~ APS warns ancillary fund changes offer short-term boost at expense of long-term philanthropy impact ~

The Government’s decision to raise the minimum distribution rate for Private Ancillary Funds (PAFs) from the current 5 per cent to 6 per cent and for Public Ancillary Funds (PuAFs) from the current 4 per cent to 6 percent is disappointing, running counter to the Government’s stated aim of building the giving culture in Australia, Judith Fiander, CEO at Australian Philanthropic Services (APS) says.

“Addressing the serious community issues facing Australia requires encouraging more people to give rather than squeezing those already engaged”, Fiander says. The current 5 per cent rule – high by international comparisons – represents a minimum, not a ceiling, with many APS clients already distributing well above the requirement.

“On the surface, raising the minimum might sound like a way to push more money to charities faster, but Treasury’s own modelling shows this is only a short-term fix with a negative impact into the future”, says Fiander.

According to Treasury’s Discussion Paper (Giving Fund Reforms, June 2025) “Higher distribution rates see aggregate distributions to deductible gift recipients (DGRs) maximised over the short term. However, in the longer term, distributions are maximised when the distribution rate is set at its current rate of 5 per cent.”

The 5 per cent rate of distribution is consistent with targets set for the Government’s own future funds such as the recently created Housing Australia Future Fund (HAFF) and Medical Research Future Fund (MRFF). As recently reported, the MRFF has failed to achieve even that level of distribution.

“If the Government is serious about increasing the flow of funds to charities, why are they applying a different standard to philanthropists than they are to themselves?”, continues Fiander.

Fiander says so far, the system has worked well.

“Since their inception PAFs have provided more than $6.7 billion to charities, while preserving long-term capital and encouraging generosity by Australians in a structured context. The system does not need changing.”

One of the key elements in the success of ancillary funds promoting a more generous Australia over the last two decades, has been a stable and relatively consistent compliance regime – this change risks derailing the progress that has been made.

“This is particularly important given the long-term nature of philanthropy. Increasing minimum annual distributions – even modestly – creates uncertainty and potential donors will question whether the rate may go up again. Tinkering with the regime risks future giving,” Fiander says.

“The 5 per cent minimum that applied before this change was well-founded, aligning with international best practice as well as the Government’s own future funds, and crucially, maintained the capital base to ensure sustained giving for generations to come.”

Fiander says there is a once-in-a-generation opportunity to embed philanthropy deeply into Australian culture, and the latest move by the government is putting this at risk.

“Since its establishment 13 years ago, APS clients have given away more than $1.4 billion to charities and now have over $2.9 billion in funds irrevocably donated into ancillary funds for future charitable use. APS consistently establishes roughly one-third of all PAFs created in Australia each year and has the fastest growing and most generous public ancillary fund of its type in the country”, Ms Fiander said.

“With patient capital, philanthropy can help tackle long-term challenges like homelessness, disadvantage and medical research. But this requires confidence in a system that works. The Government’s decision on minimum distribution levels is disappointing and doesn’t align with their own stated aims”, says Fiander. “However, we remain firm believers that ancillary funds are one of the most effective and efficient ways to support the community.”

It’s not all bad news: the Government increasing the number of new Community Charities is welcome. The two-year lead time for application of the new minimum distribution level for existing ancillary funds is sensible and aligning distribution rates across all ancillary funds is sensible. Further, the provision of smoothing of distributions levels over three years will support large charitable projects.

Finally, stability of ancillary fund guidelines was recognised as being important by the Productivity Commission which recommended that changing minimum distribution levels should only be considered once a decade. “We urge the government to confirm its agreement on this point and on increases to distributions levels from its own funds”, says Fiander.

Published 27 February 2026

About Australian Philanthropic Services (APS)

Australian Philanthropic Services (APS) is the leading independent, not-for-profit philanthropic services organisation in Australia. Our 1100+ clients donated over $242 million to charity last financial year and have committed over $2.9 billion to charity held in structures that we support.

We offer fulfilling ways for you to manage your charitable giving over time using tax-efficient structures called ancillary funds. With APS, you can establish your own private ancillary fund (PAF) or a named giving fund (also known as a sub-fund) in our public ancillary fund, the APS Foundation.