Super reform can transform charitable giving in Australia

Tue, 24 Oct 2023

A new report has revealed super bequest reform has the potential to increase giving to charity by as much as $21.9 billion per year by 2060.

The proposed reform would allow Australians to send some of their unspent superannuation funds directly to a nominated charity when they die and without the impost of a 17 per cent tax.

Dr Angela Jackson and Dr Emily Millane from Impact Economics and Policy have today released their report, Charitable Superannuation Bequests: Making Giving Easy.

The modelling finds that over the period to 2060, the reform could generate between $64.6 and $260.3 billion in additional income for charities.

The report notes that Australians donated $13.4 billion to charity in 2021.  The new modelling indicates that in the year 2060 alone, the reforms would yield between $4.8 and $21.9 billion for charity.

The Making Giving Easy report is timely: the Albanese Government has pledged to work with the philanthropic, charity and business sectors to double giving to charity by 2030.  It has also directed the Productivity Commission to advise on the best options for doubling giving.  The modelling in the Making Giving Easy report suggests that this reform alone would transform giving in Australia and turbo-charge the effort to double giving, particularly over the longer term.

Jack Heath, the CEO of Philanthropy Australia, highlighted the importance of this reform.

“This reform can transform giving in Australia.  It would also streamline tax policy and remove the anomaly that if you donate to a charity the day before you die you get a tax break but if it goes to charity the day after your death the charity loses up to 17 per cent,” Mr Heath said.

Reform to super bequests is likely to be welcomed by the wider community.  November 2022 polling, by research company Redbridge, of more than 2,500 Australians found
75 per cent support for the super bequests reform, with just 6 per cent opposed and
19 per cent neutral or not sure.  This was the highest support among any of a range of reforms to grow giving tested in the Redbridge polling.

Mr Heath emphasised that implementation of the reform should not be rushed and placed particular emphasis on consultation with the superannuation industry. 

“We think it’s important the government takes the time needed to get this reform right.  There is a Productivity Commission inquiry currently in progress which will provide options to Government to double giving with its final report due next May.  This will need to be considered by government,” Mr Heath said.

“As the report itself states, it is also critical to have a consultation process with the superannuation industry, so there’s time for them to discuss and consider the reform, and so government can leverage the industry’s expertise on policy design and implementation issues,” he said.

“In the end, this reform will have transformational impact, with tens of billions in additional funds flowing to charity.  It would play a huge role in a great national endeavour – working to make Australia one of the more generous and giving nations on earth.”

Media enquiries: Sophie Marcard at [email protected] or on 0400 089 653.



What’s the detail behind this reform?

Current arrangements make it extremely difficult for Australians to give some of their unspent superannuation to charity when they die.  There are two major challenges:

  1. The process

Currently, people are unable to directly bequest funds to a charity from any remaining superannuation when they pass away.

The process to bequest remaining super is complicated, differs between superannuation funds, and is often an area of legal dispute. 

To make a bequest, people need to fill out a binding death nomination with their super fund directing the trustee to place the funds in their estate and make a will directing that the funds go to charity.  Some super funds use binding death nominations that lapse after three years.  This can mean that, if the binding death nomination is not renewed, it is up to the discretion of the superannuation fund trustee about how funds are distributed.  Given the complexity, time, uncertainty and cost involved in the current process – including the need to complete a will – few people are taking up this option.

This reform would make the process simple by allowing people to instruct the trustee of their superannuation fund to make a direct bequest to charity from remaining superannuation.

2. The tax penalty

Bequests to charities from superannuation are currently subject to a tax of up to 17 per cent.  By contrast, donations to charities when people are alive are tax deductible.  This reform would remove the tax penalty on super bequests to charity.

How much super is left unspent when Australians die?

Many people die with significant superannuation savings intact: in 2018, $17 billion in superannuation death benefits were paid by superannuation funds. This has been forecast by Treasury’s Retirement Income Review to grow over seven-fold in real terms to $130 billion by 2060.

What were the assumptions behind the modelling in this report?

See pages 19-21 of the report and Appendix 1.