A private ancillary fund, often shortened to PAF, is a private charitable trust used for structured, long term giving in Australia. It lets an individual, family or business set aside money, invest it, and give to charity in a planned way over many years rather than as a single one off donation. If you want more control over your giving and a lasting way to support causes you care about, a PAF is one of the main vehicles built for exactly that purpose.
What is a private ancillary fund?
A private ancillary fund is a type of charitable trust that holds and invests a pool of capital and then distributes money to eligible charities over time. It sits within a broader family of structures known as ancillary funds. The word private is the key part. A PAF is funded by a single person, family or company and cannot ask the general public for donations. That is what separates it from a public ancillary fund, which is allowed to raise money from the public. A PAF gives founders their own dedicated giving structure that they control and shape around their values.
How does a private ancillary fund work?
A PAF works in three broad stages. First, someone contributes money or assets into the fund. These contributions are irrevocable gifts, which means once the money goes in it is committed to charitable purposes and cannot be taken back. Second, the fund invests that capital so it can grow over time and generate income. Third, the fund distributes grants to eligible charities each year. This cycle of investing and granting is what makes a PAF an ongoing giving vehicle rather than a simple donation. Many families who run giving funds Sydney and across the country like this structure because it turns a lump sum into decades of support for the causes that matter to them. The founders decide which charities receive grants, so the giving stays personal and intentional year after year.
Private ancillary fund vs public ancillary fund
The simplest way to tell the two apart is who can put money in. A private ancillary fund draws its funding from one source, usually a family or a business, and does not fundraise publicly. A public ancillary fund can invite donations from anyone. PAFs give founders more direct control over the fund and its granting decisions, while public funds suit donors who want to give into a shared structure run by someone else. Both hold deductible gift recipient status and both must distribute a minimum amount each year, though the required percentages differ.
What are the tax benefits of a private ancillary fund?
A PAF holds deductible gift recipient, or DGR, status, so contributions made into it are tax deductible. If a large contribution creates a bigger deduction than you can use in one year, you can choose to spread that deduction across up to five years. The fund itself is also income tax exempt and can claim refunds of franking credits on its investment income, which helps the capital base grow faster and fund more giving over the long term.
Private ancillary fund rules and obligations
PAFs operate under a formal set of rules known as the PAF Guidelines. Each fund must distribute a minimum percentage of its net assets to charity every financial year. Grants can only go to eligible item 1 DGRs, not to other ancillary funds. A PAF needs a corporate trustee and at least one responsible person who represents the wider community and helps keep the fund accountable. Trustees must keep proper records and arrange an annual audit or review. Oversight sits with the Australian Taxation Office and the Australian Charities and Not for profits Commission, so compliance and good governance are ongoing responsibilities.
How much does it cost to set up a private ancillary fund?
Setting up a PAF involves establishment costs for the trust deed and corporate trustee, plus ongoing costs for administration, investment management and the annual audit. Because of these fixed costs, a PAF tends to make financial sense once the initial contribution reaches a level where the tax benefits and long term giving outweigh the running expenses. Many advisers suggest a substantial starting contribution so the fund is cost effective from day one.
Who is a private ancillary fund right for?
A PAF suits individuals, families and businesses who plan to give significant amounts over the long term and want structure, control and a lasting legacy. It works especially well for families who want to give together across generations and build a shared tradition of philanthropy.
How to set up a private ancillary fund
- Decide on your structure and trustee
- Establish the trust deed and corporate trustee
- Apply for DGR endorsement and register with the ACNC
- Fund the PAF and set your investment approach
- Begin granting to your chosen charities
Bottom Line
A private ancillary fund is a powerful way to give with purpose, structure and control over the long term. If you are weighing up whether a PAF fits your goals, getting tailored advice early will help you set it up the right way and make the most of the tax benefits on offer.
