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Understanding Strategic Philanthropy

What is strategic philanthropy?

At its core, strategic philanthropy is a focused, thoughtful approach to giving that seeks to tackle social issues by targeting root causes instead of merely alleviating symptoms. By viewing philanthropic contributions as risk capital for social good, donors aim to fund long-term solutions, social innovation, and systems-level change. This evidence-based approach often includes setting clear objectives, establishing metrics of success, and building feedback mechanisms for accountability and learning.

Why Philanthropy Matters in Financial Planning

Incorporating philanthropy into your overall financial plan is more than just a generous gesture. It can help create financially integrated giving strategies that align with your personal values, offering both tax benefits and the satisfaction of contributing to sustained localised impact. Engaging in philanthropy as part of your financial portfolio ensures you’re thinking not only of your lifetime legacy but also of how your resources can effect generational, long-term solutions to societal challenges.

Benefits of a Strategic Approach

1. Clarity of Purpose – By defining your desired impact early on, you can develop a detailed giving plan that channels resources effectively.
   
2. Root Cause Focus – Strategic giving targets systems-level change, tackling fundamental issues rather than short-term fixes.
   
3. Efficient Use of Funds – A structured plan minimises duplication and ensures donations go where they are needed most.
   
4. Trust-Building – Engaging transparently with grantees and communities fosters mutual respect, encourages responsive funding, and addresses power dynamics in giving.
   
5. Adaptability – Strategic philanthropy is often iterative and adaptive, allowing donors to learn from failure and pivot as needed.

Different Ways to Give

• Private Ancillary Funds (PAFs) – A PAF is a charitable trust enabling individuals or families to manage their philanthropy in a tax-effective way.
  
• Donor-Advised Funds (DAFs) – These allow donors to place assets into a fund while retaining advisory privileges on how the money is distributed.
  
• Charitable Trusts – Structured vehicles that hold and distribute funds to charities or causes over a set period or indefinitely.
  
• Matching Gifts – Encouraging others to donate by matching their contributions, effectively doubling the impact of each donation.
  

For more insights into structuring your giving, visit our Structured Giving in Australia Guide to learn about setting up tax-efficient philanthropic vehicles.

Tax Considerations for Australian Donors

Tax laws in Australia recognise and encourage philanthropic acts. Strategies such as gifting assets or establishing a Private Ancillary Fund can offer significant benefits. It’s essential to consult financial advisors who specialise in philanthropy to navigate legal requirements and ensure compliance. For a deeper understanding of environmentally responsible initiatives, explore our guide on sustainable giving.

Creating a Family Giving Legacy

Family engagement in giving can unify different generations around shared values and goals. This often involves creating a giving plan with SMART goals (Specific, Measurable, Achievable, Relevant, and Time-bound), which clarifies everyone’s role and ensures progress can be measured. Legacy planning further considers the impact you wish to make after your lifetime, ensuring your philanthropic efforts continue to drive social innovation and equity for years to come.

How to Select Worthy Causes

Selecting causes that align with your personal or family ethos requires problem definition, understanding root causes vs symptoms, and evaluating organizational capacity. Look for charities that employ evidence-based approaches, demonstrate accountability, and maintain transparent grantee relationships. If you’re unsure, establishing charity selection criteria—focusing on impact, leadership, and sustainability—can help guide your decisions.

Measuring Philanthropic Impact

Measuring philanthropic impact involves setting up clear metrics of success and feedback mechanisms to track progress. This includes both quantitative data (e.g. number of beneficiaries) and qualitative assessments (e.g. improvements in community well-being). Collaboration among donors, NGOs, and communities can provide more robust insights and foster collective and collaborative models for greater reach. An accountability and learning culture encourages regular evaluations, helping you decide if your philanthropy is headed in the right direction or if changes are needed in your philanthropic strategy.

Frequently Asked Questions

Q: How much should I donate?

A: The amount varies, but start with a budget aligned with your financial plan, ensuring it doesn’t compromise personal obligations.

Q: Is strategic philanthropy only for the wealthy?

A: No. A well-thought-out plan can apply to any scale of giving, from modest donations to large-scale endowments.

Q: Can I involve my children in my philanthropic efforts?

