Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 115

Last minute tax deductions in a public ancillary fund

Although it’s only days until the end of the financial year, there is still time to establish a tax deduction by establishing a sub-fund within a public ancillary fund, such as the Australian Philanthropic Services Foundation. Unlike a private ancillary fund (PAF), there is no requirement to establish a new trust or trustee company, so a sub-fund within a public ancillary fund can be established immediately, and there’s no set-up cost to do this.

(Declaration of interest: I am the pro bono Chairman and Founder of Australian Philanthropic Services (APS), a not-for-profit organisation which sets up and administers private ancillary funds and public ancillary funds as well as providing grantmaking advice. See this link for more details).

What is a public ancillary fund?

A public ancillary fund is a philanthropic structure that allows a planned approach to charitable giving. Amounts donated by you to your own sub-fund within a public ancillary fund are immediately tax deductible, while donations to eligible charities from your sub-fund can occur over many years.

The ATO has a fact sheet for public ancillary funds here.

The benefits of public ancillary funds include:

  • Simple – the fund has the administration, investment and governance activities as the trustee, leaving donors solely to think about the charities they would like to support.
  • Taxation benefits – the money donated into a sub-fund is tax deductible in the year of the donation and the fund is a tax exempt structure, so the philanthropic dollar goes further.
  • Portability – in certain circumstances, it’s possible to transfer assets from a public ancillary fund into a private ancillary fund, or PAF.
  • Naming – the sub-fund can have a specific name, such as a family name, and grants to charities from the sub-fund will refer to this name. Anonymous grants are also possible.

Public and private ancillary funds are growing rapidly and becoming the preferred philanthropic structure for wealthier Australians.

There are a few things to consider when comparing public ancillary funds:

CC Table1 260615

CC Table1 260615

Grantmaking and choosing a charity

Last year, APS surveyed clients about the challenges and satisfaction they experience in giving away money. The responses and needs identified were varied, reflecting the diverse and personal nature of private philanthropy. The biggest challenge identified across the board however, was deciding which charities to fund.

Charities supported from a public ancillary fund must have DGR Item 1 status, of which there are around 25,000 in Australia.

In choosing a charity, many clients want to know that their donation makes a real difference.

It is important to note that there is no right or wrong way when it comes to giving. While some will approach it more scientifically, for others it’s the act of giving itself that is important. For most, grantmaking is a journey that evolves and changes over time.

Here are a few key things to consider:

  • Work out what you want to achieve. The more specific you are, the easier it is to work out whether you’ve made any progress. Who do you want to help? Where? What kind of approach resonates most with you?
  • Less is more. You can’t solve all the problems of the world. Choose whichever issue you feel most connected to, and leave the rest to others.
  • Make sure that the organisation you want to support has clear goals defined, and is measuring their progress towards achieving these goals.
  • Ask yourself is it more important to you to reach a certain, sizable number of beneficiaries, or hear individual stories and know that you’ve made a tangible difference in the lives of a few?
  • Decide whether you are okay with a change of plan and lessons learned from the process, or would you consider the project a failure if it didn’t achieve the outcomes as planned?
  • Keep in mind that building the capacity of a charity may be another valuable way to support a charity: measuring impact (evaluation), fundraising, and effective management (administration) also cost money.

APS offers services to assist clients with grantmaking, but obviously for this financial year, anyone interested will need to move quickly. For next financial year, the best results come from getting started early to identify your philanthropic goals and learn about your areas of interest and the charities you might want to support.

 

Chris Cuffe is co-founder of Cuffelinks and Chairman and Founder of Australian Philanthropic Services. This article is for general education purposes and does not address the specific circumstances of any individual investor.

For more details, contact hello@australianphilanthropicservices.com.au.


 

Leave a Comment:

     

RELATED ARTICLES

Maximising the impact of charitable giving

The $1 billion quiet achiever in Australian philanthropy

Philanthropy is growing, but what’s the best way to give?

banner

Most viewed in recent weeks

The creator of the 4% rule and his own retirement

The 4% withdrawal rate in retirement is an industry standard, a level where a retiree could be confident of not running out of money. Its creator Bill Bengen explains its use in this interview with Michael Kitces.

Welcome to Firstlinks Edition 383

One of the downsides of Donald Trump commanding the headlines is that we skim over other significant issues. For example, few Australians read the China Daily News or coverage of its contents, missing official statements that are terrifying hundreds of Australian producers. China says Australia will 'pay tremendously' for its recent lack of respect.

  • 12 November 2020

Seven items your estate plan may have left out

Most people pay cursory attention to estate planning, limited to a will and maybe a chat with the children. Those who want to make their intentions clearer and easier for others should check these quick tips.

Graeme Shaw on why investing is at a pivotal moment

Company profits have not improved for many years but higher valuations have been driven by falling rates and excess liquidity. Conditions do not suit a value and contrarian manager but here are some opportunities.

Alex Vynokur: ETFs deliver what’s written on the can

Exchange Traded Funds have moved well beyond indexes to a range of sectors, themes, smart beta and active. They are attracting strong flows from both experienced investors and newcomers.

11 key findings on retirement dreams during the pandemic

A mid-pandemic survey of over 1,000 people near or in retirement found three in four are not confident how long their money will last. Only 18% felt their money was safe during a strong economic downturn.

Latest Updates

Retirement

Five ways the Retirement Review points to new policies

The Retirement Income Review goes much further than an innocent-sounding 'fact base', and is sure to guide policies in the run up to the next election. It will change how we think about retirement incomes.

Property

Steve Bennett on investing in direct property for the long term

As people stayed home during the pandemic, a bearish view swept over most property sectors, but many have thrived and prices have recovered rapidly. The best opportunities are in long leases with quality tenants.

Retirement

Retirement Review gives strong views on hoarding of super

The Review includes some profound findings, most notable that retirement income should include drawing down far more capital. Expect post-retirement products to proliferate under a Retirement Income Covenant.

Superannuation

Paul Keating on why super relies on “not draining the bath”

Paul Keating is the champion of compulsory superannuation as the central means of funding retirement. In the wake of the Retirement Income Review, he is at his passionate best defending the system, with Leigh Sales.

Latest from Morningstar

Is your portfolio too heavy on technology stocks?

Investors with heavy allocations to a broad US index should check how much is exposed to tech stocks, especially when valuations look a bit steep. It might be time to reallocate to other sectors or styles.

Investment strategies

Beware of burning down the barn to bury the debt

At some point, policymakers will turn to the task of deleveraging, to work off massive debt burdens built up during the pandemic. Australia is already ticking the boxes on many policies used in the past.

Superannuation

New bankruptcy rules may have a domino impact on SMSF pensions

During COVID, bankruptcy rules have allowed small businesses to trade while insolvent. It may mean an SMSF is hit by the collapse of a business leaving trustees struggling to meet their own legal obligations.

Sponsors

Alliances

© 2020 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use.
Any general advice or class service prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, has been prepared by without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.