Private Ancillary Fund – What’s a PAF?

August 22, 2015

PAF

I don’t know about you, but every time I watch a TV program or read about someone who’s trying to make other people’s lives better, especially children’s, all I want to do is give them money! I’ve been hearing so much lately about the incredible work being done by these kind individuals helping those far less fortunate than me. With so many ongoing poverty areas and global disasters like the devastating earthquake in Nepal, tsunamis, storms and floods I get overwhelmed trying to decide which one I should support next.

One of my life goals is to set up a foundation, but sadly I don’t have Bill Gates’s billions (and that’s not a very good excuse, I know!), so I’ve been checking out other ways I could make a difference. I have recently been investigating Private Ancillary Funds (PAF) so I thought I’d share this with you in case you have similar aspirations.

What’s a PAF?

A Private Ancillary Fund (which used to be known as a Prescribed Private Fund) is a form of trust established by an individual, family or company to control the flow of donations or grants. The PAF makes distributions to groups registered with the Australian Taxation Office (ATO) as a Deductible Gift Recipient (DGR), a status held by most registered charities. This can include overseas charities, as long as they’re registered with the ATO.

Tax treatment

Any money that you gift to your PAF is tax-deductible to you but you can’t use the PAF to create a tax loss for yourself. You build up your PAF each year and maintain its capital base in line with the CPI. At least $200,000 is regarded as a cost-effective starting point, building on this over the years. A great idea is that you can also supplement or create the fund from your will.

Some rules

Obviously, such a good deal as this has government checks and balances. There are too many to go into here but the initial ones include – the PAF must have a trust deed, an Australian Business Number (ABN) and endorsement by the ATO as an income tax exempt charity. The fund must be audited each year and an annual return of receipts and payments must be lodged with the ATO. There are some limits to the investments that the PAF can make and the trustees of the fund must include a ‘responsible person’ not related to you. You must also donate at least 4% of the market value of the fund’s net assets every year.

More info

I found some excellent information on the ATO website www.ato.gov.au about establishing and operating PAFs and the PAF guidelines can be accessed at www.comlaw.gov.au. Just type: “Private ancillary fund guidelines” into the search engine.

I’m pretty excited about all this and will be spending some more time looking into the opportunity to make Leenane Templeton, our team, my family, and I “living treasures”!

Source:
www.ato.gov.au
www.philanthropy.org.au
www.comlaw.gov.au

Call (02) 4926 2300 or email us.

Our team are on hand to help with any questions you may have regarding the use of a PAF and any other questions you may have. Call Leenane Templeton today!

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