A: Absolutely. Family engagement in giving is encouraged, fostering shared values and generational continuity in philanthropic goals.

Next Steps in Your Philanthropy Journey

If you’re ready to refine your giving plan or explore new philanthropic ecosystem solutions, establishing a Private Ancillary Fund may be your next logical step. We simplify the complexities of giving, enabling you to maximise the impact of your charitable efforts.

With The Giving Advisory, you’re not just investing resources; you’re investing in a future of meaningful change. Our PAF Setup, Compliance, Management & More services allow you to focus on the bigger picture: creating an equitable, sustainable world.

A Private Ancillary Fund (PAF) is more than just a giving structure—it’s a long-term philanthropic tool that allows donors to strategically support Australian charities while benefiting from generous tax concessions. One of the most critical elements of managing a PAF effectively is implementing a sound investment strategy. The approach taken to investing the fund’s capital can significantly influence the income generated, the fund’s sustainability, and ultimately, the positive impact made over time.

Why Investment Strategy Matters in a PAF

Once you establish a PAF, you’re required by law to distribute at least 5% of the fund’s net assets each year to Deductible Gift Recipients (DGRs). While the initial contribution is tax deductible, maintaining and growing the fund requires careful management. Because a PAF allows donors to make distributions annually while retaining the majority of the capital, the assets must be invested with discipline and long-term intent.

An effective investment strategy ensures that the fund not only meets its annual distribution requirements but also retains the capacity to support charitable giving well into the future. As such, PAFs are typically managed with a long term view, balancing income generation with capital preservation and growth.

Key Principles of PAF Investment

1. Aligning Investments with Purpose

A PAF should be managed in a way that reflects the donor’s values. Many family foundations adopt ethical or socially responsible investment frameworks that align with their philanthropic goals. This might mean screening out certain industries or actively supporting companies with strong environmental, social, and governance (ESG) practices.

2. Working with the Right Professionals

A PAF requires oversight by a corporate trustee or a board of responsible persons, and it’s common for these trustees to work closely with licensed investment advisers. These professionals help craft and manage a tailored portfolio that complies with the fund’s objectives and risk tolerance.

If you’re unsure who can assist in establishing and managing your PAF, this guide explains who can help and how to get started.

3. Diversification and Risk Management

The income generated from a PAF’s portfolio must be sufficient to meet annual obligations without unduly depleting capital. Diversifying across asset classes—such as equities, fixed income, property, and alternatives—can help smooth returns and reduce exposure to market volatility.

4. Reviewing Performance and Compliance

PAFs must report annually to the Australian Charities and Not-for-profits Commission (ACNC)—sometimes referred to as the profits commission ACNC—and remain compliant with income tax laws and ACNC governance standards. This makes regular performance reviews and compliance checks vital.

Investment Differences: PAFs vs. Public Ancillary Funds

While both PAFs and public ancillary funds exist to support charitable causes, their investment approach differs. Public ancillary funds pool contributions from the public, often requiring broader governance and offering less control to individual donors. In contrast, setting up a private fund provides greater flexibility, allowing donors to personalise investment decisions and grant-making strategies.

Tax Benefits and Financial Considerations

One of the main incentives to establish a PAF is the immediate tax deductible benefit on contributions. Moreover, the fund’s income is typically tax free, provided it complies with all regulations. This tax-effective environment means a PAF can grow faster and distribute more over time compared to traditional giving.

However, these benefits come with responsibilities. Trustees must ensure prudent financial management, compliance with distribution requirements, and proper documentation of all financial activities. Working with trusted advisers ensures the PAF remains both compliant and impactful.

Final Thoughts

A well-managed investment strategy is essential to the long-term success of a Private Ancillary Fund (PAF). With proper planning, the fund’s capital can generate sustainable income, meet annual obligations, and deliver significant benefit to Deductible Gift Recipients (DGRs). Whether you’re managing a family foundation or acting as a corporate trustee, it’s crucial to adopt a structured, purpose-driven investment approach.

If you’re considering setting up a private fund or want to optimise your existing PAF, The Giving Advisory can assist. Our team of experts helps donors structure and manage their funds with clarity, compliance, and long-term impact in mind.

