Ancillary Fund Definition
All ancillary funds are established and maintained under a will or instrument of trust. The sole purpose of an ancillary fund must be to provide money, property or benefits to organisations which are endorsed as Item 1 DGRs (that is, funds, authorities or institutions gifts to which are deductible under item 1 of the table in section 30-15 of the Income Tax Assessment Act 1997.
Private Ancillary Funds (PAFs), formally known as Prescribed Private Funds, are vehicles for private philanthropy. A PAF must not fundraise.
Public Ancillary Funds are public funds, which means that the public must contribute to the fund and that the majority of trustees must be representative of the public. It is a common structure for community foundations in Australia and also for fundraising foundations, but can also be used to establish other types of foundation.
Please note: On November 19, 2010, Treasury released a Discussion Paper, 'Improving the Integrity of Public Ancillary Funds'. The Discussion Paper proposes the introduction of a new regulatory regime for Public Ancillary Funds, similar to that introduced for the PAFs in 2009. It is therefore possible that the regulations governing Public Ancillary Funds may change.
An ancillary fund must be exclusively for these purposes. It must not carry on any other activities. It is like a conduit or temporary repository for channelling gifts to other DGRs. An ancillary fund must not provide for, or establish, another ancillary fund or a PAF.
Helpful resources for understanding and governing ancillary funds include:
- ATO definition of Ancillary Funds
- Taxation Ruling TR 95/27 - Income tax: public anciollary funds
- Philanthropy Australia's Trustee Handbook: Roles and Duties of Trustees of Charitable Trusts and Foundations in Australia