Published 13 March 2026

At a glance – what’s changing?

• The Government plans to increase the minimum annual distribution rate to 6% of net assets for both Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs, such as the APS Foundation), up from 5% (PAFs) and 4% (PuAFs).
• Existing funds will have a two year transition period, so for most clients nothing changes for at least the next two, possibly three, financial years.
• New funds will need to meet the new minimum distribution requirements in the financial year following adoption of the new rules – likely to be FY2027.
• For PAFs, there will be a new three year “smoothing” option, allowing distributions to be averaged over three years.

Ancillary funds remain one of the most effective, flexible and tax efficient ways for Australians to structure their philanthropy for long term impact.

What this means for PAF clients

What are the main changes for PAFs?

• New minimum distribution: 6% of net assets each year (up from 5%).
• Timing: applies from the first financial year after the rules are formally changed, with a two year transition for existing PAFs.
• New flexibility: PAFs will be able to “smooth” distributions over three years, which can help when making large or multiyear grants.

How will these changes affect my giving?

• If you already give around 6% or more, you may see little or no change in your normal giving pattern.
• If you usually give around 5%, you will need to plan for a higher minimum once the transition period ends.
• The three year averaging could help you match your giving to projects (for example, a large grant in one year and lower distributions in the following years, as long as the three year average is at least 6%).

What do I need to consider with my adviser?

• Review your investment strategy and distribution policy so a 6% payout remains sustainable while preserving your fund in real terms if you want it to last for future generations.
• Consider whether additional contributions to your PAF would help offset higher required minimum distributions.
• Use the transition period to plan any larger or multiyear commitments, taking advantage of the new smoothing rules once they are confirmed in detail.

What this means for PuAF clients, including Giving Fund holders in APS Foundation

What are the main changes for PuAFs?

• New minimum distribution: 6% of net assets each year (up from 4%).
• Timing: as with PAFs, the change starts from the first financial year after the rules are updated, with a two year transition for existing PuAFs.

How will this affect my giving?

• If your Giving Fund already distributes around 6% or more, you may not notice much change.
• If your usual distribution is closer to 4–5%, you should plan to make higher minimum annual grants once the transition period ends.

What should I consider with my adviser?

• Discuss whether you want to increase contributions to your sub-fund so you can meet a 6% distribution while still preserving capital over time.
• Use the lead time to align your gifting plans (for example, number and size of gifts each year) with the higher minimum.

The Government’s rationale

• Encourage more immediate funding to flow to the charitable sector.
• Maintain fund sustainability through smoothing and transition arrangements.
• Treasury modelling suggests that, with typical market returns, a fund distributing 6% annually could remain viable for “decades.”

Industry participants, including APS, have argued that a 5% rate remains optimal for sustaining long-term philanthropic capital and why change a framework that was working? Also, Treasury’s own analysis also found that total philanthropic distributions are maximised over the long term at a 5% rate, not 6%.

APS perspective – Why it matters for clients

Many clients already regularly give 6% or more and this will not impact them. For those that give at 5% each year this will obviously represent an uplift.

APS supports a strong culture of giving but believes this change risks undermining long-term capital preservation, which enables ancillary funds to support communities for generations.

Key considerations:

• Long-term vs short-term outcomes: A higher minimum may deliver a temporary boost to charities but risks eroding capital over decades. The current 5% already aligns with major government “future funds” like the Housing Australia Future Fund and Medical Research Future Fund.
• Stability and confidence: Ancillary funds have thrived under stable rules – PAFs have distributed over $6.7 billion while preserving their capital. Changes may unsettle donors and discourage new fund creation.
• Inconsistent expectations: Government long-term funds distribute at 5% or less, yet private philanthropy will be held to a higher minimum.

That said, APS welcomes several constructive elements in the reform package:

• The two-year transition allows planning and adjustment.
• Alignment of PAF and PuAF rates simplifies compliance.
• Three-year smoothing will help PAFs support large or multiyear projects.
• Expansion of recognised Community Foundations strengthens local “place based” giving options nationally.

Likely timing

What are my next steps? 

• Many APS clients already give at or above 6%, so the proposed change will mainly affect those who have been giving closer to the current minimums.
• APS strongly supports a culture of giving but is cautious that a higher minimum may erode capital over the very long term, which could reduce support for communities in future decades.

For now, no immediate operational changes are required, and this is a good time to review your philanthropic goals, investment settings and contribution plans so you are ready when the new rules commence.

If you have any questions or would like to review your PAF or Giving Fund arrangements, please contact APS:

PAF Clients – please contact your Giving & Governance Adviser, call 02 9779 6300 or email hello@australianphilanthropicservices.com.au.

APS Foundation Giving Fund Holders – please call 02 9779 6312 or email foundation@australianphilanthropicservices.com.au