At last week’s Philanthropy Australia national conference, we released A Blueprint to Grow Structured Giving, with the goal of doubling Australia’s giving to $5 billion in the next decade. This week, we kickstart the discussion with a deeper look at three of the Blueprint’s elements
Some weeks ago, the former prime minister and acknowledged architect of the current Australian superannuation scheme Paul Keating observed: “I think people in retirement think in family terms. I don't think they just think in personal terms.’’ He enlarged his point that the superannuation reforms the government rolled out in 1992 were generally designed to enable retirees to retain some of their funds and pass them on to their children.
It’s an expectation that’s familiar to many middle-aged Australians looking towards their future – the hope of a comfortable retirement with some benefits for their family, especially when it comes to their financial legacy. The upshot is that many Australians die with the majority of the wealth they had when they retired. But what if wasn’t the case – what if some of that super became part of a donation to a cause or organisation that had been part of that person’s life?
While there is a shortage of data about the potential extent of such a superannuation pool, there are some figures that hint at the prospective benefits: one superannuation fund calculated that deceased fund members left behind 90 percent of the super balance they had at retirement. That’s the current situation.
How much is that? Well, on Grattan Institute modelling, a median retiree will leave an inheritance of $190,000, plus any home they own. The Federal Treasury estimates that superannuation balances at death will increase to $130 billion by 2059. All of which points to a potentially significant pool of funds that could be used for philanthropic purposes. But how do you access them?
At the moment, there are disincentives to passing on excess superannuation funds to charity: funds distributed to non-dependents are generally taxed up to 15 percent with a two percent Medicare Levy. And individuals are not allowed to use Binding Death Nomination to directly give some of their excess superannuation to charity. Under the current legislation, anyone wanting to make such a donation has to go through the more complex process of donating it through their estate.
The Blueprint advocates for the adoption of an innovative proposal first developed by Philanthropy Australia and put forward in our Policy Priorities for a More Giving Australia prior to the 2019 Federal Election, which would allow individuals to use a Binding Death Nomination to nominate a charity with DGR status to receive funds from the deceased’s super fund. And complementary to that, any super bequest to a DGR charity should be tax exempt, just as such donations are from our incomes.
So how do we make the change? What do need to do first to actually start the discussion?
Katherine Raskob, CEO of the Fundraising Institute of Australia, believes we need to fix the data gap first. One fact illustrates the point – only 7.5 percent of Australians leave a gift in their will. But as Katherine says, we don’t know the value of that 7.5 percent. And as a result, we don’t know the scale of potential growth from enabling people to nominate a charity within their super funds to receive a charitable gift.
Making the case for change though needs more statistics and data.
“Government pays attention when you can prove things, and data that talks about why we need to do this make a strong argument,’’ Katherine says.
The next possible steps are filling in some of those gaps and devising an awareness strategy that can be amplified through the winter and feed into the Include A Charity week in September.
There is no doubt, however, that superannuation will continue to be critical for many Australians on lower incomes, especially when many have not received a real wage increase for some years. So, maintaining the SGC legislated increases to 12 per cent is essential.