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Advice & Support

Charitable giving 101: Donor-advised funds vs private ancillary funds

When you choose to give to charity, you can either make a one-off donation or set up a more strategic way to give and make a bigger impact on the causes you care about.

If you’re ready to move away from ad hoc donations and take a longer-term approach to your charitable giving, it could be time for you to set up a structure to support your giving. Find out which option best suits your needs as an individual, family or business.

Two options: DAFs and PAFs

In Australia, there are two main options for people who want to give in a structured way:

  • Donor-advised funds – also known as DAFs, sub-funds or funds
  • Private ancillary funds – also known as PAFs or foundations.

Both enable you to make tax-deductible donations while building a lasting revenue stream for causes you care about, but there are some important differences between the two.

Donor-advised funds (DAFs) or funds

A donor-advised fund has the administrative and compliance work handled by a trustee, such as Australian Communities Foundation. All the administrative details and granting processes are taken care of on your behalf, allowing you to focus on giving.

  • A donor-advised fund can be set up within 48 hours.
  • While a fund typically requires no establishment fee, an initial minimum donation must be made, usually starting at $20,000.
  • Funds advise their trustee, for example Australian Communities Foundation, about which organisations they would like to support and how much they would like to grant. The trustee then processes that grant for the fundholder. There is no minimum distribution requirements for a donor-advised fund. The trustee manages the investments for an individual fund, usually charging a small fee for this service.
  • An individual fund can fundraise and receive donations from the public.
  • At Australian Communities Foundation, we call these Named Funds because they enable you to put a name on your giving. A Named Fund can help make your charitable giving go further.
    • Get set up in 48 hours and receive an immediate tax deduction
    • Your money is ethically invested to grow
    • You choose where it goes when you’re ready (we’ll take care of the paperwork!)

Private ancillary funds (PAFs) or foundations

A private ancillary fund (also known as a foundation or a private foundation), is a trust fund for families, individuals or organisations. A foundation is governed by a trustee, with the board usually made up of family members or business partners and at least one independent ‘responsible person’ director (someone with a degree of responsibility in the community). The board of directors is responsible for compliance and reporting to regulatory authorities.

  • Establishing a PAF takes more time and money than setting up a donor-advised fund. Generally, setting up a PAF entails an establishment fee, and usually a minimum of $1 million as an initial donation, although this amount can vary. Set-up time is usually between 4-6 weeks.
  • A foundation cannot publicly fundraise.
  • A foundation will either nominate an investment adviser or manage the investments themselves. In both cases, the investments are tax-exempt and franking credits refunded.
  • Grants or donations from foundations can only be made to charitable organisations that are endorsed as DGR1 by the Australian Taxation Office. Foundations are solely responsible for their own grantmaking decisions. A foundation must distribute a minimum of 5 per cent of the opening value of its assets each year.
  • At Australian Communities Foundation, we can help you establish a Private Foundation. While this is a more independent approach than opening a Named Fund, we can also provide ongoing support through our Foundation Support Services.
    • Generally takes 6-12 weeks to get set up
    • You manage your investments or nominate an adviser
    • You and the directors you appoint are responsible for compliance (we can help!)

Like to learn more about which one is right for you?

Australian Communities Foundation has been helping Australians with their giving for 25 years. Learn more or contact our experienced team below to find out more about setting up your own giving fund or foundation.

Get started

Ready to take your charitable giving to the next level? Chat with a member of the Australian Communities Foundation team to learn how we can support you.