Private ancillary funds (PAFs) are a vehicle for private philanthropy. They allow donors to make tax-deductible contributions, invest those funds and make grants to charities in line with the founder’s philanthropic goals. The federal government’s resurrection of its proposed tax on superannuation balances over $3 million has resulted in increased interest in the role of PAFs in structured giving.
What is a PAF?
A PAF is a type of charitable trust in Australia that allows individuals, families or businesses to make tax-deductible donations, invest those funds and then distribute investment income each year to deductible gift recipients (DGRs). It does not deliver services or undertake its own charitable work – rather, it is a pool of money and/or property that is managed to make distributions to DGRs.
Most donations to a PAF must come from the PAF’s founder (or the founder’s associates or relatives)1 and PAFs must not solicit donations from the public2. These features make PAFs suitable vehicles for private philanthropy. By contrast, a public ancillary fund (PuAF) is public in nature and must regularly invite the public to contribute to the fund.3
The Hon Dr Andrew Leigh MP recently announced proposed reforms in relation to PAFs and PuAFs4. This includes a proposal that they be renamed “giving funds” to better reflect their role in supporting charitable giving and two proposed changes in relation to distributions from giving funds (considered below).5
Key governance requirements
PAFs are regulated by the Taxation Administration Act 1953 (Cth) (TAA 1953) and Taxation Administration (Private Ancillary Fund) Guidelines 2019 (Cth) (PAF Guidelines). Under these statutes, a PAF must:
- be established and maintained under an instrument of trust (such as a trust deed or will)6;
- have a corporate trustee7, which must exercise a reasonable degree of care, diligence and skill when managing the PAF8;
- distribute at least 5% of the market value of the fund’s net assets (or the higher of 5% or $11,000 if costs are paid out of the PAF) each financial year9;
- keep proper accounts in respect of all of the fund’s receipts and payments and all financial dealings connected with the fund10;
- prepare a financial report showing the fund’s financial position for each financial year11;
- prepare and maintain a current investment strategy for the fund that sets out the investment objectives of the fund and details the investment methods the trustee will adopt to achieve those objectives12; and
- not enter into any uncommercial transactions or provide benefits to individuals associated with the fund.13
Though PAFs are not required to be registered as charities with the Australian Charities and Not-for-profits Commission (ACNC), most PAFs choose to register as charities so that they can access charity tax concessions (including income tax exemption). PAFs that are registered as charities must comply with the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (in addition to the TAA 1953 and PAF Guidelines), which entails:
Why establish a PAF?
PAFs are designed for people who want to take a structured, long-term approach to philanthropy – rather than making one-off donations – while retaining control over investment decisions and distribution priorities. For those who are seeking to give in this way, there are several compelling reasons to consider establishing a PAF, including the following:
- Tax effectiveness: Contributions to PAFs are fully tax-deductible and PAFs that are registered as charities can be endorsed for income tax exemption.
- Strategic philanthropy: PAFs provide a structured way to give over the long term, ensuring support for DGRs continues year after year.
- Family legacy: PAFs allow families to involve the next generation in structured charitable decision-making, embedding values of generosity and stewardship.
- Flexibility: Donors retain control over investment strategies and distribution priorities, within the regulatory framework referred to above.
- Responding to tax changes: Some high net worth individuals are establishing PAFs as a structured giving vehicle to receive funds as part of a strategy to reduce super balances ahead of the proposed tax on superannuation balances over $3 million taking effect.
How we can help
Our Charity and Not-for-profit Law team assists for-purpose organisations from the ground up, from the establishment process through to compliance and governance matters. Moores can assist you to establish a well-designed PAF that is tailored to your objectives and aligns with your philanthropic goals.
To hear more about the benefits of PAFs as a vehicle for tax-effective giving, you are welcome to join our live webinar on Tuesday 16 September 2025 from 1-2pm. This practical session will explore how PAFs can be used to maximise tax effectiveness while supporting long-term philanthropic goals, with time to put your questions to our legal experts. In this one-hour session, we will cover the complex issues you raise with us, including:
- how to establish and structure a PAF;
- compliance obligations and trustee responsibilities;
- investment strategies within the PAF framework;
- distribution rules and meeting minimum annual requirements; and
- governance best practices and building a lasting legacy.
Further reading
Taxation Administration (Private Ancillary Fund) Guidelines 2019 (Cth)
Giving fund reforms: distribution rate and smoothing
Contact us
Please contact us for more detailed and tailored help.
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