Although the minimum annual distribution obligation for PAFs is 5% of the value of funds under management (as at 30 June the prior year), and 3% for the APS Foundation*, some clients choose to gift more than their minimum. We run through some of the considerations for both options.

Exceed

The time is now

Current levels of community need are so pressing, there is a compelling case for responding in real-time rather than holding off in favour of future needs. Indeed, in certain sectors, (e.g. environment/climate change), it is arguably counter-intuitive to ‘save’ vital funds now for a notional future that may not even exist.

Solve the big, hairy problems

Having more to distribute within a limited timeframe creates an increased sense of urgency and a level of accountability for philanthropic boards that may not otherwise occur. Often a clear philanthropic goal is established and directors go ‘all in’ to contribute towards a particular issue, getting more deeply involved in implementation.

Giving while living

It can be enormously satisfying to start implementing your philanthropic legacy while you’re still alive to enjoy the experience, learn from it, and share your learnings with others. Why unnecessarily delay that process?

Engaging the next-gen

For philanthropists with families, choosing to exceed the minimum can help galvanise multigenerational families, enabling them to work together on a community goal that becomes part of the ‘family narrative’ – focusing on a values-based common purpose rather than familial differences.

Do not exceed

Stay for the long-term

Philanthropic foundations are one of the only sources of community funding not subject to political cycles, corporate budgets or personal whim. When perpetuity is your time horizon, all needs should be considered equal – and current needs should not be prioritised over those of future generations.

Generational change takes time

Most of society’s problems and inequities develop as a function of human behaviour, culture, and systems over time. Similarly, societal change takes generations to effect – characterised by incremental steps over many years, leading up to a trigger point for change. Philanthropy, with its capacity to support timelines of thirty years plus, is uniquely placed to support society’s changemakers for the long haul.

Program sustainability can be compromised

For many charitable programs involving long-term agendas (environmental conservation or medical research, for example) multi-year funding is a necessity for program success. Similarly, the sustainability of many smaller charities is dependent upon predictable funding over many years, versus a time-limited ‘sugar hit’.

Investment concerns

Protecting assets and not drawing down is generally how foundations are able to give away more funds over time. Further, having sufficient cash on hand to make the 5% figure is usually a carefully timed exercise. A decision to exceed minimum requirements may involve forced sales or holding large amounts of liquid assets (which may cause a drag on returns over time). Any plan to spend more would need to be reflected in a foundation’s investment strategy, and carefully monitored and revisited.

* The Australian Taxation Office amended the rules that govern the minimum gifting requirements of public ancillary funds, including the APS Foundation, to encourage increased giving during the COVID-19 pandemic.  A ‘credit’ was introduced for Foundations that have exceeded the minimum giving requirement during the previous two financial years. As a result of the amended rules and APS Foundation giving fund holders’ significant generosity, the minimum giving requirement for the APS Foundation has been reduced from 4% to 3% until 30 June 2026.