Public Ancillary Funds: Australian Legal Insights For Philanthropy

Public Ancillary Funds help turn generous intentions into real, long-term impact in Australia. If you want to make tax-deductible gifts and support a range of causes, a Public Ancillary Fund (often called a “PuAF”) can be a smart, compliant vehicle to do just that.

PuAFs are purpose-built charitable trusts that collect donations from the public and then distribute those funds to eligible charities. The rules are specific, but once you understand how PuAFs are established, governed and regulated, they can be an efficient way to grow your giving and support a broad mix of Deductible Gift Recipient (DGR) organisations over time.

In this guide, we’ll walk through what a PuAF is, how it’s different from other ancillary funds, the core legal requirements for setup and ongoing compliance, and the practical steps to get it right from day one.

What Is A Public Ancillary Fund (PuAF)?

A Public Ancillary Fund is a not‑for‑profit trust that invites donations from the public and distributes those funds to organisations that are endorsed as DGR Item 1 (for example, registered charities that can receive tax‑deductible gifts). The PuAF itself is generally endorsed as a DGR in its own right (under item 2 in the law), but it cannot run its own charitable programs. Its role is to raise, hold and invest money, then grant those funds to eligible DGR Item 1 recipients.

Key features of a PuAF include:

• It is established by a trust deed for charitable purposes, and must operate on a not‑for‑profit basis.
• Gifts to the PuAF are generally tax‑deductible for donors (subject to tax rules and any specific conditions).
• All distributions must go to DGR Item 1 entities; the PuAF cannot distribute to individuals or non‑DGRs.
• There is a minimum annual distribution requirement (see “Compliance, Governance and Ongoing Obligations” below).
• Governance is subject to the Public Ancillary Fund Guidelines (issued under tax law) and, if registered as a charity, Australian Charities and Not‑for‑profits Commission (ACNC) standards.

Because a PuAF pools donations and can invest its assets, it can build a sustainable corpus for giving, while still meeting annual distribution requirements. This creates both immediate impact and ongoing philanthropic capacity.

Public Vs Private Ancillary Funds: What’s The Difference?

Ancillary funds come in two broad forms: public (PuAF) and private (often abbreviated “PAF”). The acronyms are easy to mix up, but the differences matter.

• Public Ancillary Fund (PuAF): Raises money from the public and must have a majority of “responsible persons” on the board or trustee body (people with a degree of responsibility to the community). Distributions must go to DGR Item 1 entities. Minimum annual distribution is generally lower than private funds (see below).
• Private Ancillary Fund (PAF): Typically funded by a single donor or family group and not open to public donations. Also grants only to DGR Item 1 entities, with different governance settings and a different minimum distribution rate.

In practice, if you want to invite donations from the wider community, you’ll be looking at a PuAF. If you’re creating a family foundation that won’t fundraise publicly, a Private Ancillary Fund may be more suitable. The setup, ongoing controls and regulators are similar but not identical, so it’s important to choose the right model for your goals.

Setting Up A PuAF: Legal Building Blocks

Getting the foundation right is essential. A PuAF is a trust structure, so you’ll need to think through the deed, trustee, responsible persons, registrations and record‑keeping from day one.

1) Create A Compliant Trust Deed

The trust deed is the PuAF’s rulebook. It must reflect the Public Ancillary Fund Guidelines, set out the fund’s charitable objects, require distributions only to DGR Item 1 entities, and hard‑wire not‑for‑profit and winding‑up provisions (so surplus assets go to another DGR Item 1).

Because a deed is a special kind of legal instrument, it helps to understand what is a deed and how it should be executed to be valid. Getting the wording right up‑front can save headaches later, particularly around distribution rules, conflicts, and trustee powers.

2) Choose Your Trustee And Board (Responsible Persons)

A PuAF can have an individual or corporate trustee. Many funds opt for a corporate trustee to separate governance from personal affairs and to streamline decision‑making.

