Why have Australians given billions to establish private foundations?

Since 2001, the Australian government has enabled donors to create a simple form of private foundation now called the Private Ancillary Fund (previously, a private prescribed fund). These funds are “ancillary” because they exist only to support charities like NeuRA. Put simply, they are family-style trusts. They only distribute their income to deductible gift recipient charities, and they must distribute a minimum amount every year (usually, at least 5% of the value of the fund). The people who donate the funds receive a tax deduction, but can never withdraw the funds or direct them to their own or private use.

Up to FY 2008, $2.1 billion was donated to these funds, and $447 million was distributed. NeuRA is grateful to receive donations from several of this type of funds. There are just over 1000 of these funds in Australia. Usually, they are have been set up by individuals and families.

Why have Australians given money in this particular way?

  • Sometimes, people want to give but continue to manage the invested capital of their gift (many private ancillary funds donate just their investment income to charities, leaving the capital to grow for the future – to keep giving)
  • Sometimes, people want to retain their invested capital in the fund for a period (or maybe permanently) so that they can be sure the support of charities will continue long after they cannot give themselves
  • And of course a tax deduction enables donors to  give more (but, remember, virtually no donor gives solely for tax reasons – unless a person happens to have a 100% effective tax rate, the amount they give away is always more than the value of the tax deduction they receive)
  • But perhaps more than any other reason, many donors want to involve their young adult children in giving, in investment management, and in the feeling of purpose and social responsibility. It’s common for the trustees of private ancillary funds to include several family members from two generations.

For a fascinating insight into the motivations and life stories of Australians who have planned their giving, see Dr Wendy Scaife’s Foundations for giving : why and how Australians structure their philanthropy.

Setting up a private ancillary fund is moderately complicated, and involves continued compliance obligations as well as managing the invested capital and deciding how to give the distributions. Many funds management companies offer full services to set up and operate these. For example Perpetual Ltd offers this service. Trusts administered by Perpetual have given generously to NeuRA.

But planned giving to a permanent fund is not just for people who can give very large amounts.

  • You can give a gift to the Neuroscience Research Australia Foundation, and we will hold it as part of our endowment fund. The income will be used to support our top quality medical research to benefit all Australians and the world community – for example, by permanently funding scholarships for promising PhD researchers.
  • You can give to a permanent Public Ancillary Fund operated by private funds managers, like the JB Were Charitable Endowment Fund – which provides for named “management accounts” – or similar funds operated by not-for-profit entities like the Australian Communities Foundation or Sydney Community Foundation.

The most important aspects for charitable causes like NeuRA are that benefitting from planned giving are:

  • Usually when people plan their charitable giving, they give more and longer
  • Planned giving naturally causes our donors to consider making a charitable gift in their will
  • Planning giving can involve the next generation of a family as donors

For a confidential discussion about your giving interests please contact NeuRA Foundation Director Roewen Wishart.

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