Media Release: Philanthropy Australia encourages engagement with ‘Giving Fund’ reforms and cautions against ‘cherry picking’

The Australian Government has commenced consultation on proposed reforms to the regulation of Public and Private Ancillary Funds, which are to be renamed as ‘Giving Funds’. These flow from the recommendations in the report of the Productivity Commission’s (PC) philanthropy inquiry, Future Foundations for Giving.

In addition to renaming ancillary funds as giving funds, the proposed changes include:

• Aligning the annual distribution rate between public and private giving funds.
• Consideration of a possible increase in the distribution rate for giving funds.
• Allowing giving funds to smooth distributions across multiple years.

Philanthropy Australia CEO Maree Sidey said that public and private giving funds are a vital source of philanthropy for the benefit of the community.

“Giving funds are an enabler of generosity, providing an essential flow of support for charities doing diverse work to build a more inclusive Australia,” she said

Philanthropy Australia supports renaming ancillary funds as giving funds, and allowing giving funds to smooth distributions across multiple years.

Regarding any changes to the minimum distribution rate, our Practical Policy Priorities to Grow Giving in Australia, released in April in the run-up to the Federal Election, conveys Philanthropy Australia’s starting position.

Philanthropy Australia supports having a minimum distribution, and will take a measured stance in response to any proposed changes to its rate. We think the current arrangements work well , so we don’t see the need to increase or decrease the minimum distribution, especially given the risk of unintended consequences, such as disincentivising the establishment of new giving funds. We will be engaging further with our members and partners throughout this consultation process to finalise our position.

Maree Sidey emphasised the need for the Government to prioritise real and tangible action on the PC report’s centrepiece recommendation – reform of the ‘deductible gift recipient’ (DGR) system. The DGR system determines which charities can receive tax deductible donations and grants from giving funds. Currently, around half of charities are ineligible. This includes community-run charities such as neighbourhood houses, those supporting LGBTQIA+ Australians and advocacy charities focused on the causes of disadvantage.

“We welcome the Australian Government’s focus on responding to the Productivity Commision’s recommendations, but we would be concerned by an approach that involves cherry picking which reforms to progress, while not acting on the PC’s clear call for an overhaul of the DGR system.

“The costs of inaction on DGR reform will be borne by all those charities left outside of the system, given they will continue to be cut off from sources of support, including from giving funds,” she said.

ENDS

About Giving Funds

Giving funds (currently referred to within the tax law as ancillary funds) are a giving vehicle used in Australia. Commonly used as a structure for a public or private foundation, they enable individuals, families or businesses to make tax-deductible contributions to a fund, which are then used to make grants to Deductible Gift Recipients (DGRs).

Often, the contributions are invested to grow the amount available over time and increase the support provided to other DGRs through grants.

Private giving funds are established for private philanthropic giving, commonly used by families or businesses. Public giving funds must invite donations from the public and are typically used by community groups, corporate and community foundations, wealth advisers and other organisations.

They are subject to extensive regulation by both the Australian Charities and Not-for-profits Commission (ACNC) and the Australian Taxation Office (ATO), set out in regulatory guidelines applying specifically to them. This includes a requirement to comply with a ‘minimum distribution rate’, which is the minimum amount of funds that must be provided as grants each year. This is currently 5% of net assets for private giving funds and 4% of net assets for public giving funds.

Based on the most recent data, there are more than 3,600 giving funds. Private giving funds have distributed over $5.2 billion in grants to support the community since 2000-01, with public giving funds distributing $4.5 billion.