In the landscape of philanthropy within Australia, Ancillary Funds have become a cornerstone for structured giving, providing a conduit through which individuals, families, and corporations can contribute to the nonprofit sector in a meaningful and tax-effective way. Predominantly, there are two types of Ancillary Funds recognized under Australian law: Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs). Both serve as vehicles for philanthropic efforts but are distinguished by their operational frameworks, governance structures, and regulatory requirements. We will elucidate the primary differences between these two forms of Ancillary Funds to assist donors in making informed decisions about their philanthropic endeavors.
Private Ancillary Funds (PAFs):
Private Ancillary Funds, are private charitable trusts designed to provide a means for individuals, families, or entities to make lasting philanthropic contributions.
Public Ancillary Funds (PuAFs):
Public Ancillary Funds, on the other hand, are designed to pool donations from multiple donors for the purpose of distributing to eligible nonprofit entities.
The following chart serves as a quick reference to understand the fundamental differences between PAFs and PuAFs:
| Feature/Requirement | Private Ancillary Funds (PAFs) | Public Ancillary Funds (PuAFs) |
| Definition | Private trusts for individuals, families, or entities to contribute privately to philanthropy. | Trusts that pool donations from the public for distribution to eligible charities. |
| Donor Control | High degree of control over investment and grant distribution decisions. | Less control; managed by a board or committee, although donors can specify preferences. |
| Privacy | Higher privacy, as they do not need to solicit public donations. | Lower privacy due to the requirement of public fundraising activities. |
| Fundraising | Do not require fundraising from the public. | Must solicit and receive donations from the public. |
| Regulation | Regulated by the ACNC and must comply with ATO guidelines. | Also regulated by the ACNC with similar ATO guidelines but additional public fundraising scrutiny. |
| Minimum Annual Distribution | Must distribute at least 5% of the fund’s net assets annually. | Must distribute at least 4% of the fund’s net assets annually. |
| Tax Benefits | Contributions are tax-deductible, and the fund is exempt from income tax. | Similar tax benefits: contributions are tax-deductible, and the fund is exempt from income tax. |
| Ideal For | Individuals or families seeking to establish a private philanthropic legacy under their direction. | Those looking to contribute to a collective effort, engaging with the community and benefiting from pooled resources. |
Making the Choice:
The decision between establishing or donating to a PAF or a PuAF largely depends on the donor’s objectives, the desired level of involvement, and the need for privacy. PAFs offer a more controlled and private form of philanthropy, suitable for individuals or families wishing to establish a philanthropic legacy under their direction. PuAFs, conversely, are ideal for those looking to contribute to a collective philanthropic effort, engaging more directly with the community and benefiting from the pooling of resources.
If you need help understanding what this means for your charity, please get in contact with Warlows Legal today using the contact information below.
