by Susan Chenoweth

The Federal Government’s current review of ancillary fund rules is more than a policy update.1 It’s a defining moment for structured philanthropy in Australia.

At the heart of the review, triggered by the Productivity Commission’s 2024 Report, is a proposal to align and increase the minimum annual distribution rate for public and private funds, to somewhere between 5% and 8% of assets. 2  While the goal is admirable—more funding reaching charities sooner, there is a deeper trade-off: how do we deliver more impact now without undermining the long-term financial sustainability of philanthropy itself?

As Head of Philanthropic Services at Elston, I work with families, foundations and advisers to shape giving strategies that are both purposeful and enduring. We see firsthand that legacy-minded donors don’t just want to give, they want to give well, and for generations.

The current 5% minimum distribution has long struck a balance between impact and sustainability.3 Most balanced portfolios return around 6–7% before fees and inflation—so 5% is a carefully calibrated benchmark.4

Higher distribution mandates could accelerate the erosion of philanthropic capital, particularly in a lower-return or volatile market environment. This is especially concerning given we are emerging from a 40-year period of falling interest rates—an historical tailwind that may not repeat.

It may push Foundations toward higher-risk investment strategies—potentially increasing volatility, liquidity risk, and exposure to sequencing risk, where negative returns early on can permanently erode corpus capital. In the worst-case scenario, funds meant to provide enduring support for generations could shrink dramatically or fail entirely.

Donors who establish foundations are often legacy-driven. They want their giving to endure. Treasury’s own modelling shows that a 5% distribution rate is the only level at which the real value of a $1M gift is preserved over time.5

Of course, there are deductible gift recipients (DGRs) that need urgent support today. But many also rely on dependable funding over the long term. Building and preserving capital—when done thoughtfully—is not a delay in impact. It’s a commitment to future generations of giving.

There are several thoughtful proposals in the Treasury paper that deserve strong support:5

  • 3-year smoothing of distributions
  • Accumulation provisions for major strategic grants
  • Asset transfer flexibility and renaming to “Giving Funds”

These changes reflect how philanthropy works in practice—and encourage broader participation.

If we want more dollars flowing to community causes, the solution isn’t to stretch existing funds further. It’s to inspire and enable more Australians to participate in structured giving.

That means:

  • Education and awareness
  • Accessible, cost-effective structures encouraging more to give
  • Policy settings that balance impact and resilience

Only then can we build philanthropy that grows with Australia’s ambitions to double giving by 2030.6

If you’d like to find out more about Philanthropy, please contact our Philanthropic Services Team here or call 07 3211 9555.

References

1  https://www.philanthropy.org.au/news-and-stories/media-release-philanthropy-australia-encourages-engagement-with-giving-fund-reforms-and-cautions-against-cherry-picking/

2  https://www.pc.gov.au/inquiries/completed/philanthropy/report/philanthropy-overview.pdf

3  https://www.philanthropyroundtable.org/resource/what-higher-foundation-payout-rules-would-mean-for-charities

4  https://www.ch.vanguard/content/dam/intl/europe/documents/en/return-book-eu-en.pdf

5  https://consult.treasury.gov.au/c2025-667008

6  https://www.philanthropy.org.au/about-us/publications/a-strategy-to-double-givingby-2030/