Aussies are a generous lot – you only need to look at the way we open our hearts and pockets when a natural disaster strikes and there have been plenty of opportunities over recent years. This generosity is not only limited to these awful events, with thousands of Australians supporting multiple charities on an ongoing basis. But what if you wanted to start your own charity? You don’t have to be wealthy to do it.
The following are just three of the options available in setting up your own charity.
a foundation or trust established through your will
This is the most popular option. Many people prefer to leave instructions in their will to set up a foundation in their memory, often related to a cause or institution they were fond of or supported during their lifetime.
An endowment fund donates to other charities and the donor usually makes recommendations to the beneficiary charity trustees. The tax benefits for endowment funds are the same as those for charities, but endowment funds can be started with smaller amounts.
a charitable trust or foundation set up as a private ancillary fund (PAF)
A private charitable trust can have individuals as trustees, but PAFs must have a corporate trustee with strict guidelines on who can be a director of such a trustee. The individual who establishes the charitable trust can maintain a high level of involvement as an individual trustee of the charity. PAFs are generally favoured by the wealthy because donations to the fund are tax-deductible and public donations are not required. PAFs and charitable trusts are exempt from income tax.
As you can imagine, there is much scrutiny involved when it comes to establishing and managing charities. Trustees must meet stringent obligations to ensure the proper operation of a charity and this requires professional advice, particularly in the management of the fund’s investment strategy.
But don’t let this deter you from helping others. With the right information, it’s not as difficult as it sounds. It’s worth consulting a financial adviser for more information.
www.ato.gov.au Endorsement requirements for charities and income tax exempt funds – Tax basics for non-profit organisations
www.comlaw.gov.au “Public Ancillary Fund Guidelines 2011”
Kaplan Education, ‘Give and you shall receive: embracing philanthropic advice’