Todd Stanford
Australia ranks third in the world for giving, with 73% of Australians making a charitable donation.
Todd Stanford assists his private clients at Profile Financial Services with advice and strategies surrounding their philanthropic endeavours. Todd outlines the options for structured charitable giving in Australia.
Charitable Foundations available
- Private Ancillary Funds (PAFs)
- Public Ancillary Fund or Charitable Trusts
- Community Foundations – sub-funds, giving circles
What is a PAF?
A PAF is a type of private charitable trust established and operated in Australia. It is maintained under a Will or an instrument of trust (e.g. trust deed) under State or Territory law.
A private charitable trust or ‘PAF’ provides the most control over grant making decisions – and is very ‘hands on’. It can be ‘seen as a personal statement, even if only visible among a close-knit group’. [1]
To justify the ongoing administration costs, a private trust or PAF is recommended to have capital of at least $500,000.
How is a PAF structured and governed?
A PAF must have a company as the trustee and the company board is usually comprised of family members. It must contain at least one independent director (the ‘Responsible Person’).
PAFs are normally exempt from income tax and other federal taxes. They are also eligible to receive cash refunds of franking credits. Testamentary gifts made to a PAF also have Capital Gains Tax (CGT) exemption.
A PAF is endorsed by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR) Item 2 so can receive tax deductible gifts.
PAFs are governed by ATO Guidelines and have Australian Charities and Not-for-profits Commission (ACNC) compliance obligations.
For smaller donations from $50,000, donating to a Public Ancillary Fund (PuAF) or a community sub-fund may be more effective.
What is a Public Ancillary Fund (PuAF)?
A PuAF is a communal tax exempt philanthropic trust that enables a number of donors to establish and name a ‘sub fund’ under the broader PuAF structure. With a sub fund, the donor does not need to worry about the trustee obligations and responsibilities associated with a Private Ancillary Funds (PAF) and can put their energy into choosing charities they would like to support.
Benefits of a Public Ancillary Fund
- Less money to establish – the PuAF acts as an aggregator to provide access to a deductible charitable foundation without the funds required for a PAF.
- Simple & less time consuming– as the trustee already exists and handles the administration, investment and compliance matters, the donor can focus on the granting.
- Quick to set-up – A sub-fund can be established immediately, as there is no requirement to set-up a new trust or trustee company. A donor simply opens a new ‘sub fund’. There is no cost to do this.
- Tailored – a donor can name the sub-fund and grants made to charities will refer to this name. Anonymous grants are also possible.
- Taxation benefits – the money donated to your sub-fund is usually tax deductible in the year of the donation (or can be spread over a period of up to 5 tax years). It is a tax-exempt structure, so the philanthropic dollar goes further.
- Portability – In certain circumstances, it’s possible to transfer assets from a PuAF into your own PAF down the track. It requires the approval of the Trustee and Australian Taxation Office (ATO).
Who can donate to a PuAF?
Anyone can donate to a donor ‘sub-fund’ and its purpose is to collect donations from the public. There are no limits on the amount that can be donated. This is contrasted to a PAF where a PAF must not solicit funds from the public and is limited in any one year from accepting donations exceeding 20% of the PAF value from non-associates of the founder.
There are many other ways to also give
There are many ways to contribute including making donations via Community foundations such as the Salvation Army which funds many community activities.
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