Establishing a Private Ancillary Fund (PAF) is a powerful first step toward creating lasting impact through structured giving. But to truly make a difference, it’s not just about setting up the fund—it’s about how you manage it. A well-run PAF allows you to grow your charitable capital, make tax-effective contributions, and support the causes that align with your values over the long term. 

Registered with the Australian Charities and Not-for-Profits Commission (ACNC) and endorsed by the Australian Taxation Office (ATO), PAFs offer key advantages: your initial contribution is tax deductible, earnings within the fund are typically tax free, and all distributions must go to approved Deductible Gift Recipient (DGR) organisations. With the right strategy, a PAF can be more than a donation vehicle—it can become a cornerstone of your philanthropic legacy.

But a PAF is more than a one‑off gift. It is a structured vehicle that, by law, PAF requires an annual distribution (currently at least 5% of net assets) to eligible Australian charities. With the right governance, investment management and financial advice, you can grow the fund over the long term and support causes that matter to you for generations.

Strategies to Grow Your Private Ancillary Fund

A well‑run PAF works like a small investment pool: money is invested, it earns returns, and grants are paid out each year. Sound investment strategies are therefore essential.

1. Diversify and reduce risk

Trustees often adopt a balanced portfolio—Australian equities, global equities, fixed interest and alternatives—to smooth returns and safeguard the mandatory annual distribution. Align investments with your values; ethical screens can reinforce your philanthropic mission.

2. Re‑invest surplus earnings

Because income within the fund is tax free, compounding works in your favour. Re‑investing excess returns after meeting the 5% rule enables the corpus to outpace inflation and gradually increase grant size.

3. Review performance annually

Engage professional advisers to benchmark results, rebalance and adjust asset allocation as markets shift. Continual oversight ensures the PAF remains compliant with ATO guidelines and ACNC governance standards.

4. Compare other structures

Some philanthropists consider public ancillary funds. While these vehicles pool public donations, a PAF offers greater privacy and control. Selecting the right structure depends on the level of decision‑making you wish to retain.

With disciplined stewardship, the fund will not merely maintain its purchasing power—it will grow, letting you deliver ever larger grants while enjoying ongoing tax benefits.

For a step-by-step overview of how to set up a PAF, including registration, compliance and trust deed requirements, explore our comprehensive guide to Private Ancillary Funds.

Engaging Family Members in Your PAF

A meaningful PAF involves more than money; it can embed a lasting philanthropic legacy across generations.

a) Invite every voice

Allocate advisory roles to children or grandchildren. Younger members learn governance, budgeting and social impact, turning family gatherings into purposeful strategy sessions.

b) Set shared priorities

Draft a giving policy that reflects collective values—environment, health, education, the arts—so future trustees understand why the fund exists and how to honour its mission.

c) Build skills

Offer mentoring or short courses on grant assessment and investment basics. Practical knowledge keeps enthusiasm high and decisions well‑informed.

d) Celebrate milestones

Publish an annual family report highlighting grants made, lives touched and any innovations. Storytelling cements commitment and demonstrates to the next generation that thoughtful giving can shape society.

By weaving philanthropy into family culture, you ensure the fund endures beyond the founding donors and adapts to new social challenges.

Evaluating Your Impact

Forceful impact starts with clear measurement.

Define success metrics

Move beyond cheque writing; agree on outcome indicators—school attendance rates, carbon emissions avoided, patients treated.

Track grantee results

Require simple reporting from recipient charities. Many provide case studies that show how PAF support unlocked new programmes.

Assess portfolio alignment

Confirm that investments don’t undermine mission (e.g., fossil‑fuel holdings for an environmental fund). Mission‑aligned investment management reinforces credibility.

Publish an impact summary

Even though a PAF is private, sharing highlights with advisers or family fosters accountability and continuous improvement.

When data show progress against goals, you gain confidence that your PAF is genuinely improving lives.

Frequently Asked Questions

What is ancillary funding?
Ancillary funding refers to money held in a PAF or a public ancillary fund that is set aside to make grants to DGR‑endorsed charities rather than to run charitable programmes directly.

What is the purpose of ancillary services?
Ancillary services support the main charitable mission—things like trustee oversight, audit, legal advice and investment administration—ensuring the fund remains compliant and sustainable.

