Can I Wind Up a PAF if I No Longer Want to Operate It?

Private Ancillary Funds (PAFs) are designed to support long-term giving, but circumstances change—and it’s not uncommon for founders or trustees to reach a point where they’re no longer able or willing to manage the fund. The good news? Yes, you can wind up a PAF if you no longer want to operate it. But there are important steps and compliance requirements involved.

Is It Possible to Wind Up a PAF?

Absolutely. A PAF can be legally wound up at any time, provided it complies with both ATO regulations and the terms set out in the fund’s trust deed. The key condition is that all remaining assets must be distributed to eligible Deductible Gift Recipient (DGR) Item 1 charities. These funds cannot be returned to the donor or used for personal benefit in any form.

See also: The Future of Real Estate: Technology and Innovation

Reasons You Might Choose to Wind Up a PAF

There are many valid reasons for closing a PAF, including:

• Personal or family changes—such as retirement, illness, or reduced capacity to manage the fund
• Administrative burden—if compliance, reporting, and auditing requirements become too time-consuming or costly
• Lack of engagement—where there’s no longer sufficient interest or involvement from successors
• Strategic consolidation—you may want to transition giving to a public ancillary fund or community foundation
• The fund has fulfilled its original purpose and is no longer needed

What Happens to the Assets?

When a PAF is wound up, 100% of the remaining capital and income must be granted to DGR Item 1 charities. You may choose one or several organisations, as long as they meet eligibility requirements. These distributions must align with the fund’s original philanthropic intent and must be finalised before deregistration.

Steps to Wind Up a PAF

1. Review the trust deed – Understand the winding-up provisions specific to your fund
2. Distribute all assets – Ensure grants are made to eligible DGR Item 1 charities
3. Complete final accounts and audit – Prepare financial statements for the final reporting period
4. Lodge final returns – Submit your final return with the ATO and notify the ACNC
5. De-register the trustee company (if it exists solely for the PAF)

Professional guidance is highly recommended during this process to ensure compliance and correct handling of funds.

Key Considerations

• Timing – You’ll need to manage the distribution and compliance processes within the financial year
• Charity selection – Choose organisations aligned with your original giving goals
• Record-keeping – Maintain detailed records of distributions and final audit documentation
• Alternatives – Before winding up, consider whether appointing new trustees or outsourcing administration could keep the fund operating with less hands-on involvement

Alternatives to Winding Up

Not ready to close the fund? You could:

• Appoint new trustees or family members to take over governance
• Outsource administration and investment management to reduce your personal workload
• Transfer assets to public ancillary funds or community foundation with similar goals

These options allow you to preserve the fund’s legacy while stepping back from day-to-day responsibilities.

Takeaways

Winding up a PAF is a valid and manageable step if the fund is no longer sustainable or aligned with your circumstances. With the right planning, it can also be an opportunity to make a final, meaningful contribution to the causes you care about most. Just be sure to follow the necessary compliance steps—and consider whether a professional adviser can help you manage the process smoothly.