The Federal Government has announced significant reforms to the regulation of Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs) as part of its broader objective to increase philanthropic giving in Australia.

These changes flow from recommendations by the Productivity Commission and recent Treasury consultations and are expected to have a significant impact on how ancillary funds operate and plan their distributions. This also builds on the broader regulatory focus outlined in our previous article, which discusses similar issues around the interpretation of benefits and compliance expectations for ancillary funds.

Renaming of ancillary funds to ‘Giving Funds’

Private and Public Ancillary Funds will be renamed ‘Giving Funds’.

The government has indicated that this change is intended to more clearly reflect the core purpose of these structures, which is to distribute funds to eligible charities rather than to accumulate capital over time.

Minimum annual distribution rates

The government has announced it will align the minimum annual distribution rates for Private and Public Ancillary Funds to 6%.

At present:

• Private Ancillary Funds are required to distribute 5% of net assets each year.
• Public Ancillary Funds are required to distribute 4% of net assets each year.

Distribution smoothing

To offset the impact of higher annual distribution requirements, the government has announced that Giving Funds will be allowed to smooth distributions over a three-year period.

This means funds will be able to average their minimum distribution obligation across multiple years, rather than meeting the minimum on an annual basis. The measure is intended to:

• support more strategic grant making
• reduce the risk of forced asset sales in years of weaker investment performance.

Timing of change and transitional rules

The new rate will apply from the first financial year following amendments to the Giving Fund guidelines, and existing Giving Funds will not need to meet the new distribution rate for two years.

How SW can help

For trustees of Giving Funds, the changes create both compliance obligations and strategic opportunities. SW can help with:

• modelling the cash flow and investment impact of a 6 percent distribution rate across different market return scenarios
• reviewing trust deeds and governing documents to ensure they permit higher distributions and three-year averaging
• designing grant strategies that use averaging effectively while still meeting annual compliance requirements
• aligning distribution timing with investment performance and liquidity needs
• support large capital distributions
• documenting trustee decisions to support ACNC and ATO expectations.

Contributor

Heather Dyke

The post Government announces changes to Private and Public Ancillary Funds (Giving Funds) appeared first on SW Accountants & Advisors.

The draft provides the first comprehensive guidance on when private and public ancillary funds ‘provide a benefit’ under the Taxation Administration (Private Ancillary Fund) Guidelines 2019 and the Taxation Administration (Public Ancillary Fund) Guidelines 2022 (collectively, the Guidelines). 

SW provided feedback on the Treasury’s Giving fund reforms in August. Based on our discussions we found that trustees were concerned that the change is inconsistent with their Funds’ objective of providing long-term charitable support.

This draft determination represents a significant development in the regulation of ancillary funds, clarifying key interpretive questions that have implications for fund trustees, donors, and related entities. The determination addresses two critical provisions, those being:  

Background to ancillary funds  

Ancillary funds benefit from favourable tax treatment, with income generally exempt from tax and donations to them deductible. However, these concessions could be misused for private benefit. To safeguard the philanthropic purpose, ancillary funds are governed by strict Guidelines that set out general principles requiring ancillary funds to be both philanthropic in character and vehicles for philanthropy. 

The Guidelines impose two key obligations relevant to TD 2025/D3: 

Private Ancillary Funds have been in focus recently with the Treasury recently releasing a consultation paper on Giving Fund reforms.  

Overview of TD 2025/D3 

The determination addresses two critical questions: 

What is a ‘benefit’? 

The Guidelines do not define ‘benefit’. TD 2025/D3 clarifies that a benefit includes an advantage, a profit, or a gain, and is not limited to the payment of money or transfer of property. 

The draft determination outlines that a benefit can have the following key characteristics: 

Provision of benefits under section 15(4) of the Guidelines 

As outlined in the Guidelines, a distribution is the provision of money, property or benefits. The draft determination provides the following requirements for a benefit to qualify as a distribution under section 15(4): 

Non-binding promises of future payment 

The new determination clarifies that a promise of future payment by an ancillary fund to a DGR is not a ‘distribution’ under section 15(4) of the Guidelines. A non-binding promise of a future payment creates, at most, a mere expectancy or possibility which has no legal existence and therefore does not amount to a benefit. 

The new determination sets out that a promise of a future payment can only be binding if, when the promise is made, the trustee exercises a power that the trust deed permits to be used at that time in relation to the relevant income or capital of the fund. 

Provision of benefits under section 22(3) of the Guidelines 

Section 22(3) of the Guidelines provides an integrity provision which states that the trustee of an ancillary must ensure that the fund does not provide any benefit (except where permitted by section 23) directly or indirectly to a related entity. In this context, a related entity will be any of the following: 

In the context of section 22(3), benefit is not limited to financial gain, but encompasses things such as: 

It is further outlined that ancillary funds may provide benefits by omission. This may occur by failing or refusing to take actions, such as not requiring related entities to fulfill financial obligations for example. 

The phrase ‘directly or indirectly’ broadens the meaning of how benefits may be provided under subsection 22(3). It captures not only the ancillary fund’s direct actions but also any indirect arrangements or omissions that result in a benefit to a related entity, even if that entity is not directly involved in the transaction. The draft determination focuses on the overall effect of the fund’s conduct, ensuring that all contributing factors are considered. 