If you do use a company as trustee, remember Australian residency requirements for directors apply, so it’s worth reviewing Australian resident director requirements and how the company will execute documents (for example, signing under section 127 of the Corporations Act).

PuAFs must have a majority of “responsible persons” involved in control. These are people who, by their position in the community (for example, certain professionals or community leaders), are considered suitable to help steward public money. Your deed and governance policies should set out how these appointments work and how conflicts are managed.

3) Registrations And Endorsements

Most PuAFs seek registration as charities with the ACNC and endorsement from the Australian Taxation Office (ATO) for DGR status and charity tax concessions. You’ll also need an ABN. Exactly which registrations and endorsements you need depends on the fund’s structure and operations, but they commonly include:

• ABN for the trust (and TFN for tax administration).
• ACNC charity registration (which triggers ongoing reporting and governance standards).
• ATO endorsements (charity tax concessions and DGR endorsement for the fund).

If you’re weighing up how a trust fits within your broader planning, our overview of trusts in Australia can help you understand where ancillary funds sit alongside other structures.

4) Put The Right Policies In Place

Beyond the deed, a PuAF is expected to have clear, written policies, including:

• Grant‑making and distribution policy (including how you assess recipients and time donations).
• Investment strategy (consistent with prudent person rules and your risk profile).
• Conflicts of interest policy and a register of interests.
• Fundraising and communications standards (particularly if you solicit public donations).
• Privacy and data handling rules for donors and supporters, supported by a clear Privacy Policy if you collect personal information on your website or forms.

If you send electronic fundraising campaigns or newsletters, make sure your team understands Australia’s email marketing laws, including unsubscribe requirements and consent.

Compliance, Governance And Ongoing Obligations

Ancillary funds are trusted with public money and generous tax concessions, so the compliance bar is high. Here are the core areas you’ll need to manage year to year.

Minimum Annual Distribution

PuAFs must distribute a minimum percentage of their net assets each year to DGR Item 1 recipients. This minimum rate is set in the Public Ancillary Fund Guidelines and can change over time. Practically, you will need to value assets annually, calculate the minimum, and plan grants to ensure you meet (or exceed) the requirement each financial year.

Falling short can risk penalties or affect your DGR endorsement, so this should be built into your budgeting and board calendar.

Receipting And A “Gift Fund”

A PuAF must maintain a dedicated “gift fund” to receive tax‑deductible gifts and issue compliant receipts. The gift fund and general fund must be tracked separately in your accounts so you can demonstrate proper use of donations.

Investment And Restricted Benefits

Investments must follow a prudent strategy, be consistent with your charitable purposes, and avoid conferring any private benefit on donors, trustees or related parties (other than reasonable expenses of running the fund). Related‑party dealings require particular care and clear documentation.

Reporting And Audit/Review

Expect at least two key reporting streams each year:

• ACNC reporting: Annual Information Statement, plus financial report if applicable (and an audit or review depending on size).
• ATO reporting: Ancillary fund annual return and financial statements, including confirmation of minimum distribution and other guideline requirements.

Keep robust financial records, minute all key decisions, and schedule compliance checks throughout the year, not just at year‑end. Good record‑keeping and clear execution practices (see legal requirements for signing documents) reduce risk and make audits far smoother.

Privacy And Data Governance

Most PuAFs maintain donor databases, email lists and online forms. If you collect, store or use personal information, make sure your Privacy Policy matches your actual practices and that your team follows it. It’s also worth reviewing your internal retention rules against Australia’s data retention laws, especially if you hold sensitive information or payment details via third‑party platforms.

Tax Benefits And DGR Rules For Donations

One of the big drawcards for donors is tax deductibility. In broad terms, gifts of money or property to an endorsed PuAF are tax‑deductible for the donor, and the PuAF can then distribute to DGR Item 1 charities.