What is an example of ancillary activities?
Examples include preparing the PAF’s annual ACNC return, conducting due diligence on grantees, or managing the investment portfolio: all activities essential to keeping the fund operational but not grant making in itself.

Partnering with The Giving Advisory

Setting up and maintaining a Private Ancillary Fund can be complex, but you do not have to manage it alone. The Giving Advisory specialises in establishing and administering PAFs, providing end‑to‑end support that covers:

• Structure and Compliance – Drafting trust deeds, securing ATO endorsements and maintaining ongoing ACNC obligations.
  
• Investment Management – Crafting tailored, mission‑aligned portfolios that balance growth with risk, ensuring your annual distribution target is comfortably met.
  
• Reporting and Impact Measurement – Supplying clear, timely statements so you—and future family trustees—always understand how the fund is performing and whom it benefits.
  
• Family Engagement and Education – Facilitating governance workshops and succession planning to embed a robust philanthropic legacy.

With The Giving Advisory handling the technicalities, you can focus on what truly matters: achieving lasting social change and maximising the impact of every charitable pound granted. Reach out today to discover how we can help your family or business create, grow and sustain a powerful Private Ancillary Fund.

Choosing the right philanthropic structure is less about complexity—and more about clarity. Whether you’re giving as an individual, family, or through a business, the structure you select should reflect how you want to give, who you want involved, and how you envision your impact over time. It’s not about finding the most sophisticated model, but the one that supports your long-term goals, offers the right level of control, and delivers the administrative and tax efficiencies that matter. With the right foundation in place, your giving becomes more than a gesture—it becomes a lasting legacy.

Key Considerations When Selecting a Structure

Before choosing a legal or governance framework, it’s important to consider your goals, resources, and how actively you wish to participate in managing your giving.

1. Purpose and control

Do you want to fund a specific cause or support a broad range of registered charities? Will you be involved in grant-making decisions or delegate that responsibility?

2. Tax efficiency

Some structures provide immediate tax deductible benefits and ongoing tax concessions for income earned within the fund. This can maximise your giving potential over time.

3. Regulatory obligations

Structures differ in their annual reporting and compliance requirements. Consider whether you’re prepared for regular audits, board oversight, and adherence to specific regulations.

4. Family involvement

If you wish to involve your family in long-term philanthropic efforts, choosing a structure that allows shared governance and succession planning is important.

5. Investment management

For structures that hold capital, your chosen investment strategy must balance risk, return, and the ability to meet annual giving obligations.

Common Philanthropic Structures in Australia

Australia offers several legal structures suitable for charitable giving. Each option varies in terms of setup complexity, oversight, and flexibility.

1. Private Ancillary Fund (PAF)

A Private Ancillary Fund is a type of charitable trust that enables families, individuals, or businesses to give in a structured and strategic way. A PAF requires a trust deed, must distribute a minimum percentage of its assets annually to Deductible Gift Recipient (DGR) organisations, and enjoys generous tax concessions. It’s suited to those who want control over their giving, a long-term approach to investment, and the ability to build a legacy.

PAFs must adhere to ACNC and ATO regulations, including governance standards, investment rules, and annual reporting. While setup and compliance may be more involved, the benefits of tax efficiency and control often outweigh the complexity.

Learn more about establishing a PAF and how The Giving Advisory can assist.

2. Public Ancillary Fund

A Public Ancillary Fund is also a charitable trust, but it is designed to receive donations from the public rather than a private source. It is generally managed by a not-for-profit organisation and must distribute funds to eligible DGRs. It’s ideal for those looking to pool resources and support multiple causes, with less desire for hands-on control. While tax deductible benefits still apply to donors, decision-making is typically handled by a board or trustee committee.

3. Charitable Company (Company Limited by Guarantee)

A company limited by guarantee is a common structure for charitable entities that operate as not-for-profit organisations. This model is suited to groups that intend to run charitable services or programmes directly rather than simply fund others. It has a formal governing document (the constitution), and is registered with the ACNC and ASIC. While this structure allows for operational control, it also requires strict compliance, a board of directors, and robust governance procedures.

