For business owners who want to formalise their charitable giving, a common question is: can you set up a private foundation through your company in Australia? The short answer is yes.
In Australia, a company can establish a philanthropic structure such as a private ancillary fund (currently known as giving funds). This allows individuals, family members and businesses to make fully tax deductible donations and support charitable causes through a strategic approach to long-term giving.
A well-structured private foundation can offer tax benefits, tax free growth on investments, and a lasting impact for the charities and charitable organisations you care about.
What Is Meant by a Private Foundation in Australia?
The term “private foundation” is commonly used to describe a private ancillary fund (PAF). A PAF is a type of charitable trust designed for structured giving.
A PAF must be:
- Established under a trust deed
- Registered with the Australian Charities and Not-for-profits Commission
- Endorsed by the Australian Taxation Office as a deductible gift recipient (DGR) and income tax exempt charity
- Managed by a corporate trustee or trustee company
- Operated in accordance with the private ancillary fund guidelines
Unlike a public ancillary fund (PuAF), a private ancillary fund cannot solicit funds from the public. Instead, it is generally funded by a founder, family group or private company.
Once established, the fund can receive tax deductible donations, invest those funds in line with an investment strategy, and distribute money each financial year to other charities that are endorsed as DGRs.
Can a Company Establish a Private Ancillary Fund?
Yes, a company can establish a private ancillary fund.
This is one of the most effective ways to set up a foundation through company Australia. The company may contribute money or other eligible assets to the fund and claim tax deductions, subject to Australian tax law and its particular circumstances.
The company itself does not own the charitable trust fund. Instead, the company may: act as the corporate trustee, make tax deductible donations to the fund, cover some ongoing management costs and involve directors and family members in governance.
Because the PAF is a registered charity and income tax exempt charity, investment earnings are generally exempt from income tax. This creates a tax efficient structure for charitable giving and can significantly enhance the value available for philanthropic purposes over time.
For businesses seeking a more flexible alternative, some community foundations and public ancillary funds offer sub fund arrangements for sub fund holders, allowing structured giving without establishing a standalone charitable trust.
How the Structure Typically Works
When a company establishes a private foundation, the legal structure typically involves the following steps:
- Create the trust deed setting out the charitable purposes and operating rules.
- Appoint a corporate trustee, often a company limited by shares or guarantee.
- Register the fund as a charity with the ACNC.
- Apply to the ATO for DGR endorsement, tax concession charity status and income tax exemption.
- Donate capital to establish the opening value of the trust fund.
- Develop an investment strategy consistent with the fund’s objectives.
- Maintain financial records and financial statements.
- Meet annual reporting obligations, minimum distribution requirements and annual audit requirements.
The fund must distribute a minimum percentage of its net assets each financial year to eligible charities.
Is This the Right Structure for Your Business?
A private ancillary fund is ideal for businesses and families seeking a sophisticated philanthropic structure for long-term giving. It provides control, flexibility and meaningful tax concessions.
However, there are establishment costs, ongoing costs and compliance requirements. Directors must ensure the fund meets all obligations under tax law, the private ancillary fund guidelines and ACNC governance standards.
For some, a testamentary charitable trust, public ancillary fund or sub fund may be more suitable.
Before proceeding, it is important to seek advice from legal, accounting and philanthropic specialists who can assess your tax status, business structure and giving goals.
With the right structure in place, your company can turn profit into purposeful giving and create a lasting legacy for Australian charities.
How The Giving Advisory Can Help
At The Giving Advisory, we understand that initiating and maintaining conversations about giving in the family can sometimes be challenging. Our services team is here to help guide your family through the process of family philanthropy, whether you’re starting a donor advised fund, planning your first charitable contribution, or seeking advice on how to align your giving with your family’s values.
If you want to learn more about how to engage your family in giving and create a lasting philanthropic legacy, contact us today. We’re here to help you reach your philanthropic goals and make a positive impact together.