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

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The Treasury has released a consultation paper ‘Giving fund reforms: distribution rate and smoothing’, as part of its broader strategy to double charitable giving by 2030.

While these reforms aim to boost philanthropy, there are concerns that raising the minimum distribution rate could undermine the long-term sustainability of Private Ancillary Funds (PAFs), also known as Giving Funds (the Funds). These Funds were originally established to provide long term charitable support.

Our feedback on Giving Fund reforms

In response to these concerns, we have submitted feedback on the 31 July 2025, on behalf of our clients to Treasury’s consultation process.

Heather Dyke, Associate Director, expresses that

“Philanthropy is very important for many of our private clients. Most of our large private clients have set up Private Ancillary Funds (to be known as Giving Funds) to provide much needed long-term funding to charities.”

We are actively involved in the consultation process and represent our clients’ interests, with our Directors also serving on the boards of several Giving Funds, offering valuable insight into their investment and giving strategies.

Background

The Government has previously committed to working with the philanthropic, for-purpose, and business sectors to develop a national giving strategy.

What are the changes?

Following the introduction of a new Deductible Gift Recipient (DGR) category for Community Foundations, the government announced it would also improve the support provided to charities through Funds by:

• aligning and increasing the minimum annual distribution rate for public and private funds
• allowing funds to smooth their minimum annual distributions over three years, and
• renaming Private Ancillary Funds in the tax law to Giving Funds to reflect their role in giving to charities.

Drawbacks of raising minimum distribution rate

The key message from our feedback is that a 5% minimum distribution rate should be maintained. A higher distribution rate may decrease the attractiveness of Giving Funds to donors and impact the long-term sustainability of perpetual funds.

As the minimum distribution rate is not a cap, our clients generally provide regular distributions to charities at the minimum rate and extra distributions for capital works, special projects or when natural disasters occur. If the minimum rate is increased, then smoothing becomes very important and could be overly complex to monitor.

Our full submission to the Giving Fund consultation can be found here.

How SW can help

SW supports private clients in establishing and managing Giving Funds that align with their long-term philanthropic goals. We provide strategic advice on fund structuring, compliance, and distribution planning to ensure sustainability and impact.

We are actively engaged in the consultation process and advocate on behalf of our clients to help shape policy outcomes that support enduring charitable giving.

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

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Matthew has built a successful career in providing business and tax advice to high net wealth family group and leads our Family Office team. Matthew is passionate about philanthropic activities and works with his clients to assist them manage the financial and governance aspects of their grant making.

He also leads our Corporate Social Responsibility Committee, Co2. which engages with our staff, local communities and the wider world including our environment to have a positive impact.

Matthew’s experience includes:

• Managing tax and accounting requirement for clients
• Connecting his clients with a broad range of professionals who add value to their business interests, including stockbrokers and property agents
• Working closely with our Wealth Management team to enable a full service offering for our high net wealth families
• Holding directorships, trusteeships and secretarial positions in private companies and not-for-profits
• Succession and estate planning.

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

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