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:

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

Charitable giving and tax deductions

The $1 billion quiet achiever in Australian philanthropy

banner

Most viewed in recent weeks

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

The greatest investor you’ve never heard of

Jim Simons has achieved breathtaking returns of 62% p.a. over 33 years, a track record like no other, yet he remains little known to the public. Here’s how he’s done it, and the lessons that can be applied to our own investing.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Welcome to Firstlinks Edition 552 with weekend update

Being rich is having a high-paying job and accumulating fancy houses and cars, while being wealthy is owning assets that provide passive income, as well as freedom and flexibility. Knowing the difference can reframe your life.

  • 21 March 2024

Why LICs may be close to bottoming

Investor disgust, consolidation, de-listings, price discounts, activist investors entering - it’s what typically happens at business cycle troughs, and it’s happening to LICs now. That may present a potential opportunity.

Latest Updates

Shares

20 US stocks to buy and hold forever

Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Property

Baby Boomer housing needs

Baby boomers will account for a third of population growth between 2024 and 2029, making this generation the biggest age-related growth sector over this period. They will shape the housing market with their unique preferences.

SMSF strategies

Meg on SMSFs: When the first member of a couple dies

The surviving spouse has a lot to think about when a member of an SMSF dies. While it pays to understand the options quickly, often they’re best served by moving a little more slowly before making final decisions.

Shares

Small caps are compelling but not for the reasons you might think...

Your author prematurely advocated investing in small caps almost 12 months ago. Since then, the investment landscape has changed, and there are even more reasons to believe small caps are likely to outperform going forward.

Taxation

The mixed fortunes of tax reform in Australia, part 2

Since Federation, reforms to our tax system have proven difficult. Yet they're too important to leave in the too-hard basket, and here's a look at the key ingredients that make a tax reform exercise work, or not.

Investment strategies

8 ways that AI will impact how we invest

AI is affecting ever expanding fields of human activity, and the way we invest is no exception. Here's how investors, advisors and investment managers can better prepare to manage the opportunities and risks that come with AI.

Sponsors

Alliances

© 2024 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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.