“With great power comes great responsibility”- Uncle Ben to Spiderman
Individuals, families and organisations wishing to engage in philanthropy often choose to do this through a Private Ancillary Fund (PAF) . We think this is a great idea, but as you might expect, because they involve tax-advantaged donations and are used to distribute funds to charities, PAFs are highly regulated including, who plays the key roles in the decision-making of a PAF. To ensure your family’s PAF is compliant, your PAF must have a ‘responsible person’.
So, what does it mean to be a ‘responsible person’ in the world of PAFs, and how can you tell if someone is fit for the role?
Who Can Be a Responsible Person?
The role of responsible person exists to provide independent oversight and public accountability. The responsible person must ensure that the fund is managed in line with legal, ethical, and governance standards. Every PAF must have a corporate trustee and there must be at least one responsible person on the board.
Legislation governing the establishment of PAFs restricts the class of person who can fulfil the responsible person role. Essentially, it is not a question of whether you think someone is responsible, but rather whether the person you wish to appoint has a professional code of ethics that they must adhere to, and which governs their behaviour.
For this reason, a responsible person is typically someone who holds a position of authority or responsibility in the community. This may include professionals or public figures such as:
- School principals
- Solicitors
- Doctors or other qualified professionals
- Mayors or councillors
- Members of parliament
- People authorised to witness statutory declarations
These individuals are seen as having the right level of responsibility to ensure the PAF operates in the public interest.
Who is Excluded From Being a Responsible Person?
To ensure the responsible person remains independent of the PAF’s founders and major donors, a responsible person cannot be:
- A founder of the PAF;
- A donor who has contributed more than $10,000; or
- A relative or associate of a founder or major donor.
This is to prevent conflicts of interest and maintain independence in decision-making.
Legal and Ethical Requirements for Responsible Persons
Being a responsible person isn’t just about having the right title – it comes with serious legal obligations. In addition to the laws governing PAFs, responsible persons are subject to the same rules that apply to corporate directors under the Corporations Act 2001 (Cth). This means they must avoid conflicts of interest and meet certain legal standards. For example, a responsible person cannot:
- Have a conviction for a serious offence related to business or financial matters;
- Have a conviction of an offence under the Corporations Act punishable by over 12 months in prison;
- Have a conviction for dishonesty, punishable by more than 3 months in prison; or
- Be an undischarged bankrupt.
Active Participation is Key
The role of a responsible person isn’t something to be taken lightly. A responsible person can’t simply “dial in” to meetings.
Responsible persons must actively participate in board discussions and provide objective, well-considered judgment. It’s essential they are fully engaged in the PAF’s decision-making process, especially when it comes to governance, risk management, and overseeing the fund’s charitable activities.
Training: Set Yourself Up for Success
If you’re thinking about becoming a responsible person for a PAF or wishing to appoint someone to be a responsible person for your trust, some training in key areas of governance might be in order. Training topics might include:
- Governance and risk management
- Director duties
- Financial management and reporting
- Philanthropy laws and regulations governing PAFs
By equipping the responsible person with this knowledge, they’ll be better prepared to fulfil their responsibilities and help the PAF succeed.
Why This Matters
A PAF can’t make any decisions or start its charitable work until a responsible person is appointed. So, if you’re ready to establish a PAF make sure you give the legal requirements of this role some consideration.
How We Can Help
We have written more about the benefits of PAFs as a form of structured giving here. If you are thinking about establishing a PAF or wish to know more about your compliance obligations, including appointing a responsible person, call us on 1300 654 590 or email us. We act as a responsible person for several PAFs and enjoy supporting our clients to give back to their communities.
The information contained in this post is current at the date of editing – 27 February 2025.