Q. What is a Named Sub-Fund?
Giving
Questions
Glossary
The following is a glossary of terms frequently used at Australian Communities Foundation. A more detailed glossary of philanthropic terms can be found here.
| term | definition |
| bequest | A sum of money made available upon the donor’s death by provision in their will. Many people leave bequests to charities. Many charitable foundations in Australia have been established by bequest. |
| charitable purpose | The law recognises charitable purposes that include: relieving poverty, sickness or the needs of the aged, advancing education, advancing religion, and other purposes beneficial to the community (which are outlined in the Charities Act 2013). |
| Deductible Gift Recipient (DGR): | A deductible gift recipient as endorsed by the ATO. This means the entity can receive tax-deductible gifts. A DGR can be classified as either an Item 1 DGR or an Item 2 DGR. Item 1 DGR is also known informally as a ‘doing’ organisation. Most DGRs fall into this category, and include public benevolent institutions, universities, environmental organisations, cultural organisations and many others. Item 2 DGR is also known informally as a “giving” DGR. This includes organisations which are private or public ancillary funds and exist only for the purpose of providing donations to Item 1 DGRs. |
| donation | This refers to gifts of cash, property, shares, etc. made to ACF generally or in to one of the sub-funds. |
| donor | Someone who has set up a fund with ACF. |
| flow-through fund | A process whereby sub-funds are established with the intention being to grant out the corpus in a relatively short timeframe, such as 12 to 18 months. |
| grant | The distributions made from one of the ACF sub-funds to an eligible organisation/individual. |
| grant request | The request or recommendation made by a sub-fund holder to ACF about where they want a grant to go. Requests are considered by ACF’s Grants Committee. |
| Future Funds | Future Funds are funds established by DGR1 not-for-profit organisations. The not-for-profit needs to be registered with the Australian Charities and Not-for-profits Commission (ACNC). They can only grant back to themselves and they are limited to one grant per annum – hence they have a lower fee. Once a Future Fund reaches a balance of $1 million, the fee will follow the arrangements described for sub-funds. |
| Public Ancillary Fund | A form of ancillary trust fund designed to encourage philanthropy by providing the public with flexibility to support a wide range of Deductible Gift Recipients. The underlying concept of public funds is that the public are able and invited to contribute and the fund is operated in a public manner for public interest. |
| Statement of Wishes | An expression of intent for the use of a bequest. A person who leaves a bequest may submit a Statement of Wishes to the recipient of the bequest so the money is used as intended when granted. |
| sub-fund holder | A sub-fund holder is the person/s who established the sub-fund and is generally the primary contact for it. Sub-fund owners are also known as donors, although donors can include any person who makes a donation to ACF or to a specific sub-fund. |
| Tax Concession Charity (TCC) | A tax concession charity as endorsed by the ATO. This means the entity is exempt from income tax, eligible for GST concessions and refunds on franking credits. |
A Named Fund, also known as a donor-advised fund or sub-fund, is a vehicle for structured charitable giving.
A Named Fund is like a personal charitable savings account in that a donor creates an account and makes contributions of cash, stock, or other assets like real estate or artwork, and can take an immediate tax deduction for the gift.
In Australia, a sub-fund operates under the auspices of a community foundation or other public ancillary fund (PuAF). As a sub-structure of the public ancillary fund, legal compliance is managed by the trustees of that PuAF, meaning the sub-fund can enjoy all the benefits of a public ancillary fund with none of the burdens.
Every sub-fund can be open to the public to donate into if that is the wish of the sub-fund holder. Upon donation, a tax-deductible receipt is issued immediately, and the money is held in trust by the Trustees.
While it is not legally possible for the Trustee to guarantee that they will follow the donor’s direction for sub-funds; in practice, the sub-fund holder makes grant requests, and the Trustees action those requests (unless there is a legal reason that would render the request impossible).
Australian Communities Foundation places a premium on following the advice of donors and has always done so in its 20+ years of granting.
