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.