Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 288

Gail Kelly reveals how her family gifts money

When Gail Kelly sits down with her family to talk about giving money to charity, it's serious business. There are no ad hoc conversations about their private ancillary fund (PAF) – a tax-effective structured vehicle that enables the family to set aside a chunk of money in a trust to support charities over time. They hold scheduled meetings twice a year, often over Christmas or Easter when her four children and husband come together. The family gatherings have involved PowerPoint presentations, business cases about what charities fit the bill for each family member's area of interest and how their giving has made an impact. Each person has an equal pool of funds to give to the charity as they see fit. Former Westpac CEO Gail Kelly says giving away your wealth to charity is not just for the uber wealthy. The highly regarded former boss of Westpac is adamant that it's not just about giving money. Everyone must be personally involved. "It's a real time of sharing ideas," Kelly says of her young adult children. "They own it. This is very powerful stuff. This is very rewarding." "When Alan and I pass away, this is a family asset and they will continue with the giving and frankly they will develop something for their own families because they see the power of it from a family point of view." Kelly has been a long-time client of Australian Philanthropic Services (APS), where she recently joined the board headed by the founder, Chris Cuffe. It took Cuffe three years to convince her to join the high-profile board, which also includes other notable philanthropists David Gonski, Belinda Hutchinson, Tim Fairfax and Michael Traill. Kelly, who is passionate about supporting the empowerment of women and girls, says she joined the board because of the family involvement, and also due to Cuffe's credentials. "I think he has really forged a path here that is very impressive with regard to APS and philanthropy more broadly," Kelly tells the AFRWeekend. "The model is a not-for-profit business – which is awesome. So you know that all the funds are going to charities."

Streamlining a clunky process

Cuffe was instrumental in bringing together the vision that an Australian charity would be dedicated to growing philanthropy. The Hall of Fame fund manager along with about 30 investors provided around $2 million to get APS off the ground in 2012. APS is not quite break even today but has enough cash at hand so it does not need to raise more funds. The services offered were to set up and manage private ancillary funds for individuals and families, and to support wealth advisers to help their clients do the same. It also provided a grant-making service. Sirtex Medical founder Bruce Gray was one of Cuffe's first clients. APS today services more than 380 clients from just 120 five years ago. It has about $800 million in assets, and $52 million was given to charity in the 2018 financial year. Cuffe spends about 25% of his time on APS, where he manages the day-to-day investment of the near $70 million public ancillary fund – APS Foundation – on a pro-bono basis. He is busy with other commitments having just launched the $500 million LIC Hearts and Minds Investments Limited. He's a founder/PM of Third Link Investment Managers and a member of the UniSuper Investment Committee, among other roles. But he has a soft spot for APS after his own experience of setting up his family foundation after he finished his executive career as CEO of Challenger Group in 2006. He ran into difficulties. And it was pricey: it cost him $30,000 to set up his family's fund. "It was a clunky experience, and it was not an easy thing to do, dealing with multiple parties," Cuffe says. "I thought it has got a lot of value, so it would be good to streamline this process." He heard about PAFs from venture capitalist Daniel Petre. The idea took off, with proven demand for a service that is low cost at $3000 to set up a PAF at APS.

Lack of incentives

While this is a growing area of structured philanthropy, less than two decades ago Australia didn't have tax-efficient philanthropic structures comparable with those in the US and UK. There was rising concern there was no incentive for Australians to give away part of their wealth during their lifetime. In 2001 the Howard government introduced the Prescribed Private Fund or PPF (now the private ancillary fund) which allowed for a tax break when giving. APS has grown to become the largest provider of PAF services in Australia, setting up more than 30% of all such structures each year. So how does it work? A family donates around $1 million plus to create a private fund. The funds are put into the trust and the client gets the upfront tax deduction. The family can never get this money back since it's a charitable trust, but they can control how that money is used. Every year a minimum of 5% of the trust must be given away to eligible charities. APS chief executive Antonia Ruffell says while tax incentives play an important role as to when people choose to set up a structure, it's not usually the underlying reason. "Some might be driven by religious or personal values. For many people, they are worried about the impact that wealth will have on their kids. They see philanthropy as a way to inspire charitable values, and develop a sense of responsibility around wealth," she says. Ruffell adds that there will be a big change in the coming years, as the next generation gets more involved in their family's philanthropy.

Aussies could give more

Kelly agrees, saying more young people are getting involved who are interested in fairness in society and climate change. "There is a new generation of givers," she says. "They bring a focus on innovation. My kids want to know the funds they are giving are having an impact." APS also offers a public ancillary fund, the APS Foundation, in which people can open a named sub-fund. The APS Foundation has grown from just $7.2 million in 2014 to nearly $70 million in 2018. Graham Hand and his wife, Deborah Solomon, are sub-fund holders in the APS Foundation. Graham, founder and managing editor of investment newsletter Cuffelinks, says he likes the idea of giving an annuity stream, giving $5,000 to $10,000 a year. "I would concede that I wanted to share some money and this was a tax-efficient way of doing it," he says. Hand says that, while there is giving among Australians, more could be done. "What you do hear about here in Australia, as opposed to other cultures, we give quietly rather than making a big deal of it," he says. "We don't need to have the wing of the university named after us. "There is lots of giving going on. That said, there are lots of people who are making $1 million a year that are not giving. It would be good to encourage people who have had good fortune to consider sharing some of it."

