TD 2025/D3—Income tax: when does a private or public ancillary fund ‘provide’ a ‘benefit’?

Submission Date: 30 January 2026

This submission has been prepared by the Charity and Not-for-profit Law Committee of the Law Council of Australia’s Legal Practice Section (the Committee). The Committee welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in relation to the draft TD 2025/D3¹.

General Comments

The Committee suggests the use of the word ‘benefit’, when used to refer to the provision of money, property or benefits under Guideline 15(4), needs further clarification to avoid the suggestion or any confusion that money and property can be provided without this being for the benefit of the DGR. Perhaps the term could be capitalised, and TD 2025/D3 could include a statement that any provision of money, property or Benefits must be for the benefit of the DGR in order to be included as a distribution.

The Committee recommends that the paragraphs relating to Guideline 22(3) are reviewed to reflect the interpretation of benefit being consistent with the general principles that ancillary funds are philanthropic in nature and for the public (not private) benefit.² The ATO has taken this approach in drafting the model deed for Ancillary Funds which allows, under clause 5.2, a benefit to be given to a DGR that is a Related entity as a distribution under clause 4.1.

This clarification is necessary as many DGRs have set up Ancillary Funds as fundraising foundations and the DGR may be the founder, the trustee, a donor, or one of the members of an Ancillary Fund, and therefore the DGR is a Related entity. The public is giving to the Ancillary Fund in order for it to support the DGR. The purposes are often expressed as being for the benefit of the DGR. The interpretation of Guideline 22(3) in TD 2025/D3 would mean these Ancillary Funds can no longer make grants to the DGR.

In addition, under clause 5.2 of the model deed, a benefit may be provided to a Related entity under the uncommercial benefits provision or under the indemnity provision.

TD 2025/D3 must be consistent with the approach taken in the model deed.

Finally, there have been examples where an Ancillary Fund has the same investments as the founder or donor, which may indirectly benefit the Related entity. But, as the benefits are the same and arguably incidental, the ATO has confirmed this is not a breach of Guideline 22(3). This type of situation needs to be reflected in TD 2025/D3.

^{1 We have adopted the same definitions as in TD 2025/D3 without repeating them in this submission.
2 Paragraph 3 TD 2025/D3.}

Last Updated on 30/01/2026

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