Higher ancillary fund distributions more damaging in long-term: APS

Yasmine Raso

Senior Journalist, Financial Newswire

2 March 2026

The Australian Philanthropic Services (APS) has warned that while the Government’s decision to increase the minimum distribution rates for ancillary funds would deliver more money to charities faster in the short-term, it risks eroding funds’ capital bases and inhibits their ability to sustain giving over the long-term.

With the distribution requirements for private ancillary funds (PAFs) set to increase to six per cent from five per cent and public ancillary funds (PuAFs) also to six per cent from four per cent, APS chief executive, Judith Fiander, said this goes against the Government’s previously stated “aim” of “building the giving culture in Australia”.

A Treasury discussion paper from June 2025 confirmed that while “higher distribution rates see aggregate distributions to deductible gift recipients (DGRs) maximised over the short term”, it would also ensure distributions remain maximised in the long-term “when the distribution rate is set at its current rate of 5 per cent”. The Government’s own future funds, such as the Housing Australia Future Fund (HAFF) and Medical Research Future Fund (MRFF), have distribution targets set at five per cent – and they are even struggling to reach these levels.

Fiander said the Government should focus on “addressing the serious community issues” to encourage more people to give instead of “squeezing those already engaged”.

“On the surface, raising the minimum might sound like a way to push more money to charities faster, but Treasury’s own modelling shows this is only a short-term fix with a negative impact into the future.

“If the Government is serious about increasing the flow of funds to charities, why are they applying a different standard to philanthropists than they are to themselves?”

“Since their inception PAFs have provided more than $6.7 billion to charities, while preserving long-term capital and encouraging generosity by Australians in a structured context. The system does not need changing.”

Fiander also aired concerns that these changes could “derail” the progress already made towards embedding philanthropy and giving into Australian culture, risking the “stable and relatively consistent” compliance system already in place.

“This is particularly important given the long-term nature of philanthropy. Increasing minimum annual distributions – even modestly – creates uncertainty and potential donors will question whether the rate may go up again. Tinkering with the regime risks future giving,” she said.

“The 5 per cent minimum that applied before this change was well-founded, aligning with international best practice as well as the Government’s own future funds, and crucially, maintained the capital base to ensure sustained giving for generations to come.

“Since its establishment 13 years ago, APS clients have given away more than $1.4 billion to charities and now have over $2.9 billion in funds irrevocably donated into ancillary funds for future charitable use. APS consistently establishes roughly one-third of all PAFs created in Australia each year and has the fastest growing and most generous public ancillary fund of its type in the country.

“With patient capital, philanthropy can help tackle long-term challenges like homelessness, disadvantage and medical research. But this requires confidence in a system that works. The Government’s decision on minimum distribution levels is disappointing and doesn’t align with their own stated aims.

“However, we remain firm believers that ancillary funds are one of the most effective and efficient ways to support the community.”