Private Ancillary Funds (PAFs) are one of the most flexible and tax-effective ways to give to Australian charities. They allow individuals, families, and businesses to create a structured fund that provides long-term support for causes they care about. But when it comes to growing that fund, an important question often arises: who can actually contribute to a PAF?
Understanding PAF Contributions
A contribution to a PAF is any gift of money or assets made for the purpose of funding its charitable distributions. This can include the initial amount used to establish the fund, as well as ongoing donations made over time. Under Australian regulations, contributions must meet certain requirements to qualify as tax deductible and to comply with the Private Ancillary Fund Guidelines 2019.
If you’re considering starting or growing your fund, it’s worth exploring the detailed guidance provided by The Giving Advisory pafs to ensure your contributions meet the necessary criteria.
Eligible Contributors to a PAF
The Founder(s) of the PAF
The most common contributor is the individual, family, or business that establishes the fund. Founders typically provide the initial capital and continue to make contributions to grow the fund over time.
Family Members & Close Associates
PAFs can receive contributions from family members, helping to strengthen the culture of giving across generations. Many families use this as an opportunity to involve children or grandchildren in philanthropic decision-making.
External Donors
Friends, colleagues, businesses, or other philanthropists may also contribute to your PAF. This can be especially valuable for large-scale projects or shared community goals. When accepting donations from others, it’s important to ensure compliance with all legal and reporting requirements.
Tax Deductibility for Contributors
One of the key advantages of contributing to a PAF is that all donations are tax deductible for the donor, provided the fund is endorsed as a deductible gift recipient (DGR). Deductions can generally be claimed in the financial year the contribution is made, although in some cases they may be spread over multiple years. Issuing compliant receipts is essential for both record-keeping and tax purposes.
Conditions & Restrictions on Contributions
Eligible Recipients of Donations from the PAF
While a PAF can accept contributions from multiple sources, it can only distribute funds to charities that are registered as deductible gift recipients (DGRs). This ensures all grants are directed towards legitimate charitable purposes.
No Return Benefit to Donors
Contributions must be made without expectation of personal benefit. This means no goods, services, or other advantages can be received in return for the donation. Transactions must also be conducted at arm’s length.
Managing Contributions Responsibly
Every PAF must appoint at least one responsible person: an individual with a recognised degree of responsibility to the Australian community, such as a lawyer, accountant, or experienced charity board member. This person plays a key role in overseeing compliance, maintaining financial statements, and ensuring that an appropriate investment strategy is in place to manage contributions effectively.
Getting Professional Guidance
Establishing and managing a PAF involves more than just accepting donations. It requires careful attention to tax rules, compliance obligations, and long-term planning. Working with a PAF specialist can ensure contributions are handled in line with both legal requirements and your giving goals.
Conclusion
A PAF can receive contributions from founders, family members, and external donors, as long as the donations meet eligibility and compliance criteria. By understanding the rules around who can contribute, and managing those contributions responsibly, you can grow your fund and increase its charitable impact for years to come.
For expert guidance on contributions, compliance, and strategic giving, The Giving Advisory can help you establish and manage your PAF so you can focus on making a lasting difference.