Q. Why start a Named Sub-Fund? Why not just give directly to a charity?
There are four great reasons to structure your giving:
- It enables you to make philanthropic gifts at the right time for you.
- You can plan when the money is granted out of your fund to non-profit organisations based on your granting strategy and the needs of that non-profit.
- It’s a way to give to back to future generations or establish a family legacy that can be passed down. You receive a tax deduction now, but you can grant out the money over many years.
- Be part of a thriving community of givers, giving you support and access to a variety of events and connections to like-minded donors.
Read more: Why open a fund and not just give directly?
Q. Is a Named Sub-Fund the same as a foundation (Private Ancillary Fund)?
No. A Named Fund is a management account established as part of one of Australian Communities Foundation’s charitable trust funds. It is established by you and named by you. A Named Fund is not a legal entity and the sub-fund holder is not the Trustee.
A private ancillary fund, or PAF, is a form of charitable trust that can be used for strategic long-term giving. It offers donors tax deductibility and flexibility in their charitable giving. Private ancillary funds differ from public ancillary funds in that they cannot seek or receive contributions from the public. Donors are an individual, family or corporate entity.
Like public ancillary funds, private ancillary funds must have corporate trustees. A donor with a Named Fund does not have to worry about the on-going compliance, investment and administration – they can concentrate on giving.
Find out which type of fund is right for you here.
Q. Are all Named Sub-Funds the same?
No. Every foundation has its own rules and procedures that affect the fund opened. Some of the differences are:
- the minimum allowable amount in the fund
- whether the fund is locked into that foundation for a period of time
- what kinds of causes and organisations the fund can grant to
- limits and caps on how often money can be donated or granted from the fund
- the fees charged.
As a donor-focused organisation, Australian Communities Foundation offers flexibility to our sub-fund holders who can:
- donate into their fund and grant out as often as they like
- make grants of any size (the smallest grant is $500)
- establish a Named Fund with a minimum requirement of only $20,000
- close a sub-fund and take funds to another similar foundation
- donate to any valid charitable organisation.
Find out more about our Named Funds here.
Q. Who is the Trustee at Australian Communities Foundation?
Australian Communities Foundation is governed by a not-for-profit company limited by guarantee, Australian Communities Foundation Limited, which is the Trustee. It consists of a Board of Directors made up of voluntary leaders representing a broad cross-section of the community. Find out about our Trustees here.
Q. How do you start a Named Sub-Fund?
Very easily and quickly. Simply fill in an establishment form and make the initial donation. At Australian Communities Foundation there are no establishment fees and no waiting period – you can be up and running in a day. You can also start a Named Fund through a bequest. Get started here.
Q. Can a Named Sub-Fund be passed on through my family?
Yes. At Australian Communities Foundation the future of your fund is recorded in your Will and in your Statement of Wishes lodged with us. We can assist you with succession planning.
Q. How much money do I need to establish a Named Sub-Fund with Australian Communities Foundation?
The minimum opening donation is $20,000 and this amount must remain in the account at all times. You may make grants with any monies over the $20,000 minimum.
There must also be an understanding that a Named Fund will grow to at least $100,000 over time. There is no upper limit.
Q. What if I want to have a Named Sub-Fund, but don’t have $20,000 now?
Australian Communities Foundation is all about making philanthropy accessible; you can open a Gumnut Account for as little as $5.45 per day or $2,000 per year. Regular contributions are made until your account reaches $20,000 when it can be transferred into a Named Fund and you start your giving program. Find out more about a Gumnut Account here.
Q. Can a Named Sub-Fund close?
Yes. A donor can request to close a Named Fund and have the balance granted to a specific project or organisation or to Australian Communities Foundation’s Community Fund. Alternatively, the funds can be moved into a similar foundation with a once-off exit fee of $500.
Q. When can grants be made?
Grants can be made so long as the Named Fund balance does not fall below $20,000.