Keep these points in mind:

• Only genuine “gifts” qualify. If a donor receives a material benefit in return (for example, a product or a high‑value benefit at an event), deductibility may not apply to all or part of the payment.
• Receipts should include the fund’s full name, ABN, and a statement that the receipt is for a gift.
• All distributions must go to DGR Item 1 organisations. This is a core rule of ancillary funds and should be reflected in your due diligence on grantees.
• Tax settings can change, so build tax reviews into your annual compliance calendar.

Important note: This article provides general information only and is not tax advice. Donations and DGR endorsements involve tax considerations that depend on your circumstances. Speak with your accountant or tax adviser before making decisions about deductibility, investment approach or distributions.

Practical Tips And Documents To Get Your PuAF Running Smoothly

A strong governance toolkit will keep your fund on track and reduce the risk of compliance gaps.

Core Documents And Policies

• Trust Deed: The governing document that sets charitable purposes, DGR‑only distributions, not‑for‑profit and winding‑up provisions, and trustee powers.
• Trustee Resolutions: Clear resolutions for key decisions (investments, distributions, appointments) and a board calendar to ensure you meet annual obligations.
• Investment Policy: Sets your risk profile, permitted assets, ESG preferences (if any), rebalancing and reporting cadence.
• Grant‑Making Policy: Confirms eligibility criteria (DGR Item 1), due diligence steps, grant agreements, and reporting expectations for recipients.
• Conflicts Of Interest Policy: Requires disclosure and management of conflicts, including a register and meeting procedures when conflicts arise.
• Privacy Policy: Explains how donor information is collected and used and aligns with your data practices and systems. If your fund has a website, publish your Privacy Policy where it’s easy to find.
• Communications & Fundraising Protocols: Covers email, social media and events, including compliance with email marketing laws and state fundraising rules (where applicable).

Set Up Processes That Make Compliance Routine

• Calendar Reminders: Lock in key dates for ACNC and ATO lodgements, valuation of assets, minimum distribution checks, and audit/review milestones.
• Template Receipts: Use standard wording to keep receipts compliant and consistent.
• Distribution Pipeline: Maintain a shortlist of eligible DGR Item 1 recipients and pre‑screen them to avoid a year‑end rush.
• Execution Checklist: For deeds, contracts and board resolutions, use an execution checklist that reflects company signing rules (if you have a corporate trustee) and standard deed execution steps.

If your PuAF sits within a broader charitable group or you’re using a corporate trustee, it can help to align your governance with common company practices while remembering that an ancillary fund is still a trust. Understanding the basics of how trusts work will make that alignment simpler.

Common Pitfalls To Avoid

• Mixing Funds: Keep your gift fund separate in your accounts and don’t use donated money for non‑charitable purposes or private benefits.
• Missing Minimum Distributions: Plan grants early in the year and track your minimum percentage so you don’t fall short.
• Weak Conflict Management: With responsible persons and community leaders on the board, conflicts can arise - document them and manage them actively.
• Poor Documentation: Inadequate minutes, unsigned resolutions, or informal approvals create risk. Follow the basics of signing requirements and store your records securely.
• Privacy Gaps: Fundraising often means handling personal data. Ensure your Privacy Policy and internal practices match.

Key Takeaways

• A Public Ancillary Fund (PuAF) is a charitable trust that raises public donations and must distribute only to DGR Item 1 charities.
• PuAFs differ from Private Ancillary Funds (PAFs): they fundraise from the public, require “responsible persons” in control, and have their own distribution and governance rules.
• Your trust deed, responsible person appointments, DGR endorsement and ABN/charity registrations form the backbone of a compliant PuAF.
• Expect ongoing obligations: minimum annual distribution, proper receipting, clear investment and grant policies, and dual reporting to the ACNC and ATO.
• Donor tax deductions are a major benefit, but the PuAF can only grant to DGR Item 1 recipients - build this into your due diligence and distribution pipeline.
• Strong documentation and processes (board calendar, policies, compliant execution and privacy practices) make compliance routine and protect the fund.

If you’d like a consultation on setting up or reviewing the documents for a Public Ancillary Fund, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.