philanthropy-africaAustralia’s culture of giving

Early in life, while you are accumulating assets and developing your financial acumen, you will probably donate to your favourite charities on an ad hoc basis. However, once your personal wealth has grown to a certain level, you may wish to start thinking of the good that you want to do in this world and the legacy you wish to leave.

Some people choose to take their commitment to giving to a higher level. Known as philanthropists, these are usually high net worth individuals who have both the means and the motivation to make a difference through their support of charities, foundations and not-for-profit organisations.

Planning your philanthropic approach

Not everyone’s fortunate enough to be in a financial position to help others in the community through monetary donations. But for those who are, there are various drivers which further their generosity as well as ways to increase the long-term impact of their giving.

Like many things in life, you can proceed with little – or lots – of planning. When it comes to you and your family giving back, proper planning will enhance the overall impact you are able to make to whichever cause that’s important to you.

The benefits of a Private Ancillary Fund

A Private Ancillary Fund (PAF) is a form of charitable trust introduced by the Federal Government in 2001 to encourage greater personal and corporate philanthropy in Australia and provides a mechanism to enhance your giving through tax-effective investing.

Its relatively simple and flexible structure allows you to fulfil your philanthropic goals, engage deeply with the organisations you support, and leave an enduring legacy.

PAFs enjoy Deductible Gift Recipient status which means donations made by individuals and companies are tax deductible. PAFs can also apply for endorsement as a tax concession charity so any income they earn is not taxed.

PAFs cannot receive contributions from the public. They must have a corporate trustee along with a ‘responsible person’, invest wisely in accordance with a written policy, and distribute at least five per cent (or $11,000, whichever is greater) of the value of the trust each year to ATO approved non-profit organisations.

The biggest trigger was Dad setting up the PAF and realising he could get the whole family into this to create an even bigger legacy than before.

Clare, Director of a Private Ancillary Fund

A more meaningful and deeper engagement

Philanthropists who use PAFs as part of their giving strategy often become deeply engaged with the work of the organisations they support which gives them the satisfaction of seeing the performance and impact of their donations. By identifying specific areas and causes of interest, the trustees of a PAF have the discretion and flexibility to provide funding where it is needed at a certain point in time – and can choose to favour organisations who spend more on their cause than they do on administration.

A part of the family

A PAF commonly involves several members of a family and many philanthropists say that overseeing the fund and choosing where its donations would do the most good is an excellent way of bringing a family together and introducing a culture of giving to the next generation.

A philanthropic fund can also be a part of your estate planning. Whether the fund is established in your lifetime, or set up as a result of an instruction in your will, it will be a lasting legacy and encourage the next generation of your family to share your philanthropic ideals.

Expert advice from TWD

At first glance, setting up a PAF may appear daunting. But the steps involved are actually very logical and simple, and your TWD advisor can guide you through the necessary process.

It’s important that your philanthropic fund is considered as part of your overall financial strategy and we can advise you on your personal requirements for capital as well as providing you with the financial certainty to be able to make the commitment to establish a PAF by gifting a portion of your wealth.

For us the tax benefits were not a driving force at all – we wanted to understand how to give money away better. The tax side of things needs to be understood and explained but in our case it was not a big issue.

Wayne, Executive Director of a WA-based food and agribusiness company and also a Director of a Private Ancillary Fund

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