Minimum grant size is $500 and grants are distributed every two weeks, so when you want to grant, we are ready to help you.
Q. Are donations tax-deductible?
Yes. Donors have the ability to donate to a tax-deductible fund. All monies that receive a tax deduction must be granted to a TCC or DGR1 organisation or to an individual via a scholarship.
Q. What if a tax deduction is not required?
Australian Communities Foundation has a non-tax deductible extension fund. All earnings are exempt from tax. Grants can be made for charitable purposes to both organisations and individuals. Generally, bequests and corporate donations are made to an Extension Fund.
Q. How do I choose who, or what, to give to?
The giving process may seem daunting when you think about the multitude of organisations and causes to which you can contribute. When you are deciding who, or what, will be the recipients of your giving, a great place to start is within yourself. As individuals, we are all passionate about something. What is your passion? What keeps you awake at night or has you so excited that you have to tell others about it? Use these thoughts to help refine and focus your ideas about giving and remember that the team at Australian Communities Foundation is on hand to give advice and help you find the right organisation. Our community values our advice and learns together. Explore current granting opportunities here.
Q. Can the donor choose their grants?
Grants are only made at the donor’s request. However, the Trustee has to approve all grants as part of its due diligence and formal responsibility. This gives donors the confidence of knowing their grantmaking is both effective and fully compliant with the regulations.
Q. How do donors choose their grants?
There are lots of options. If a donor knows what they want to support, they can simply make the requests when they are ready to grant. You can explore all kinds of projects and organisations seeking support at our national funding platform here. Australian Communities Foundation also undertakes bespoke research for our donors, in their areas of interest, where we will identify grant opportunities against a specific brief. Australian Communities Foundation frequently and regularly receives a broad range of requests for funding from community organisations. Once we’ve done our due diligence, these requests are passed on to donors.
Q. What charities can I support? What ‘community’ do you cover?
The Australian Communities Foundation trust deed allows grants to be made to charitable organisations anywhere in Australia and overseas to Australian registered charities. We can usually get your donation to the organisation you want to support wherever they are. At the same time, Australian Communities Foundation also undertakes its own research and identifies strategic initiatives for funding.
Q. How do I ensure that my donations to Australian Communities Foundation are used effectively?
All our donors have access to Australian Communities Foundation’s significant community and grantmaking knowledge as well as the opportunity to participate in a range of thought-provoking, insightful forums, site visits and other events enabling you to deepen your knowledge and connect with other like-minded people.
Q. How are donors kept updated?
Australian Communities Foundation communicates regularly with all our donors via newsletters and our website provides updates on investment performance, granting opportunities and event information.
Q. How much can I give away each year? Do I have to make a minimum distribution each year?
Unlike Private Ancillary Funds, sub-fund holders are not required to make a minimum annual distribution. Australian Communities Foundation is obliged to grant a minimum of 4 per cent of capital based on our net assets at the end of the previous financial year annually. This is calculated at the consolidated trust fund level. This allows flexibility for Named Funds to either give away more than 4 per cent of capital or alternatively to accumulate and grow for a period of time, without making grants.
Q. How are the funds invested?
The Australian Communities Foundation Board, through its Finance and Investment Committee, is responsible for the investment policy and approach. Australian Communities Foundation has appointed an investment adviser, Brightlight Advisory, which works to a mandate and service agreement. Read more about our responsible investing approach here.
Q. How is the Australian Communities Foundation operations funded?
Australian Communities Foundation’s major source of income to cover operating expenses is the management fee charged to Named Funds. There is also an annual investment fee on capital which covers all investment-related costs including the investment advisory fees. Find out more about our fees here.
Australian Communities Foundation also offers a fee-for-service grantmaking and consulting research and advice to individuals and other organisations, including private trusts and foundations. In addition, Australian Communities Foundation relies on gifts and donations from supporters and Board members.
Ready to start giving or want to learn more?
Contact our team, who’ll be happy to help.