An important update by APS Technical Director David Ward

Philanthropic planning in Australia is being shaped by several important regulatory and policy developments, including proposed changes to Giving Funds, minimum distribution rates, Community Charities, Capital Gains Tax and Family Trust tax treatment.

The philanthropic landscape has been unusually active in recent months, with several important regulatory and policy developments that will affect how givers structure and mange their giving.

While some changes may require adjustments, the overall environment remains strongly supportive of philanthropy. Tax-deductible giving continues to be encouraged, and several reforms are designed to improve access to funding for community organisations and preserve incentives for charitable donations.

Below, we outline the key developments and what they could mean for you.

Key changes affecting philanthropic planning in Australia

• Ancillary Funds are set to be renamed Giving Funds.
• Minimum distribution rates for Giving Funds will rise to 6%, with transitional arrangements for existing funds.
• A new smoothing mechanism will provide greater flexibility in annual grant distributions.
• The new Community Charity category will make it easier to support smaller local organisations.
• Changes to CGT preserve the value of charitable deductions following sector advocacy.
• Proposed Family Trust tax reforms are expected to continue recognising gifts to DGR charities.
• Broader DGR reform remains an important priority for the philanthropic sector.

Are Ancillary Funds being renamed Giving Funds?

In a move aimed at making philanthropy more accessible and easier to understand, legislation has been introduced to rename Ancillary Funds as Giving Funds.

The proposed change recognises that the term “Giving Fund” more clearly reflects the purpose of these structures and is easier for donors and advisers to understand. APS has embraced this terminology since 2019 through the APS Foundation, and we welcome a shift that makes philanthropic giving more approachable.

What is the new minimum distribution rate for Giving Funds?

One of the most significant changes relates to the minimum annual distribution rate (MAD) applying to Private and Public Giving Funds.

The Australian Taxation Office has confirmed that the minimum distribution requirement will increase to 6% p.a., up from the current 5% p.a. for Private Ancillary Funds and 4% p.a. for Public Ancillary Funds.

When will the new Giving Fund distribution rate apply?

The change is expected to take effect once new Guidelines are finalised, likely later this year. For newly established giving funds, the higher distribution rate is expected to apply from 1 July 2027.

Importantly, existing Private Giving Funds and funds within structures such as the APS Foundation will be given a transition period, with the new rate not expected to apply until around 1 July 2029.

While APS and others advocated for retaining the 5% rate, the Government has proceeded with the increase. On a positive note, a new “smoothing” mechanism will also be introduced, allowing distributions to be averaged over a period of up to three years. Although details are still to be released, this flexibility could help donors manage giving more strategically from year to year.

What is the Community Charity?

A particularly positive reform for local giving is the introduction of a new Deductible Gift Recipient (DGR) Item 1 category known as Community Charities.

This framework will allow distributions via Community charities to organisations undertaking eligible charitable work, even where those organisations do not hold DGR Item 1 status themselves.

For givers, this has the potential to open new opportunities to support smaller grassroots organisations that are making a meaningful difference in local communities but have traditionally faced barriers accessing tax-deductible funding.

Do charitable donations still reduce taxable capital gains?

The 2026 Federal Budget introduced significant changes to the taxation of capital gains as part of broader reforms targeting housing-related investment incentives.

Initially, the proposed measures would have imposed a minimum 30% Capital Gains Tax (CGT) regardless of whether a taxpayer made deductible charitable donations. This would have reduced the effectiveness of philanthropy as part of legitimate tax planning.

Following strong advocacy from across the sector, initiated by APS, the Government has amended its approach. Under the revised proposal, charitable DGR deductions will continue to be taken into account before the minimum tax is applied.

This ensures that donations to DGR charities remain appropriately recognised within the tax system and preserves an important incentive for givers considering major charitable gifts.

The new rules are expected to apply to capital gains realised after 1 July 2027.

Family Trust Tax Proposals and Giving Funds

The Budget also announced a proposed 30% minimum tax for Family Trusts.

While the detailed legislation has not yet been released, current indications suggest that distributions to DGR charities, including Giving Funds, will be included considered in the application of the new rules. This would align with the broader principle that charitable giving should receive consistent tax treatment across the tax system.

APS has formally advocated for this outcome and will continue to monitor developments as more details become available.

At this stage, any changes are not expected to commence before 1 July 2028.

What could broader DGR reform mean for Australian philanthropy?

These recent Budget measures have also highlighted the growing need for wider reform of Australia’s DGR framework.

The current system can produce unintended outcomes, particularly for organisations tackling complex social issues through multiple programs or innovative approaches that do not fit neatly into existing DGR categories. As a result, some highly impactful organisations remain ineligible to receive tax-deductible donations.

The Productivity Commission’s 2024 recommendations identified many of these challenges, and further reform remains an important opportunity for government.

While the new Community Charity category provides a practical pathway for supporting many worthwhile causes, a broader review of the DGR framework would help ensure Australia’s philanthropic system remains fit for purpose and capable of supporting emerging community needs.

What givers should consider in their philanthropic planning

Although several of these reforms will take a number of years to fully come into effect, they signal an evolving philanthropic landscape.

Encouragingly, the core principles that underpin charitable giving remain unchanged. Tax-deductible donations continue to be supported, new pathways are emerging to fund grassroots organisations, and recent advocacy efforts have helped preserve important incentives for philanthropy.

As always, APS will continue to monitor developments, engage in consultation processes, and keep clients informed as further details become available.  We can help review your giving structure and distribution strategy, keep you informed as new Giving Fund rules are finalised and offer advice before you make major charitable gifts.

Published August 2026