iscover Enabling generosity under scrutiny: How accountants can help philanthropists give confidently
BusinessThe ATO is sharpening its focus on private wealth compliance – and philanthropy is not exempt. In a new era of scrutiny, the question for advisers and their philanthropic clients is how to keep giving confidently, writes Andrew Binns.
In Australia, wealthy families usually give through their own private ancillary fund (PAF) or a donor-advised fund (DAF) within a public ancillary fund (PuAF). Both options allow families and individuals to receive immediate tax deductions for their contributions and recommend grants over time. As scrutiny intensifies, however, many advisers are seeing clients look for approaches that reduce governance burden and lower risk – and that’s where DAFs increasingly stand out.
A recent draft determination from the ATO reinforces a simple principle: charitable structures must deliver genuine public benefit. The guidance makes clear that tax concessions may be at risk where arrangements provide value back to donors or related parties, or compromise a fund’s independence. It also sets out practical examples of what the ATO considers a ‘benefit’, which is not limited to the payment of money, but can include other advantages or forms of value. For donors and advisers, the guidance is clear: strong governance and a strict separation between private interests and public good matter more than ever.
Framing the ATO’s focus as merely punitive misses the opportunity in this moment: to help clients give more confidently and more strategically. For families weighing a PAF against a DAF, the decision increasingly depends on governance burden and risk appetite. A PAF can be the right choice for clients prepared to meet significant trustee obligations, including independent oversight, annual audits, investment strategies, minimum distribution requirements, and strict limits on related-party benefits. That governance load is substantial – and growing.
A donor-advised fund offers the same tax deductibility for gifts and ability to recommend grants to eligible charities, without the need to run a foundation. The PuAF trustee (or host foundation) assumes responsibility for compliance, investment oversight, and reporting, ensuring all activity aligns with the ATO’s guidelines. Donors retain advisory privileges over their giving – choosing causes, timing, and strategy – while professional governance keeps decisions independent and transparent. In the current climate, that balance of flexibility and rigour is increasingly compelling for donors and advisers alike.
By simplifying administration and helping avoid governance pitfalls, DAFs allow clients to focus on supporting the causes they care about – climate action, First Nations initiatives, arts and culture, or medical research – rather than the ins and outs of tax law, trust deeds, and audit schedules.
There are broader benefits, too. Professional management by the host foundation helps ensure funds are invested prudently, minimum distributions are met (meaning individual DAFs can often grant at their own pace), and grants flow only to eligible charities. In practice, this reduces administrative friction and lowers the risk of costly compliance errors.
For clients who already have a PAF and value its bespoke control, a DAF can complement existing strategies, particularly where speed, simplicity, and independence matter most. For those at the beginning of their philanthropic journey, a DAF offers a smart entry point.
Unlike PAFs, which generally require an initial investment of $1 million and can take months to establish, a DAF can be opened in a matter of days, making them especially attractive in the lead-up to 30 June. Some are opened with as little as $10,000, while others start with millions. Whatever the amount, DAFs provide flexibility to adapt as circumstances change, with learning opportunities often provided by the host foundation along the way. Economies of scale – shared audit, accounting, legal and due diligence – also mean DAFs are generally more cost‑effective than running a standalone foundation.
While the ATO intensifies its focus on private wealth and philanthropy, many clients are already looking far beyond tax minimisation towards purposeful, long-term giving that delivers real social value. That change in perspective matters. When philanthropy is seen only through the lens of tax and regulation, the real purpose gets lost. True philanthropy is about living your values and contributing to a better future.
In a time of heightened regulatory attention, Australia’s generosity shouldn’t be slowed by red tape. Donor-advised funds offer a clear and trusted path forward for advisers and their clients, enabling national generosity to continue to thrive.
Andrew Binns is CEO of the Australian Communities Foundation.
