charities. You could pick a few charities, make your tax-deductible donations, and perhaps even see your name on a building. But once that money is donated, it’s gone forever.

There is a way to make your generosity last.

Private Ancillary Fund: A Lasting Approach to Generosity

With your own Private Ancillary Fund (PAF), you can transform that initial million into an ongoing legacy. By investing the funds and claiming an upfront tax deduction spread over one to five years, you can continue to support your favourite charities annually. With the right investment strategy, your fund could potentially support charitable causes indefinitely.

Who Qualifies for a PAF?

We partner with Australians who meet wholesale investor tests as defined by the Corporations Act 2001. Typically, this includes individuals or families with a gross income of at least A$250,000 over the last two financial years or net assets of at least A$2.5 million.

How Much Do You Need to Establish a PAF?

We recommend starting with an initial investment of at least A$1 million in your PAF. This capital remains within the PAF to continually support charitable work, while you retain control over investment decisions and distributions. This setup not only maximises potential returns but also ensures that your contributions align with your values and ethical standards.

What are the Benefits of a PAF?

• Give Indefinitely: By growing your fund’s value beyond your annual donations, you ensure ongoing support for your cherished causes.
• Manage Your Investing: With expert advice, strategically invest your fund’s resources to maximise returns and adhere to ethical standards.
• Control Your Giving: Move from one-time donations to providing ongoing support to your chosen charities, allowing you to adjust your contributions as your priorities evolve.
• Tax Benefits: A PAF is a tax-exempt entity, meaning it does not pay income tax on its investment earnings and is eligible for a refund on franking credits.

Building a legacy for good through Private Ancillary Funds

A PAF offers a unique opportunity to build a living legacy by turning a portion of your wealth into a lasting giving machine. This enriches not only your life with purpose and fulfilment but also provides an opportunity to involve your loved ones in decision-making and stewarding the fund’s activities. By fostering a sense of shared purpose, a PAF ensures your impact resonates across generations. Through a PAF, you can pass on an enduring legacy that empowers your future generations to champion change, creating a meaningful cycle of giving that extends beyond a single lifetime.

Embrace a Sustainable Approach to Philanthropy

Considering a PAF? Let’s start a conversation about how you can turn your passion for giving into a sustainable legacy.