The end of financial year is always a busy time of the year for individuals, families and corporations, leveraging structured giving vehicles for their philanthropy.
Over the past few months, founders and successors have been focused on recommending charitable distributions from their structured giving vehicle, whether that be a private ancillary fund (PAF) or public ancillary fund (PuAF) sub-account, exploring how to create the greatest impact with their giving.
And with less than one week to go before 30 June, others are turning their minds to additional contributions to their vehicle. That might be for tax-deduction purposes or to grow the size of their account to increase future distributions to community.
In the lead up to the end of financial year 2024, we have also seen a marked increase in the number of individuals reaching out to us and asking about structured giving vehicles – how they work, what are the rules, among other queries.
With Philanthropy Australia’s and the Australian Government’s commitment to the Blueprint to Grow Structured Giving and new data around the estimated $5.3trillion in generational wealth which will be transferred in the next 20 years, the interest in structured giving will only grow.
Some of the key elements of structured giving vehicles for philanthropists looking to start their giving journey or to enhance it:
STRUCTURED GIVING VEHICLES – THE KEY ELEMENTS
1. CONTRIBUTIONS AND TAX DEDUCTIBILITY
The initial donation and any additional contributions to a structured giving vehicle is eligible for a tax deduction. You can also spread your deduction over five financial years, in even or uneven amounts. The form can be found on the ATO website.
If your structured giving vehicle is a public ancillary fund (like the Equity Trustees Charitable Foundation), donations can be accepted from any member of the public.
2. IRREVOCABLE DONATIONS
Seed contributions as well as any subsequent contributions are irrevocable and cannot be transferred back to the donor. By using a structured giving vehicle, donated funds are designated for ‘charitable purpose’ and the structure is effectively a holding vehicle, until the funds are ready to be distributed to eligible beneficiaries.
3. ELIGIBLE BENEFICIAIRES
Eligible beneficiaries of ancillary funds must be charitable in purpose and have an ATO endorsement of Deductible Gift Recipient – item 1 (DGR1). As a tax deduction has been given on donations into Ancillary Funds (informally known as “giving charities”, DGR2s), these giving structures can only distribute to organisations that can receive deductible donations and are also DGRs (“doing charities”, DGR1s).
4. ANNUAL DISTRIBUTIONS
Public Ancillary Fund sub-accounts must distribute a minimum of 4% of the value of the sub-account as at 30 June the previous year.
5. SUCCESSION
At establishment, Founders can nominate ‘successors’ who may be children, siblings, nephews or nieces, or any other stakeholder to continue to make recommendations to the trustee of the giving structure in relation to charitable distributions.
6. GOVERNANCE
Ancillary Funds are governed by the terms of its trust deed and the applicable guidelines published by the ATO. They are not financial products and therefore Product Disclosure Statement (PDS) information is not available for Ancillary Funds. Ancillary Fund Trust Deeds and other governing documents can be found on the ACNC website.