4. Testamentary or Family Trusts with a Charitable Purpose

In some cases, individuals choose to use a trust deed to create a philanthropic legacy through a family or testamentary trust. While these may not always qualify for tax deductible donations or DGR status, they offer flexibility and privacy, particularly for those giving across state and territory borders or internationally. Careful structuring is required to ensure they remain compliant and aligned with philanthropic intentions.

Now What

The best philanthropic structure is one that aligns with your vision, resources, and the level of involvement you desire. Whether you’re exploring a Private Ancillary Fund, a Public Ancillary Fund, or setting up a company limited by guarantee, the structure you choose will shape the way you give, govern, and grow your impact.

At The Giving Advisory, we help individuals, families, and organisations navigate the legal, tax, and compliance requirements of setting up the right structure. We’ll guide you through selecting the most suitable framework, drafting your governing document, managing annual reporting, and creating a strategy that ensures your philanthropy is both effective and enduring.

Why Become a Philanthropist?

Philanthropy offers a unique opportunity to create meaningful change. Whether supporting education, medical research, environmental causes, or community projects, practising philanthropy allows individuals to give back to society in powerful and lasting ways. Many philanthropists find that giving enhances their sense of purpose, broadens their perspective, and strengthens their personal and professional relationships. The satisfaction that comes from helping others — alongside tangible societal benefits — makes philanthropy a rewarding long-term commitment.

How to Get Started

You do not need to be a billionaire like Bill Gates to start your philanthropic journey. Becoming a philanthropist is more about your mindset and commitment than about the size of your bank balance. Start by identifying causes that resonate with your values and passions. Research the organisations making a difference in those areas and consider how you can best support them. Setting up a charitable trust or contributing to existing initiatives can help you practise philanthropy in a structured and impactful way. Whether you are donating money, offering expertise, or volunteering your time, consistency and thoughtful planning are key.

How Much Can You Give?

One of the first steps towards effective philanthropy is an honest assessment of the time, money, and personal involvement you can dedicate, both now and in the future. Some philanthropists offer significant financial resources but prefer a hands-off approach, while others contribute smaller sums but engage deeply with the organisations they support. Your circumstances may evolve, so it is essential to build flexibility into your giving strategy. Setting clear intentions about your desired level of involvement will help guide decisions and ensure your contributions remain aligned with your goals over the long term.

Ways to Give

There are countless ways to give, depending on your preferences and resources. Some of the most common methods include:

• Direct Donations: Offering financial support to charities, non-profits, or community organisations.
• Setting Up a Charitable Trust or PAF: Creating a structured vehicle for ongoing giving while retaining strategic oversight.
• Volunteering Your Time: Sharing your skills, knowledge, or labour with organisations that align with your values.
• Leaving a Legacy: Including philanthropic contributions in your will or estate plans.
• Donating Assets: Providing non-cash assets such as real estate, art, or securities limited to support charitable causes.

Each method offers its own tax benefits, governance considerations, and level of involvement, so it is important to choose the approach that fits your goals and financial position.

Benefits of Philanthropy

Becoming a philanthropist is not only about giving — it is also about gaining. Benefits include:

• Personal Fulfilment: Making a positive impact provides deep personal satisfaction and a sense of achievement.
• Stronger Connections: Supporting meaningful causes can expand your network and strengthen your influence.
• Financial Advantages: Structured giving through mechanisms like a charitable trust or PAF may offer valuable tax benefits.
• Building a Legacy: Philanthropy allows you to build a legacy that reflects your values and benefits future generations.

Beyond these tangible rewards, philanthropy helps foster a more equitable and compassionate society, inspiring others to contribute as well.

At Giving Advisory, we specialise in establishing and managing Private Ancillary Funds (PAFs) so you can focus on what truly matters — your impact. Whether you’re starting your philanthropic journey or enhancing your current strategy, we are here to support you every step of the way.

For those looking to engage in long-term, structured philanthropy, establishing a Private Ancillary Fund (PAF) is a strategic and tax-effective way to support Australian charities. While setting up a PAF involves careful planning and regulatory steps, the process is straightforward with the right guidance. From initial discussions to formal registration and compliance, the typical timeframe to establish a PAF is approximately 4 to 8 weeks.

Understanding what’s involved at each stage helps manage expectations and ensures the fund is set up correctly from the outset.

