By Susan Chenoweth

Giving can give you the satisfaction of making a positive impact. It can give you a stronger connection to communities.

It can also give you a tax benefit. And that tax benefit could be bigger this financial year than next.

Are Stage 3 tax cuts an incentive to give more now?

Most Australians will be receiving lower tax bills after the Treasurer Jim Chalmers implements the stage three tax cuts from 1 July this year.

When it comes to philanthropy and giving, this means that for donations made this year, a higher tax deduction will be possible, in comparison to next year.

How can you take advantage of this opportunity?

1. Consider bringing forward planned future donations

For those who regularly give tax deductible donations to charity, this provides an opportunity to bring future years donations forward to this financial year, and take advantage of the higher rate.

2. Consider setting up a sub-fund in a public ancillary fund.

Public ancillary funds (PuAFs) can help you to bring your giving forward.

PuAFs are charitable foundations that can receive tax deductible donations from the public, for the purpose of providing grants to DGR Item 1 Charities*. The Trustee has the ultimate decision power on which Charities can receive donations.

Deductions for donations to PuAFs can be spread over up to five income years, so you can defer your tax benefits if your income is less than expected in the 2024 financial year.

You can separate the decision to donate, from the decision about what charities you want to grant to, giving you time to think carefully about which charities and causes you wish to support. This means that you can bring your giving forward, but make your decisions on which charities to support later.

You can establish a sub-fund which is your own charitable giving account within the PuAF. The trustee will manage all of the operation and investment of the fund, so you can focus on the charities you want to support. You can involve your family, and share the enjoyment of giving back together.

PuAFs must donate at least 4% of their assets each financial year. The balance of the donations to the PuAF can be invested, with the objective of growing the capital over time, thereby giving far more to charity in the long term.

PuAFs are tax exempt, so investment returns are tax free, and eligible for full franking credit refunds, ultimately helping to further grow the amount available to give to charities you care about.

Using a PuAF is a strategy that is accessible for many Australians. Sub-funds in the Elston giving foundation can be established with as little as $25,000, though with low fees, this is an option that can be used with large balances as well.

To learn more about how you can bring your giving forward, and get ahead of the Stage 3 tax cuts, talk to your adviser, or get in touch with Susan Chenoweth from Elston Philanthropic Services.

References:

*DGR Item 1 refers you to lists of funds, authorities and institutions such as public hospitals, overseas aid funds and public museums (including entities listed by name). Deductible gift recipients | ABN Lookup (business.gov.au)

Gifts and donations | Australian Taxation Office (ato.gov.au)

Public ancillary funds | Australian Taxation Office (ato.gov.au)