Policy update: amendment secured to address impact of proposed CGT change on philanthropy

Following the release of the Federal Budget in May, Philanthropy Australia worked with members and partners to examine the proposed tax measures and understand any potential implications for philanthropy/charitable sector. 

An issue was identified with the design of the proposed minimum rate of tax on capital gains. This imposes a minimum 30 per cent tax on any capital gain, with the stated aim of reducing the benefit of taxpayers deferring capital gains realisation to years where their marginal tax rates are low. 

An unintended consequence of this change would have been the introduction of a floor under the tax deduction for donations of income derived from a capital gain. Even if a person donated all of the income from a capital gain, it would still have been subject to a minimum 30 per cent rate of tax.  

This had the potential to create a significant new disincentive for philanthropy, particularly structured philanthropy, given it commonly arises from a ‘liquidity event’ such as the sale of a business.  

Philanthropy Australia’s response 

Philanthropy Australia convened a small working group of members and partners to examine the proposal and identify potential solutions. A coordinated advocacy effort included Philanthropy Australia: 

• Writing to the Australian Government seeking targeted changes to address the identified issue 
• Making a submission to the Senate Committee inquiry examining the legislation implementing the minimum rate of tax on capital gains – the submission can be viewed here 
• Working with members and partners to ensure the concerns were also considered by key stakeholders as part of their contributions to the Senate Committee inquiry 
• Meeting with Treasury officials and discussing the issue with the office of the Assistant Minister for Charities, the Hon Dr Andrew Leigh MP 

A positive outcome 

Last week, the Government announced that amendments would be made to the legislation before the Parliament, to address a number of matters, including the impact of the proposed minimum rate of tax on capital gains on philanthropy. Philanthropy Australia made a media release in response to the announcement. 

The report of the Senate Committee inquiry, released last Friday, also drew upon Philanthropy Australia’s submission.

The amendments were tabled in the Senate this week, with the amended legislation passing the Parliament on Thursday 25 June. Philanthropy Australia is confident that the amendments address the identified issue with the design of the proposed minimum rate of tax on capital gains, and will ensure it does not have unintended consequences for philanthropy.

Tax reform is a complex undertaking, and governments must balance various objectives, including supporting productivity, promoting equity, and providing revenue to fund important community services. In this context, Philanthropy Australia’s advocacy focuses on ensuring that the taxation framework supports giving for the benefit of the community. 

We are pleased to have worked with our members and partners to achieve this important outcome, and we thank the Australian Government for acting on the concerns we raised. 

This is an important advocacy win for the sector. By identifying potential unintended consequences, bringing together expertise from across the philanthropic community and engaging directly with decision-makers, Philanthropy Australia helped secure changes that support the flow of philanthropic capital to charities and communities across Australia. 

Philanthropy Australia is planning an upcoming webinar with Executive Director, Policy and Sector Development, Krystian Seibert, about these changes and other key advocacy issues shaping the sector.