Step 1: Preparing to Establish a Private Ancillary Fund (Weeks 1–2)

The first stage involves confirming your philanthropic goals, determining how involved you and your family or business will be in decision-making, and identifying the right structure. Unlike a Public Ancillary Fund, which accepts donations from the public, a PAF is a charitable trust funded and controlled privately—typically by individuals, families, or businesses.

Step 2: Drafting the Trust Deed and Legal Documentation (Weeks 2–3)

The trust deed is a foundational legal document that sets out how the PAF will be governed. It must comply with Australian trust law and the Private Ancillary Fund Guidelines 2019, as issued by the Australian Government.

This document will include:

• The objectives of the PAF.
• Governance and reporting obligations.
• Provisions to ensure grants can only be made to Deductible Gift Recipients (DGRs).

The deed must clearly reflect that the fund is being established and maintained solely for charitable purposes.

Step 3: Registration and ATO Endorsement (Weeks 3–6)

Once the trust deed is executed, the next step is to register the PAF with the Australian Charities and Not-for-profits Commission (ACNC)—often referred to as the profits commission ACNC. This process ensures the PAF is recognised as a registered charity, enabling access to various income tax exemptions.

Following registration, the fund must be endorsed by the Australian Taxation Office (ATO) as:

• A deductible gift recipient (DGR) under Item 2 of the DGR register.
• An entity eligible for income tax exemption and other tax concessions.

ATO endorsement usually takes 1–2 weeks if all documentation is in order.

Step 4: Operational Readiness and Launch (Weeks 6–8)

After receiving ACNC registration and ATO endorsement, the fund can begin operating. This includes:

• Opening a bank account in the name of the PAF.
• Accepting the initial donation from the donor to the fund.
• Establishing an investment strategy aligned with the fund’s purpose and sustainability.
• Setting internal procedures for grant-making, record-keeping, and annual reporting.

Trustees must ensure that the PAF distributes at least 5% of its net assets each year to eligible DGRs and complies with governance and audit obligations.

How Long Should You Expect?

In total, the process to establish a PAF typically takes between 4 and 8 weeks. Factors that can influence the timeframe include:

• The availability of nominated trustees and the Responsible Person.
• The readiness of your trust deed and supporting documentation.
• The processing time of both the ACNC and ATO.

Choose Us As Your Support System

While setting up a PAF involves several technical and regulatory steps, the timeline is manageable—especially with expert assistance. Choosing the right structure, preparing accurate documentation, and aligning with legal requirements ensures the fund can be launched efficiently and with confidence.

At The Giving Advisory, we support individuals, families, and businesses through every stage of establishing a PAF. From drafting your trust deed to navigating ACNC registration and developing a compliant investment and governance plan, we ensure your fund is set up correctly—and ready to make a meaningful impact over the long term.To get started, explore our guide to Private Ancillary Funds or contact us for tailored support.

Understanding what constitutes reasonable expenses is vital to ensure your Private Ancillary Fund (PAF) remains compliant with Australian Charities and Not-for-profits Commission (ACNC) regulations and the Australian Taxation Office (ATO) guidelines. Managing a PAF involves responsible stewardship of funds, maintaining transparency, and supporting charitable purpose activities within a clear legal framework.

Expenses Must Relate Directly to the Operation of the PAF

All expenses paid by a PAF must relate directly to the operation and furtherance of its charitable purpose. The Australian Treasury’s Guidelines 2019 emphasise that expenses must be reasonable, necessary, and incurred at arm’s length. Typical allowable expenses include accounting and audit fees, preparation of financial statements, investment management fees in line with the PAF’s investment strategy, trustee insurance, and general administrative costs associated with running the fund.

The corporate trustee or individual trustees must ensure that any payment is strictly for PAF activities and not for private benefit. All transactions should be properly documented and justified through careful record-keeping, helping to avoid issues during compliance reviews.

Expenses Should Be Appropriate to the Size of the PAF

The size of a PAF significantly influences what level of expenses can be considered reasonable. Larger PAFs, managing more complex investments and making substantial annual distributions, may naturally incur higher operational costs. Conversely, smaller funds are expected to maintain lower expenses relative to their asset base.

