ARTICLE
3 June 2023

Private Ancillary Funds

PP
Pointon Partners

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Pointon Partners is a medium-sized legal firm known for its full-service offerings to businesses and stakeholders. With a focus on building long-term relationships, the firm helps clients achieve successful outcomes. They provide top-tier expertise with a personalized touch, serving a wide range of clients from Australian companies to private individuals. Additionally, they are a member of LAWORLD, offering international legal support.
A private ancillary fund is a philanthropic vehicle established and operated by a high net worth individual or family.
Australia Tax

In May or June as we near the end of the financial year we are commonly asked to establish private ancillary funds for clients.

A private ancillary fund is a private philanthropic vehicle typically established and operated by a high net worth individual or family. Private ancillary funds do not carry out charitable activities themselves on a day to day basis but instead act as a sieve through which the high net wealth individual or family is able to stream donations to charities which have their own DGR status. In fact they are the only charities to whom the private ancillary fund can make donations to. The high net wealth individual is able to obtain an immediate tax deduction for making a donation to the private ancillary fund. Hence we often see private ancillary funds being established in a year when a successful business is sold and the individual or family may otherwise be liable for a significant capital gains tax bill.

Private ancillary funds are completely creatures of statute and have to comply with strict requirements in relation to:

  • the form of trust deed;
  • only operating in Australia;
  • distributing at least 5% of their net assets each year;
  • dealing at arms length with the founder and their associates; and
  • having at least one trustee, or if a corporate trustee is acting then at least one director, who is a "responsible person". This is defined as someone with a degree of responsibility to the Australian community as a whole (eg because they perform a public function or belong to a professional body which has a code of ethics) and includes an individual before whom a Statutory Declaration can be made.

Provided that the above requirements are satisfied then upon registration with the ATO the fund is automatically granted DGR status without separate application having to be made.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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