How to Set Up a Foundation in Australia: Costs, Benefits, and Legal Steps Explained

To set up a foundation in Australia, you must choose a legal structure, register with the ACNC or ASIC, and meet governance and compliance requirements

Whether you’re aiming to establish a charitable entity or a private foundation for long-term wealth and legacy planning, it’s essential to understand the distinctions and obligations that apply in the Australian context.

In this guide, we’ll cover:

• What is a foundation in Australia?
• How to start a foundation in Australia
• How much money is needed to form a foundation in Australia?
• Is a foundation the same as a charity?

My contact details are hello@adamfayed.com and WhatsApp +44-7393-450-837 if you have any questions.

The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.

What Is Foundation Meant For?

In Australia, a foundation typically refers to a legal entity established to manage and distribute funds for specific purposes, most commonly philanthropic.

While some foundations are set up to support public causes, others are created for private wealth structuring, intergenerational legacy planning, or asset protection.

Foundations in Australia commonly take one of two legal forms:

• Charitable trusts, governed by trust law and used exclusively for public benefit
• Public or private ancillary funds (PuAFs or PAFs), which are structured under ATO regulations to facilitate grants to DGR charities

Depending on the structure and jurisdiction, a foundation can serve objectives such as:

• Philanthropy, through structured charitable giving
• Legacy planning, by setting up a long-term wealth vehicle
• Asset protection and privacy, particularly for private foundations in less transparent jurisdictions
• Tax efficiency, depending on structure and eligibility under tax laws

The intended purpose and target beneficiaries determine how the foundation must be established, registered, and operated under Australian law.

How to Set Up a Foundation in Australia

1. Choose the Right Structure
   Decide whether the foundation will operate as a charitable trust or an ancillary fund, depending on your goals, tax considerations, and level of donor involvement. Each option comes with distinct regulatory and compliance requirements.
2. Define the Foundation’s Purpose
   The foundation’s purpose must be clearly articulated. For charitable foundations, the objective must provide public benefit and align with the Australian Charities and Not-for-profits Commission (ACNC) requirements to qualify for charity registration and tax concessions.
3. Draft a Governing Document
   Prepare a trust deed (for charitable trusts or ancillary funds). This document outlines the foundation’s charitable purpose, governance framework, decision-making processes, and compliance obligations.
4. Appoint Trustees or Responsible Persons
   Designate eligible individuals or a corporate trustee to manage the foundation. Ancillary funds must appoint a majority of responsible persons, who have a degree of responsibility to the community (e.g., professionals, public servants, or community leaders).
5. Register with Relevant Authorities
   • Charitable foundations must register with the ACNC to access tax concessions.
   • Ancillary funds must also apply for Deductible Gift Recipient (DGR) endorsement through the ATO.
   • A corporate trustee, if used, may need to be registered with the Australian Securities and Investments Commission (ASIC).
6. Set Up Financial and Compliance Systems
   Open a dedicated bank account, implement sound accounting systems, and establish procedures for meeting annual reporting, audit, and distribution requirements (e.g., the minimum annual distribution for ancillary funds is 5% of net assets).

How Much Money Do You Need to Have to Create a Foundation?

Private Ancillary Funds typically require at least AUD 500,000. Setup costs range from AUD 5,000 to 15,000+, with ongoing annual expenses for audits, governance, and compliance.

1. Minimum Capital Contributions

• Private Ancillary Funds (PAFs): Recommended minimum starting capital is AUD 500,000, though AUD 1 million is considered more practical for long-term viability and administrative efficiency.
• Public Ancillary Funds (PuAFs): No fixed capital requirement, but they must maintain enough assets to meet annual minimum distribution requirements (usually 4% of the fund’s market value).
• Charitable Trusts: No statutory minimum, but must hold sufficient assets to support their charitable objectives and cover administrative costs.
• Non-Charitable Foundations (e.g., companies limited by guarantee): No formal capital threshold, but should demonstrate financial sustainability if operating long-term or seeking public donations.

2. Key Setup Documents and Costs

• Legal Documentation:
  • Trust deed (for charitable trusts or ancillary funds)
  • Constitution (for companies limited by guarantee)
  • Governance policies, investment strategies, and board charters (especially for PAFs/PuAFs)
• Professional Setup Costs:
  • Legal structuring and documentation: AUD 5,000–15,000+
  • ASIC/ACNC registration fees: Typically low, but expect additional professional fees
  • Initial tax and regulatory advice: AUD 2,000–10,000+

3. Ongoing Costs and Compliance Requirements

• Annual audit and financial reporting: AUD 3,000–10,000+ depending on size and complexity
• Governance and board expenses: May include director/trustee fees
• Tax and legal advisory services: To maintain ATO and ACNC compliance
• Distribution obligations: Ancillary funds must distribute a minimum percentage of assets each year to eligible charities

What Is the Difference Between a Charity and a Foundation in Australia?

A charity is a formally recognized entity that exists for public benefit and is registered with the ACNC, while a foundation is a broader term referring to a legal structure that may or may not be charitable in nature.

Foundations can be charitable (e.g. a private ancillary fund) or non-charitable (e.g. a family foundation focused on asset holding or legacy planning).

Key Distinctions in Regulation, Tax Treatment, and Accountability

• Charities must meet strict public benefit criteria, register with the ACNC, and often qualify for tax exemptions and deductible gift recipient (DGR) status.
• Foundations that are not registered as charities may still operate legally but don’t enjoy the same tax concessions or public trust status.
• Charities are subject to greater regulatory oversight, must file annual reports, and are expected to demonstrate transparency in governance and financial management.
• Private foundations not registered as charities typically face less reporting but also less access to public fundraising or tax-deductible donations.

When a Foundation Qualifies as a Charity
A foundation qualifies as a charity when:

• Its purpose aligns with the legal definition of charitable purpose under Australian law
• It applies for and obtains registration with the ACNC
• It adheres to governance standards, including responsible management and annual compliance reporting

Foundation in Australia: Advantages and Disadvantages

Advantages

• Tax benefits for approved charitable foundations
  Charitable foundations registered with the ACNC and endorsed by the ATO may receive tax exemptions and qualify for Deductible Gift Recipient status, allowing donors to claim tax deductions.
• Control over philanthropic strategy
  Foundations offer significant autonomy in how funds are allocated, which causes are supported, and which organizations receive grants, especially in private ancillary funds.
• Legacy and asset protection potential
  Foundations can be used as a long-term vehicle for preserving family values, supporting causes across generations, and separating certain assets from personal estates.

Disadvantages

• High setup and compliance costs
  Legal fees, structuring advice, and registration expenses can be substantial, particularly for private foundations or those seeking charitable status.
• Ongoing governance requirements
  Foundations are required to maintain formal governance structures, submit annual reports, and meet compliance obligations with ASIC, ACNC, or the ATO.
• Limited flexibility in fund usage (for regulated foundations)
  Charitable foundations must adhere strictly to their stated purpose and may face restrictions on how funds are invested, distributed, or used operationally.

Conclusion

A foundation in Australia isn’t one-size-fits-all. Choosing the right structure affects not just governance but long-term sustainability.

Beyond the initial setup, foundations must meet strict regulatory, tax, and reporting standards through the ACNC and ATO.

But for those with sufficient capital and a clear philanthropic or legacy vision, a properly managed foundation can offer both control and continuity across generations.

The process may be complex, but the long-term benefits often outweigh the upfront investment.

Pained by financial indecision?

Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.