How SW can help 

SW can assist ancillary funds in ensuring that any benefits they wish to provide fall within the scope of the Guidelines as clarified in TD 2025/D3. We can review proposed distributions and related party arrangements to confirm they meet the ATO’s definition of a ‘benefit’ and do not trigger penalties under subsection 22(3). 

Taxpayers can still make comments on the draft guidelines until 30 January 2026.

For assistance in establishing or managing a Fund please contact our private client specialists, Heather Dyke or Matthew Oakey.  

Contributors

Blake Trad

Heather Dyke

The post ATO Draft Determination TD 2025/D3: New guidance on when ancillary funds ‘provide a benefit’  appeared first on SW Accountants & Advisors.

For the eighth year, we are delivering an interactive 5-part seminar series to aspiring and emerging leaders in the Property and Real Estate Credit Funds Management sectors, with direct access to leading industry experts and their experience, strategic industry insights and pitfalls, and key issues ranging from structuring, debt and equity through to legal and compliance.

Facilitated by our property funds specialists, featuring content developed alongside industry, each session featured practical working considerations and discussions with market leaders.

Series speakers

Industry speakers

• David Omond | KM Property Funds
• Charlie Renney | Hall & Wilcox
• Greg Sugars | Preston Rowe Paterson
• Bruce Corrin | CDC Property Consultancy
• Tim Slattery | ASA Real Estate Partners
• Adam Murchie | Forza Capital
• Georgia Liu | CBA
• Kevin Said | AUS Finance Group

SW speakers

Simon Tucker
Director, Tax 
SW

Rami Eltchelebi
Partner, Assurance and Advisory Services
SW 

Stephen O’Flynn
Director, Tax
SW

Abi Chellapen
Director, Tax 
SW

Sejla Kadric
Director, Business & Private Client Advisory 
SW

Luke Fernandes
Director, Tax
SW

Shaneel Kumar
Associate Director, Corporate Finance
SW

James Serpell
Associate Director, Assurance and Advisory Services 
SW

Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

The post Emerging Property Fund Managers’ Series appeared first on SW Accountants & Advisors.

The session delivered a deeper insight into the technical and information requirements when preparing accounts, demonstrated how tax components are calculated and common accounting vs. tax differences.

Our fund experts helped you better understand:

• the technical and information requirements when preparing accounts
• demonstrate how tax components are calculated
• common accounting vs. tax differences
• the basic accounting and tax knowledge of property trusts
• key financial reporting requirements for funds
• common issues for ordinary trusts, MITs and AMITs – including issues that affect property, equity and debt funds
• update on recent tax and accounting changes.

SW Speakers

René Muller
Partner, Assurance and Advisory Services
SW 

Luke Fernandes
Director, Tax
SW 

The post Funds Tax & Accounting technical training appeared first on SW Accountants & Advisors.

Embark on a journey into the fundamentals of fund management as SW’s Director, Rick Hemphill and Polar 993 Founder, Adam Lindell share invaluable advice tailored for first-time fund managers. Uncover the key insights, strategies, and essential knowledge that lay the groundwork for a successful venture into the world of fund management.

In the second episode, SW’s Director, Rick Hemphill and Polar 993 Founder, Adam Lindell unravel the complexities of capital sourcing, focusing on the pivotal task of raising the initial $25 million. Discover proven strategies, actionable tips, and real-world experiences that illuminate the path for fund managers seeking to secure the crucial capital to kickstart their investment journey.

Join SW’s Director, Rick Hemphill and Polar 993 Founder, Adam Lindell in the final chapter of this enlightening series, where they explore the ever-evolving investment market trends. Delve into the realms of Build-to-Rent (B2R), Build-to-Sell (B2S), and Managed Investment Schemes (MIS). Gain a comprehensive understanding of these trends, empowering fund managers to navigate the dynamic landscape of investment opportunities.

The post Polar 993 Founder Adam Lindell talks fund management insights with SW’s Director Rick Hemphill appeared first on SW Accountants & Advisors.

She has strong technical and practical skills advising and assisting clients across a range of industries, but with particular emphasis on funds management and property. Abi’s clients include a number of ASX listed and wholesale property funds, equity funds, corporate entities and large complex private groups.

Abi has been actively involved in submissions to the ATO and the State Revenue Office on numerous land tax, stamp duty and Division 7A issues. She also advises a number of other accounting firms in a specialist capacity on issues affecting their clients.

Abi’s experience includes:

• Advising Funds on the appropriate structure to achieve optimal tax outcomes for investors including consideration of income tax, withholding tax and AMIT regime.
• Providing strategic tax advice for foreign multinationals looking to acquire businesses and properties in Australia.
• Providing income tax, GST and stamp duty advice on M&A transactions.
• Advising large private groups on various complex tax issues such as Division 7A, section 100A, income distributions, tax loss recoupment and management of tax audits.

In addition to her technical skills, Abi has outstanding client management and communication skills.

Abi is a Partner of SW Audit and a Director of SW Accountants & Advisors Pty Ltd.

The post Abi Chellapen, Partner appeared first on SW Accountants & Advisors.