Ask an Adviser: What is a private ancillary fund, and how can I set one up?

Published on: September 28th, 2023

Many of us want to make an impact through philanthropy, and if it’s one of your goals, it should be part of your financial plan. Our advisers are often asked about practical and structured approaches to giving back, and a private ancillary fund is an excellent option for those with the means to give back over a more extended period. Here, we talk to Apt Director Andrew Dunbar about the structure.      

Andrew Dunbar: A private ancillary fund (PAF) is a charitable trust designed for individuals, families and businesses who want a structured and strategic approach to their philanthropic activities. It provides a long-term investment structure, with income and capital gains used for charitable purposes.

The minimum initial requirement is $500,000. If you have similar objectives but want to start with as little as $20,000, you can instead establish a sub-fund in a public ancillary fund. In this vehicle, you lose control of the funds, but you can still make recommendations for annual grants, which are usually facilitated.

A PAF is perfect for those with significant philanthropic goals who want to maximise their impact on the causes and communities close to their heart. By investing with a long-term strategy, you can support each cause or community on an ongoing basis to really make a lasting difference.

It’s a great way to get the entire family involved and ensure your legacy continues, as the PAF can be handed down for generations to come.

On the financial side, it can also be a beneficial tax set-up. Your contributions are tax-deductible, and the income generated within the PAF is tax-exempt, meaning more can go to the vital work you want to fund.

How to set up a private ancillary fund

The first step is to seek professional advice. Establishing a PAF involves various legal, tax and investment decisions. Your Apt adviser can assist you in understanding the complexities and responsibilities associated with running a PAF and work with your other professionals, including legal and tax, or recommend experts from our network.

Your team can provide holistic advice and set up the proper structure if you decide to proceed.

Typically, a PAF set-up will involve:

  • Setting up the trust deed. A legal document establishing the terms under which your PAF will operate, such as objectives, management structure and process for making grants.
  • Appointing a trustee. Nominating the person, group or corporation that will manage the fund’s operations and ensuring it complies with the legal obligations set by the Australian Charities and Not-for-Profits Commission (ACNC) and the Australian Taxation Office (ATO).
  • Registering your PAF. Once the trust deed is ready, your PAF will be registered with the ACNC.
  • Investing the funds. Your Apt adviser can create an investment strategy suited to your philanthropic goals. Your PAF must distribute at least 5% of its net market value assets annually to eligible charities.

Establishing a private ancillary fund represents a significant commitment to giving. The rewards – for you and your charitable beneficiaries – can be profound, ensuring you live a meaningful life today and leave a lasting impact.

Interested in finding out more? Your Apt adviser can help. Our experts can help you create a robust philanthropic strategy, guiding you through the set-up and ongoing management of your private ancillary fund. Contact us today.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.