Businesses often increase their tax-deductible donations to charities at this time of year. However, you can support the community in a tax-effective way over the long term by establishing a private ancillary fund, a sub-fund in a public ancillary fund, or through Demeter Legacy Fund.

Why set up a philanthropic structure?

Tax deductions are a great incentive to set up a philanthropic structure of your own, but that’s by no means the full story. People choose to establish a foundation for a range of reasons, including a wish to involve the family in giving, concerns around succession planning, and a desire to be actively involved in the charities they support over the long-term.

We help clients to articulate what they are passionate about, the ways in which they would like to make a difference, and how they should focus their giving.

We also find clients who receive a taxable gain (such as a share sale or large redundancy payout) often want to share their good fortune with others, but do not want to make a quick decision and donate the entire amount in one go.

Establishing a private ancillary fund enables you to receive an immediate tax deduction while the choice of charity can be made at a later stage, when there’s more time for research.

What is a private ancillary fund?

A private ancillary fund (PAF) is a type of charitable trust – your own foundation that you control with the purpose of providing funding to charities. Put simply, when you establish a PAF, you donate capital into it (usually an initial donation of $500,000-$1 million) and receive an immediate tax deduction for the donation. The capital is then invested over the long term, and a minimum of 5% of the value of the PAF assets must be distributed as grants to charities each year.

What is a sub-fund in a public ancillary fund?

A public ancillary fund (PuAF) has the same tax advantages as a PAF but is a communal structure. Unlike a PAF, there is no requirement to establish a new trust or trustee company, so a sub-fund can be established immediately (you could even do so just a few days before 30 June), and there’s no set-up cost to do this. Amounts donated are usually smaller, with a minimum of $20,000.

Demeter Legacy Fund

For an alternative to establishing a PAF, you may wish to become a member of the Demeter Legacy Fund. This will enable you to feel confident knowing you can claim an immediate deduction. As a member, you’ll also have a say in where Demeter Legacy donates its funds, by participating in the grantee selection voting process later in the year.  

For more information please contact me, Gerri Scott, on (08) 9382 1970 or gerri@demeterwealth.com.