The number of tax-effective philanthropic foundations has gone from virtually zero to more than 350 during the past four years, with wealthy Western Australians establishing 19 per cent of those foundations.
An estimated $400 million has been put into Prescribed Private Funds since they were approved in Australia in 2001.
While philanthropy in Australia is not as prevalent or substantial as the US, for example, where giving is almost culturally ingrained, PPFs encourage Australian high net worth individuals to participate in philanthropy.
PPFs have the advantage of being tax deductible and income tax exempt, and can be used to support several different charities.
Freehills senior associate Ivy Loh, who has worked on establishing several of the funds, said a PPF was essentially a private fund established by high net worth individuals wanting to pursue philanthropy purposes through a trust.
“They can control who the money goes to, the amount given and the way that the money is used,” Ms Loh said.
She said that, in the last year, she had worked on establishing 10 PPFs in WA, ranging in value from $2 million to $15 million.
“Since 2001 when the government recognised PPFs we have been seeing more and more of them; their structure is becoming more and more well known and there is a lot more interest.”
Ms Loh said that, in order to justify the associated costs, the minimum amount required for a PPF was roughly $1 million.
Among the Western Australians to have established PPFs is Great Southern Plantations co-founder Helen Sewell.
Ms Sewell established a PPF in 2003, the same year she sold her significant holding of Great Southern Plantation shares, and said a PPF was the perfect vehicle in which to put aside a significant amount of money in a year where she had a significant taxable income.
The PPF established by Ms Sewell has been used to fund a $3 million adolescent cancer ward at Princess Margaret Hospital, construction of which began this month.
“The administration of the fund is not the time consuming part, but choosing charities is the time consuming part,” Ms Sewell told a recent seminar on PPFs.
“It gives the most amazing sense of fulfilment – if people can afford to do it, they should do it now and ensure their money is spent the way they intend it to be.”
