Government announces changes to Giving Funds (Ancillary Funds)
The Australian Government has announced reforms aimed at increasing philanthropic funding to charities. The changes focus on Giving Funds (currently referred to in the tax law as ancillary funds) and form part of the Government’s response to the Productivity Commission’s Future Foundations for Giving report and the Not‑for‑profit Sector Development Blueprint.
Key measures
Minimum annual distribution rate set at 6%
The Government will introduce a single minimum annual distribution rate of 6% of net assets for both private and public Giving Funds. This replaces the current split rate of 5% for private funds and 4% for public funds.
Three‑year distribution smoothing
Giving Funds will be able to smooth distributions over a three‑year period. This is intended to support large or multi‑year charitable projects without requiring significant capital draw‑downs in a single year.
Timing and transition
The 6% rate will apply from the first financial year after the Giving Fund Guidelines are amended.
Existing Giving Funds will have a two‑year transition period before the new rate becomes mandatory.
Background
Private ancillary funds are commonly used by families and family‑owned businesses as a long‑term philanthropic structure. Donors can make tax‑deductible contributions to a controlled charitable fund, which then distributes to endorsed deductible gift recipients in line with the family’s giving objectives.
Capital is typically invested so the fund can preserve and grow its base over time, enabling ongoing philanthropic activity across generations. Private Giving Funds remain the most widely used vehicle for family philanthropy. Public Giving Funds perform a similar role where donations are sought from the broader community.
Both private and public structures are regulated by the ACNC and ATO and must meet annual minimum distribution requirements.
We work closely with family groups on the establishment, governance and ongoing management of their philanthropic structures. If you would like advice on how these changes may affect your Giving Fund, please contact Rachel Vijayaraj or Geoff Stein.
The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.
contact
Rachel Vijayaraj
Partner
E rlv@bwslawyers.com.au
P 02 9394 1049
Geoff Stein
Partner
E gds@bwslawyers.com.au
P 02 9394 1008