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PAFs - How they work - a PAF case study

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PAFs
Essential features of a PAF
Advantages of a PAF
Establishing your PAF
How they work - a PAF case study
A Donor's Gift
Adam Scott Foundation
Australian Children's Trust
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Page 5 of 8

An individual sells an investment with a large capital gain, and also wants to support a charity

Situation

  • Selling investment for cash
  • Triggers large capital gains tax liability
  • Pledges $1M to a charity, on the basis of $100,000 each year, for the next 10 years

Action

  • Set up a Private Ancillary Fund
  • Make a larger donation to the PAF in year one to offset capital gains tax liability
  • The PAF will generate a growing annual contribution which can support the charity

Result

  • Donor will gain relief for the large capital gains tax liability
  • Capital will begin to compound in a tax exempt environment
  • Charity receives a growing income stream that keeps growing after the end of the 10 years
  • Donor achieves maximum tax benefit (that may not have occurred in years 7, 8, 9 and 10 if the donor hadn’t had the taxable income to offset his annual gift).


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Meet Jack

To see Jack playing with his younger brother Luke, you’d never imagine he has a chronic, life-threatening disease.

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