Cuffe expects the sub fund to double in size every year for several years with the number of sub-fund clients per year far exceeding the private ancillary fund clients. Cuffe adds that some wealthier clients prefer the sub fund: the largest sub-fund account is $8 million. He admits that, while APS has had success in a short period, he would like to see "'ancillary funds' become as popular as the words 'self-managed super'". The number of private ancillary funds is increasing: there are now about 1600 with a corpus of $10 billion, distributing $500 million per annum. Data from JBWere Philanthropic Services division shows that PAFs are susceptible to financial market performance. When the GFC hit in 2008, the number of new PAFs fell to fewer than 50 in 2009. But the numbers are climbing again.

Not just for the rich

Kelly and Cuffe are both clear that you do not have to be uber-wealthy with a fat balance sheet to donate. The public fund is a pooled investment vehicle. Families set up a sub fund, with a minimum $50,000 donation. APS manages all aspects of the foundation, and charges clients 1% of fund balance per annum. A sub fund must give away a minimum of 4% of its balance per annum. Most the assets of the foundation are managed by external fund managers. Often their investment services are also on a pro bono basis. Cuffe aims for a return target of inflation plus 4% per annum (after fees) over a rolling seven-year period. Since its inception in 2012 it has posted a 12.5% return. "A $50,000 entry point that can be with you for life is quite accessible for many people. In particular as Baby Boomers retire there will be much more transfer of wealth. It's not just for rich people," Cuffe says. Kelly – who started her career as a school teacher in Rhodesia (Zimbabwe) – has always remained interested in helping others. Outside of APS, she is an (unpaid) adjunct professor at UNSW, and set up a $1 million scholarship fund which links UNSW to Cape Town University where students can spend a semester on exchange. However, she is clear that APS is central to her family. "This is about learning about the impact, and the joy of helping others," she says. The AFR’s, Carrie LaFrenz has more than 10 years’ experience as a business journalist having previously covered healthcare, retail/consumer goods, industrials and agribusiness. This article was first published in The Australian Financial Review and is reproduced with permission.

 


 

Leave a Comment:

RELATED ARTICLES

Philanthropy can blend tax deductions, engagement and impact

Charitable giving and tax deductions

$5.4 trillion wealth transfer poses deep questions on legacy

banner

Most viewed in recent weeks

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Designing a life, with money to spare

Are you living your life by default or by design? It strikes me that many people are doing the former and living according to others’ expectations of them, leading to poor choices including with their finances.

World's largest asset manager wants to revolutionise your portfolio

Larry Fink is one of the smartest people in the finance industry. In his latest shareholder letter, the Blackrock CEO outlines his quest to become the biggest player in private assets and upend investor portfolios.

Latest Updates

Investment strategies

An enlightened dividend path

While many chase high yields, true investment power lies in companies that steadily grow dividends. This strategy, rooted in patience and discipline, quietly compounds wealth and anchors investors through market turbulence.

Investment strategies

Don't let Trump derail your wealth creation plans

If you want to build wealth over the long-term, trying to guess the stock market's next move is generally a bad idea. In a month where this might be more tempting than ever, here is what you should focus on instead.

Economics

Pros and cons of Labor's home batteries scheme

Labor has announced a $2.3 billion Cheaper Home Batteries Program, aimed at slashing the cost of home batteries. The goal is to turbocharge battery uptake, though practical difficulties may prevent that happening.

Investment strategies

Will China's EV boom end in tears?

China's EV dominance is reshaping global auto markets - but with soaring tariffs, overcapacity, and rising scrutiny, the industry’s meteoric rise may face a turbulent road ahead. Can China maintain its lead - or will it stall?

Investment strategies

REITs: a haven in a Trumpian world?

Equity markets have been lashed by Trump's tariff policies, yet REITs have outperformed. Not only are they largely unaffected by tariffs, but they offer a unique combination of growth, sound fundamentals, and value.

Shares

Why Europe is back on the global investor map

European equities are surging ahead of the U.S this year, driven by strong earnings, undervaluation, and fiscal stimulus. With quality founder-led firms and a strengthening Euro, Europe may be the next global investment hotspot.

Chalmers' disingenuous budget claims

The Treasurer often touts a $207 billion improvement in Australia's financial position. A deeper look at the numbers reveals something less impressive, caused far more by commodity price surprises than policy.

Fixed interest

Duration: Friend or foe in a defensive allocation?

Duration is back. After years in the doghouse, shifting markets and higher yields are restoring its role as a reliable diversifier and income source - offering defensive strength in today’s uncertain environment.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.