Rachael Rofe

Ahead of the new financial year, Australians who have more than they need may want to think about putting greater purpose into their financial plans through philanthropy, according to Rachael Rofe, head of the Australian Philanthropic Services (APS) Foundation.

Australia is in the midst of a $5.4 trillion intergenerational wealth transfer, the largest in its history. Fuelled by decades of rising property prices and investment gains, this unprecedented shift is prompting many Australians to rethink the sharing of their wealth. For those seeking to leave a meaningful impact, structured giving is a practical option, with the bonus of significant tax advantages, according to Rofe.

“With the end of the 2024-25 financial year nearing and tax considerations front-of-mind, we encourage those Australians who have more than they need to consider donating or sharing their wealth through gifts.  Unlike previous generations, Australian heirs are more likely to receive wealth at a time when they are less likely need it. The average recipient is in their 50s, typically at or near peak earning years, often already established in career and property ownership,” said Rofe. 

“With more wealth than they need, it is increasingly common to see such Australians undertake philanthropy and establish a giving fund, and use the fund as a long-term vehicle to deliver capital to charities, one that can continue well beyond their own lifetime.”

Givers can choose between establishing their own foundation (private ancillary fund or PAF) or a giving fund in the APS Foundation (a public ancillary fund). Both have the same tax deductibility and givers have the ability to select the eligible charities they wish to support.

“Such funds provide a tax-smart strategy for individuals seeking both an immediate tax deduction and the flexibility to give over time. Structured giving allows a person to pre-fund their giving, that is, to claim the tax deduction while they are still earning an income, then support the causes they care about,” Rofe said.

“Australians are generous – more than 80% give in some form – but what is changing is the structure, scale, and sophistication of that giving. There are now more than 3,000 ancillary funds in Australia, managing billions in capital committed to the community. Contributions to these vehicles in the last financial year (FY24) are anticipated to have reached a record high, building on the exponential growth in contributions over the past decade.”

Financial advisers who suggest structured giving to clients can often save them a large tax bill. If the structure is a PAF, they will still have the care and management of the funds, allowing their client the time to think about their giving and engage with the charities they choose to support. 

“Importantly too, the charitable sector benefits from structured giving because the funds in PAFs and giving funds are invested and earnings are tax-free, growing the amount committed to the community over time.”

While giving during one’s lifetime offers the greatest tax benefits, charitable gifts made through an estate can also be tax-efficient. Appreciated assets bequeathed to Deductible Gift Recipients (DGRs), like ancillary funds, are exempt from Capital Gains Tax (CGT), says Rofe. 

“Structured giving is a tax effective way to bring purpose and joy during a person’s lifetime. It also allows families to pass down not just wealth, but the profound joy of giving,” she said. 

According to data from the Australian Taxation Office (ATO), in the 2021-22 income year, individual Australian taxpayers claimed a total of $4.55 billion in tax-deductible donations. This is an increase from the $4.39 billion claimed in the 2020-21 income year.

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