The gift of giving
Australians are known for their generous spirit of giving. During the 2011 financial year, Australians donated more than $2.2 billion to charity1, and an increasing number of Australians are creating long-term giving structures.
If philanthropy is a priority for you during your lifetime, rather than making a series of charitable donations, have you ever thought about establishing a long-term giving structure?
While you are alive, there are two long-term giving options available:
- You can set up an account within a public ancillary fund (PuAF), or
- You can establish your own private ancillary fund (PAF).
What is a public ancillary fund (PuAF)?
A public ancillary fund (PuAF) is a public charitable fund in which you can establish your own account. You can nominate the charity that you would like to benefit from your donation but while the trustee will consider your nomination, the trustee makes the final decision about the distribution of funds.
A PuAF would be appropriate if you have around $20,000 and want to establish a long-term charitable giving program but do not have a desire to be involved in the investment management or decision making process because, with this type of fund, you do not have any input in the investment strategy of the fund.
What is a private ancillary fund?
A private ancillary fund (PAF) is a long-term giving structure. Instead of a one-off donation, the perpetual nature of this type of fund allows you to create a long-term giving strategy for your nominated charities that will provide funding in your, or your family's, name forever.
It allows you to build an investment portfolio of carefully selected assets for the purpose of supporting philanthropic causes that have significant meaning to you. You might like to consider a PAF if you have around $500,000 for charitable purposes and want to be involved in the ongoing decision-making and application of that money.
What are the tax advantages?
Both a PuAF and a PAF have major tax advantages – all income and capital gains earned are tax exempt and any imputation credits attached to Australian franked dividends are able to be refunded back to the foundation. In addition, donors are able to claim tax deductions for moneys contributed to a foundation.
In determining the most suitable option for you, you should consider how much you would like to give and how involved you want to be in the process of giving as well as the reasons that drive your philanthropy.
1 Australian Centre for Philanthropy and Nonprofit Studies (CPNS), Giving Australia, 2013