Positive, but more to do on Double Giving: our response to Productivity Commission’s draft findings

Sam Rosevear, Executive Director Policy, Government Relations and Research Fri, 1 Dec 2023 Estimated reading times: 4 minutes

Philanthropy Australia thanks the Productivity Commission for the open and consultative approach it took in developing its draft report, ‘Future foundations for giving’, available here. The report recommends some important reforms, including the expansion of Deductible Gift Recipient status to more charities and the establishment of an independent philanthropic foundation controlled by, and for the benefit of, First Nations communities. However, the final report will need to recommend a stronger suite of high-impact reforms if Australia is to achieve a step-change lift in our culture and practice of giving.

The report recommends important reforms, including the expansion of Deductible Gift Recipient status to a broader group of charities, more transparent reporting of corporate donations, and the establishment of an independent philanthropic foundation controlled by – and for the benefit of – Aboriginal and Torres Strait Islander communities. We are encouraged that superannuation bequests are canvassed and an information request made on the benefits and costs of implementing this important reform. We see opportunities for philanthropy to co-invest and contribute to the reform agenda.

Overall, however, we are concerned the draft report does not indicate a roadmap, or identify the key building blocks, that will enable us to double philanthropic giving by 2030. Even in relation to the most substantive reform recommended – expanding DGR – the Commission acknowledges that the expected effects on the overall level of giving will be relatively modest and that several thousand charities would have their status withdrawn.

Philanthropy Australia believes the final report needs to identify for Government a suite of reforms that will lead to a step-change increase in the culture and practice of giving in Australia. High-value reforms that could achieve this are super bequests and measures to strengthen giving at the local community level including growing Australia’s network of community foundations and a National Giving Campaign.

We note that the PC has included information requests on a number of potential reforms and will consider recommending more substantive reforms in its final report. Philanthropy Australia looks forward to engaging with our members to elicit their views on the draft report and working with the PC to help ensure the final report recommends a substantive reform agenda that can set us on the road to double giving by 2030.

The report in more detail

  1. Positive reforms

Expanding DGR status to more charities: The PC recommends expanding accessto DGR and focusing it where it can deliver the most community-wide benefit. The reform would increase access from about 25,000 to 30,000-40,000 charities.Key beneficiaries would be charities working on animal welfare, injury prevention, public interest journalism and charities undertaking advocacy activities related to most charitable purposes. Charities that pursue multiple eligible purposes – such as many First Nations charities –would also find it easier to access DGR status because eligible entities would only need one DGR endorsement from the Australian Taxation Office (ATO), which would cover all eligible activities. School building funds for primary and secondary schools and religious education would be the main entities that would no longer be eligible for DGR status under the Commission’s proposals. There are currently about 5,000 DGR endorsements for school building funds.

First Nations philanthropy: Philanthropy Australia is delighted to see the recommendation for theestablishment of an independent philanthropic foundation controlled by – and for the benefit of – Aboriginal and Torres Strait Islander communities to enhance the arrangements linking philanthropic and volunteer networks, and funding to Aboriginal and Torres Strait Islander organisations. The PC states: “The Australian Government should provide funding toward an initial endowment, with additional contributions to the endowment provided by philanthropic funders. The endowment should be of sufficient size to ensure that the foundation is financially sustainable and independent.”

Super bequests: The PC makes an information request on the desirability of allowing people to make a bequest through superannuation, raising the potential for it to be a recommended reform in the final report.

Corporate donations:  The PC recommends listed companies be required to report donations money and assets to entities with deductible gift recipient status in their tax returns. The ATO would regularly publish aggregate information on corporate giving in Australia including, at a minimum, donations by company size, taxable status and industry.

Better information on bequests: The PC recommends the ACNC should require registered charities to separately report income from bequests in their annual information statement, and publicly report the aggregate data.

2. Structured giving vehicles

The PC notes the important role of PAFs and PuAFs in driving rising philanthropic giving. It recommends allowing smoothing of minimum distributions over 3 years.  The PC also asks for views on whether minimum distribution rates should be higher or lower. It recommends the ACNC and ATO work together to publish additional information on distributions by ancillary funds, including collecting and publishing additional information by sub-funds within public ancillary funds.

3. Areas that could be further investigated for consideration in the final report.

Philanthropy Australia will look to engage the PC to encourage development of a suite of recommendations that could deliver a fundamental step-change increase in giving and a more generous culture. At this stage, we are concerned there is more rigour applied to why reform should not occur than to the potential benefits of reform and how it can be designed to work effectively and efficiently. In addition to considering super bequests, some of the areas that could be further considered include:

  • Community Foundations: While the benefits ofcommunity foundations are briefly discussed,there remains scope to consider policy reforms that would strengthen and expand the national network, while delivering a net economic benefit.
  • A voluntary choice to donate as part of the tax return process: While the potential risks and costs of this measure are extensively canvassed, there is very limited analysis of potential benefits and how a policy proposal could be designed to deliver a strong net benefit. With Government returning more than $30 billion each year in tax returns, a simple choice to donate some of the return could yield several billion each year for charity, and become a positive national custom.
  • Living Legacy Trusts (LLTs): LLTs are briefly described in the report, but there is no analysis of the costs and benefits of implementing this reform, nor any attempt to design a reform that might deliver a cost-effective increase in giving.
  • Measures to foster a more generous and giving culture: The framework applied in the report focuses narrowly on tax and regulatory settings, but does not include measures to foster a more generous and giving culture, which is a key determinant of national giving levels. It would be good to collaborate further with the PC on such measures, including:
    • The philanthropy and business agendas: How key actors, such as the philanthropy and business sector, could help drive giving, potentially working on reforms in partnership with government.
    • A National Giving Campaign. The PC provides helpful analysis on public campaigns and concludes: “A public campaign, supported by government, could help broaden participation in giving but there is insufficient evidence to conclude that such an intervention would be effective or produce net benefits.”There is very strong evidence on the cost-effective benefits of campaigns in a suite of fields such as skin cancer.In attempting a pioneering policy endeavour, where existing evidence is necessarily inconclusive, the next step would be to consider how a National Giving Campaign could be made to work to efficiently lift giving.
  • Strengthening the charity sector: The report notes the importance of maintaining trust in the charity sector – which is important to spurring giving – and discusses how regulation can be strengthened accordingly. An alternative means to maintaining trust are positive measures to build capability, such as creating a stronger cadre of effective fundraisers and charity leaders. It could also involve creating a more favourable environment in which charities operate, such as reducing red tape, providing longer contract lengths and full funding for provision of government services. These measures could be considered in the final report.
  • A national giving and community participation data set: The PC has made some excellent recommendations to improve data collection in areas such as bequests and corporate giving. The final report could identify how all the data could be organised into a single comprehensive national data set, led by a single agency and distributed regularly to guide policy and philanthropic activity.
  • Governance arrangements for stronger co-operation between government and philanthropy:  With philanthropy and government playing complementary roles, the final report could consider simple governance arrangements that would facilitate more effective co-operation and drive stronger impact, including by drawing on the example of the Investment Dialogue for Australia’s Children.

Next Steps

With the report coming in at more than 170,000 words, Philanthropy Australia will take time to judiciously consider the content. We will seek to provide a draft response to members prior to Christmas. Member sessions to discuss the response will be held in late January, prior to submitting our final response to the PC on 9 February. The PC will provide its final report to Government on 11 May, with the government response to follow thereafter.