Tag: corporate trustee

Can You Set Up a Private Foundation Through Your Company?

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:

  1. Create the trust deed setting out the charitable purposes and operating rules.
  2. Appoint a corporate trustee, often a company limited by shares or guarantee.
  3. Register the fund as a charity with the ACNC.
  4. Apply to the ATO for DGR endorsement, tax concession charity status and income tax exemption.
  5. Donate capital to establish the opening value of the trust fund.
  6. Develop an investment strategy consistent with the fund’s objectives.
  7. Maintain financial records and financial statements.
  8. 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. Our Administration & Compliance service is designed to support business owners through exactly this process, from establishment through to ongoing reporting obligations.

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.

Brad Seeto

Charitable Trust vs Private Foundation in Australia

When it comes to structured giving in Australia, one of the most common questions is the difference between a charitable trust and a foundation in Australia. Both options are widely used by private individuals, families, and organisations looking to create a lasting legacy through charitable activities. However, they differ in legal structures, tax treatment, and how they manage assets.

Understanding these differences is essential before deciding which structure is right for your charitable purposes. While this guide provides a clear overview, it does not constitute legal advice, and you should always seek professional advice to ensure compliance with relevant laws and regulations.

What Is a Charitable Trust?

A charitable trust is a type of trust fund established under trust law, where trustees manage assets for a specific charitable purpose such as advancing education, social welfare, or human rights.

A charitable trust structure is created through a governing document known as a trust deed. This document outlines the responsibilities of the initial trustees, how trust assets are managed, and how income is distributed. The trust itself does not have a separate legal identity; instead, the trustees act on behalf of the charitable entity.

Charitable trusts can take different forms, including a standalone charitable trust or a testamentary charitable trust established through a will. In some cases, families use testamentary trust arrangements to leave money or assets for charitable organisations after their passing, creating a long-term positive impact.

From a tax perspective, charitable trusts may be eligible for tax concessions if registered with the not-for-profit commission (ACNC) and endorsed by the Australian taxation office. If the trust qualifies as a deductible gift recipient, it can receive tax-deductible donations, which is a major benefit for fundraising activities.

Charitable trusts are commonly used by family trusts or individuals who want a structured way to manage assets and distribute funds over time. They offer strong asset protection and flexibility, but they must operate strictly within their stated charitable purposes and legal requirements.

What Is a Private Foundation?

The Australian equivalent is typically a giving fund (previously known as a private ancillary fund). A private ancillary fund is a type of charitable fund that allows private individuals, families, or corporate groups to make tax-deductible donations and then distribute those funds to other registered charities over time.

Unlike a traditional charitable trust, a private ancillary fund is designed specifically for structured giving and grant-making. It is regulated by both the not-for-profit commission, ACNC and the Australian taxation office, ensuring transparency and accountability.

A private foundation usually has a corporate trustee, giving it a more formal organisation’s legal structure. This setup provides a clearer legal identity and can simplify governance, especially for larger funds. These foundations cannot directly conduct charitable activities; instead, they provide grants to other charitable organisations that carry out the work.

Private ancillary funds must follow strict rules, including minimum annual distribution requirements and limitations on fundraising activities. For example, they typically cannot solicit funds from the public, which distinguishes them from public ancillary fund structures or community foundations that are designed to receive income from a broader donor base.

One of the key attractions of private foundations is the tax advantages they offer. Donations made to a private ancillary fund are tax-deductible, and the fund itself may benefit from income tax exemptions. This makes them an appealing option for high-net-worth individuals looking to manage money in a tax-effective way while supporting charities.

Key Differences in Structure

Understanding the key differences in structure is crucial when comparing a charitable trust vs. a private foundation in Australia.

First, legal identity is a major distinction. A charitable trust does not have a separate legal identity, whereas a private foundation operates as a distinct legal entity. This affects governance, liability, and how the organisation can borrow money or enter into contracts.

Second, purpose and function differ. Charitable trusts can directly carry out charitable activities, such as delivering social services or advancing education. In contrast, private foundations (private ancillary funds) primarily act as grant makers, distributing funds to other registered charities rather than operating programs themselves.

Third, funding and fundraising models vary. Charitable trusts may receive income through donations, government grants, or other sources, and they can sometimes solicit funds depending on their structure. Private foundations, however, are typically funded by a single donor or family members and have restrictions on public fundraising.

Fourth, regulatory requirements are stricter for private foundations. They must comply with detailed guidelines set by the profits commission, ACNC and the Australian taxation office, including minimum distribution rates and reporting obligations. Charitable trusts also need to ensure compliance, but their obligations can be less prescriptive depending on their setup.

Finally, flexibility is an important consideration. Charitable trusts offer more flexibility in how funds are used and managed, including options like fixed trust arrangements or sub-fund structures. Private foundations are more rigid but provide clearer frameworks for structured giving and tax benefits.

Should I Set Up a Charitable Trust or a Private Foundation?

So, should I set up a charitable trust or a private foundation? The answer depends on your goals, resources, and desired level of involvement.

If you want to directly manage charitable activities, maintain flexibility, and potentially involve family trusts or a testamentary trust, a charitable trust may be the better option. It allows trustees to act in the best interests of the charitable purpose while adapting to changing needs.

On the other hand, if your goal is to create a structured, tax-effective fund that supports other charities through grants, a private foundation (private ancillary fund) may be more suitable. It offers strong tax benefits, clear governance, and a streamlined way to create a lasting legacy.

Ultimately, both options play a vital role in Australia’s not-for-profit sector. Whether you choose a charitable trust or a private foundation, the key is to align your structure with your charitable goals, ensure compliance with legal requirements, and focus on creating meaningful social impact.

If a private ancillary fund looks like the right fit, our guide to setting up a Private Ancillary Fund and who can help is a practical next step before you engage your legal and financial advisers.

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.

Brad Seeto