Excessive or disproportionate expenses can affect the PAF’s capacity to meet the minimum distribution requirements and may raise concerns during audits. Trustees should review expenses annually to ensure alignment with the scale of operations, the fund’s financial resources, and its commitment to maximising grants towards charitable activities by 30 June each financial year.

The Importance of Preserving Community Funds

PAFs exist to benefit the community. It is crucial that administrative expenses do not unduly reduce the funds available for charitable distributions. Trustees are custodians of community funds and must carefully balance necessary administrative spending with the primary goal of advancing the PAF’s charitable purpose.

Financial statements should transparently reflect how resources are allocated between administrative costs and charitable distributions. Following the Guidelines 2019, trustees must ensure that the fund’s core activity remains providing financial support to eligible charities and Deductible Gift Recipients (DGRs), thereby upholding public trust and protecting valuable income tax concessions.

Key Considerations for Managing PAF Expenses

When managing reasonable expenses, trustees should always consider:

• Whether the expense supports the fund’s investment strategy and charitable purpose.
• Whether the cost is incurred at arm’s length rates and terms.
• Whether the expenditure is necessary for meeting regulatory obligations such as preparing audited financial statements.
• Whether the costs are proportionate to the size and financial capacity of the PAF.
• Whether the expenses align with preserving community funds for annual distributions.

Documenting decisions and obtaining independent advice where necessary can further strengthen a trustee’s ability to demonstrate compliance.

How Giving Advisory Can Help

Partner with Giving Advisory to expertly manage your Private Ancillary Fund (PAF). We provide full support across governance, compliance, and strategy, helping you achieve your philanthropic goals while ensuring your fund remains fully compliant and purpose-driven.

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 private 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. This structure ensures that PAFs focus solely on distributing funds rather than raising them, allowing donors to concentrate on their philanthropic goals without the need for public fundraising. PAFs are regulated by the Australian Taxation Office (ATO) and the Australian Charities and Not-for-profits Commission (ACNC), operating under strict operational guidelines established by the ATO to ensure full compliance with Australian laws and regulations.ws 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.

Disclaimer

The following list includes various charities and organisations across Australia working to address homelessness. While we aim to provide accurate and up-to-date information, details such as services, contact information, and availability may change. Please visit each organisation’s website for the latest updates and support options.

National Homelessness Charities

• Mission Australia – Website | Call: 1800 88 88 68
• Vinnies (St Vincent de Paul Society) – Website | Call: 13 18 12
• Salvation Army Australia – Website | Call: 13 SALVOS (13 72 58)
• Homelessness Australia – Website
• Homeless No More – Website
• Homelessness QLD – Website
• Homeless Healthcare – Website | Call: (08) 6260 2092
• Upper Hunter Homeless Support – Website | Call: 02 6542 5051
• No More Homeless – Website

Youth Homelessness Support

• Yfoundations – Website | Call: (02) 8306 7900
• Backpack Bed for Homeless – Website | Call: 1300 366 560

Women & Family Homelessness Charities

• Women’s Housing Ltd – Website | Call: (03) 9412 6868
• Homelessness We Care – Website | Call: 0488 417 831

Indigenous Homelessness Support

• Aboriginal Housing Victoria – Website | Call: 1800 248 842

Disclaimer

The following list includes various climate change charities and organisations across Australia. While we aim to provide accurate and up-to-date information, details such as services, contact information, and availability may change. Please visit each organisation’s website or the ACNC website for the latest updates.

Environmental Conservation Charities

• Australian Conservation Foundation – Website | Call: 1800 223 669
• Bush Heritage Australia – Website | Call: 1300 628 873
• WWF Australia – Website | Call: 1800 032 551
• Climate Action Network Australia – Website
• Climate Action Newcastle – Website
• Climate Foundation – Website
• Climate and Health Alliance – Website

Climate Policy & Advocacy Charities

• The Climate Council – Website
• The Australia Institute – Website | Call: (02) 6130 0530
• Environment Victoria – Website | Call: (03) 9341 8100
• Climate For Change – Website

Sustainability & Renewable Energy Charities

• Beyond Zero Emissions – Website
• Solar Citizens – Website | Call: (02) 8304 6819
• Friends of the Earth Australia – Website | Call: (03) 9419 8700
• Climate Change Balmain-Rozelle – Website