Creating a lasting financial legacy through philanthropy

Philanthropy is about giving and Australians are well known as being very generous. This generosity is often essential alongside governmental responses to societal needs.

Consider the billion dollar impact of floods and bushfires, or the COVID pandemic related issues we as businesses and individuals are all continuing to face. 

For those in a position able to help others financially, considering the inclusion of an investment structure designed for philanthropic purposes can be a meaningful part of an individual, family or association’s overall financial position, and one which can continue across future generations for the benefit of many worthy causes to come. 

What is a PAF? Formalised Philanthropy and Private Ancillary Funds

For those wanting a formalised philanthropic focus as part of their financial position, the use in Australia of Private Ancillary Funds (PAFs) has been rising steadily. In the last ten years PAF distributions are growing at an enormous rate. In the 2016 financial year $457 million was distributed to Australian charities from PAFs. In early 2020 there were almost 3000 PAFs in Australia with combined net assets of $12 billion.

A PAF is a type of charitable trust established to provide an investment structure for philanthropic purposes, providing grants to eligible charities over time. PAFs are available to individuals, families or organisations and can be an efficient, tax effective way to put a structure around your philanthropic objectives. Controlled by a company as trustee, the board of a PAF is generally comprised of family members but must have at least one independent director. Amounts are contributed to the Trust (taking into consideration certain limitations), for which donors receive a tax deduction. These deductions can be spread over as many as 5 years.

Generally, a PAF must distribute a minimum of 5% of the PAF’s assets to deductible gift recipients each financial year. Deciding on the charities to support can be a very rewarding experience, but also difficult when there are so many worthy eligible charities. If involving other family members such as your children or grandchildren, it can be a satisfying means of family engagement and encouraging social awareness for future generations. It also means you can create an enduring legacy in support of charitable causes that are important to you, or in the memory of loved ones.

PAFs are governed by ATO guidelines and have Australian Charities and Not-for-profits Commission (ACNC) compliance obligations. Therefore, for individuals who want to give on an ad-hoc basis, a PAF may not be required, particularly in the case of the individual having limited time to devote to giving.

Philanthropy as part of your financial position 

Understanding how a PAF works and obtaining relevant professional advice is critical. For example, it is generally suggested that a minimum of $1 million is made as an initial donation to a newly established PAF to improve cost effectiveness of the structure. 

A PAF can then invest these funds in a wide range of investments (taking into account certain restrictions) including cash, equities, fixed interest securities and property. The directors must develop a written investment policy. When certain conditions are met, earnings on the investments are income tax exempt. 

A financial adviser, such as those at Accru Wealth Management, are in a position to be able to provide trustees with advice around the management and administration of these investment assets.

For more information on the use of Private Ancillary Funds, contact one of our Financial Specialists.


The information provided in this blog is general in nature. It has been prepared without taking into account any person’s individual objectives, financial situation or needs.

Before acting on any information in this blog, you should consider its appropriateness to you, having regard to your objectives, financial situation and needs, or seek professional advice from a financial advisor.

Accru are not recommending any investment or product, the investments mentioned are examples only. Please seek professional advice or conduct your own research when considering an appropriate investment.  

About the Author
Kate Rhodes
Kate is an extremely focused and driven individual, which for her clients translates into providing them with a personable and proactive service. Her superior time management and organisational skills allow her to be on the front foot with the service she provides and ensures she attends to her clients’ needs in a timely manner.
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