Setting up a Private Ancillary Fund (PAF) is a powerful way to take control of your charitable giving and create a lasting philanthropic legacy. But who exactly can establish a PAF—and what’s involved in getting started?
This blog explores who can set up a Private Ancillary Fund, what’s required, and the key considerations before taking the next step.
Who Can Set Up a Private Ancillary Fund?
A Private Ancillary Fund can be established by a variety of people or entities, including:
- Individuals: People who want to manage their charitable giving privately and strategically
- Families: Families seeking to create an intergenerational giving vehicle or family foundation
- Private Companies: Business owners who wish to align philanthropy with corporate values
- Trusts: Certain trusts, provided they meet legal requirements for establishing a PAF
Typically, Private Ancillary Funds are set up by individuals or families with significant wealth who wish to formalise their giving and enjoy the tax advantages that come with a structured fund.
Legal and Regulatory Requirements
While anyone can technically establish a Private Ancillary Fund, there are legal and governance obligations that must be met.
A PAF must have a trustee, which can be either an individual or a corporate trustee. Importantly, the trustee board must include at least one “responsible person”—someone with a degree of responsibility to the community, such as a lawyer, accountant, or doctor. This is designed to ensure accountability and proper oversight of the fund’s operations.
The trustee is responsible for complying with regulations set out by the Australian Taxation Office (ATO) and the Australian Charities and Not-for-profits Commission (ACNC). This includes making minimum annual distributions, maintaining audited financial statements, and fulfilling reporting requirements.
For a detailed explanation of compliance obligations and fund management, it’s worth exploring more about Private Ancillary Funds to understand the responsibilities involved.
Is There a Minimum Amount to Start?
Although there’s no legal minimum to establish a PAF, it’s generally recommended to start with at least $500,000 to $1 million. This is because the ongoing costs—such as audits, compliance, and administration—can otherwise outweigh the benefits at lower fund sizes.
Starting with a sufficient capital base allows for meaningful grant-making, while covering the operational costs of managing the fund.
Key Considerations Before Setting Up a PAF
Setting up a Private Ancillary Fund is not just a financial decision; it’s a long-term commitment to structured philanthropy. Some key questions to ask yourself include:
- Am I committed to supporting charitable causes over many years?
- Am I prepared to meet the ongoing governance and compliance obligations?
- Do I have access to professional advisers to assist with legal, tax, and investment matters?
A PAF requires careful planning and a willingness to stay actively involved in its operation.
Benefits of Setting Up a PAF
There are several advantages to establishing a PAF:
- Immediate tax deduction: Donations into the fund are tax-deductible in the year they’re made
- Flexibility: You can decide which eligible charities to support over time
- Legacy building: A PAF can serve as a family foundation, encouraging philanthropy across generations
A PAF provides greater control and flexibility compared to making one-off donations.
Alternatives to a Private Ancillary Fund
For those who don’t want the administrative responsibilities of managing a private fund, a Public Ancillary Fund may be a better option. Public Ancillary Funds allow donors to make tax-deductible donations into a public fund that then distributes grants to charities on their behalf.
Alternatively, direct giving without a fund structure may be preferable for those wanting a simpler approach to philanthropy.
Wrapping Up
A Private Ancillary Fund offers an excellent way for individuals, families, and businesses to engage in structured giving while enjoying tax benefits and building a lasting philanthropic legacy.
While anyone can technically set up a PAF, it requires a trustee structure, governance commitments, and a readiness to comply with regulatory requirements. If you’re considering establishing a PAF, it’s wise to seek advice from legal, tax, and philanthropic professionals to ensure it’s the right fit for your charitable goals.
