Philanthropy peaks welcome historic Federal Government support for community foundations

March 29th, 2022

​Community Foundations Australia and Philanthropy Australia welcome the Federal Government’s Budget announcement of long-sought reforms that will give community foundations greater scope to drive impact in local communities.

The Budget announced that up to 28 community foundations affiliated with Community Foundations Australia would receive a specific listing as Deductible Gift Recipients from 1 July 2022 to 30 June 2027.

This is an important reform that will streamline how community foundations fund local charitable groups and initiatives in their communities. It will enable a more rapid response to fires, floods or drought, and higher impact support in areas like health, education and homelessness. The change is significant for all community foundations and particularly important for the 80 per cent that operate in regional Australia.

‘Australia’s network of community foundations is a great national asset that has arguably been underutilised to date’, said Community Foundations Australia Chair Ben Rodgers. ‘This reform will position our sector for greater impact in the decades ahead so that we can contribute as we should to regional community development, building resilience to natural disasters, and addressing the big challenges in our cities.’

CEO of Philanthropy Australia, Jack Heath, said: ‘This is a historic reform that changes the dynamic for community foundations – it will enable them to draw on their long-term relationships and leverage their local knowledge to deliver funding where it’s needed most, especially in emergencies that we’re seeing with the current floods in Queensland and NSW.’

Community foundations are commonly place-based and community-led charities that are owned, run and supported by local people. Being part of the communities they serve, they have an intimate understanding of needs on the ground and have deep trusted relationships in their community. Community foundations are ideally placed to partner with government, philanthropy, national charities, and the private sector when it comes to investment in community development or support in emergencies to ensure help quickly reaches those who need it most and is directed where the greatest impact can be achieved.

The current DGR rules mean that community foundations can currently only receive tax deductible donations if they set up a ‘Public Ancillary Fund’, known as an ‘Item 2 DGR’. This restricts how they distribute funding, which can only be granted to charities that are ‘Item 1 DGR’ endorsed. In regional Australia where most community foundations work, there are very few such ‘Item 1 DGR’ charities. This reform will simplify the work of community foundations, enabling faster responses and greater impact.

The reforms will also allow Private Ancillary Funds (PAFs – private foundations set up by individuals, families or businesses) to distribute funds to community foundations – up until now community foundations have been cut off from this growing flow of private philanthropy.  Philanthropy Australia has heard from a number of members that they want to use their PAF to donate to community foundations, especially in emergencies, and this significant announcement will allow that to happen.

In 2018-19 alone, PAFs distributed $565 million, so access to this potential pool of funds under this reform will likely give community foundations, and Australian communities, a very useful boost.

Sam Rosevear, Executive Director Policy, Government Relations and Research at Philanthropy Australia, commented ‘We really appreciated the open and consultative way Assistant Treasurer Sukkar, his advisers, and the Federal Treasury went about developing this reform. Treasury invited our technical and broader policy input on the reforms, which we provided working closely with Community Foundations Australia and other sector experts. This is a great way to develop good policy and achieve targeted reform that works for all parties and benefits Australia.’

Background on the reforms:

Community foundations – such as the Northern Rivers Community Foundation, Ballarat Foundation, and Stand Like Stone Foundation in Mount Gambier – are place-based philanthropic organisations.  Local people donate to, volunteer for, and run community foundations.  Through local knowledge and networks, they develop a detailed understanding of where support is needed most, and fund community organisations and initiatives best able to support the top local priorities.

The reforms announced by the Government do two important things: 

• They make it easier for listed community foundations to support local charitable activities, making donor dollars go further faster: Until these reforms, community foundations – the majority of which operate in regional areas – have only been able fund ‘Item 1’ Deductible Gift-Recipient (DGR) charities.  There are few charities with this status in regional areas, which meant that community foundations could not fund many grassroots community groups and initiatives. Based on the announcement, specifically listed community foundations will now be able to fund any charitable activities carried out by groups and organisations, provided those activities are covered by one of the 52 existing DGR endorsement categories and are consistent with the community foundations own purposes and rules.
• It enables listed community foundations to accept donations from PAFs and other ancillary funds:  PAFs, which are mostly based in bigger cities, invested $565 million in 2018-19 to support important causes.  Until this reform, they were banned from providing support to any other types of ancillary fund, including community foundations that operate as Public Ancillary Funds (PuAF).  There is ample anecdotal evidence that people and families would like to contribute from their PAF to community foundations that are often better placed to direct funds to support local priorities based on local knowledge, especially disaster response and recovery. By granting ‘Item 1 DGR’ status to community foundations, this will boost the flow of funds to communities across Australia, helping to support better philanthropy that is responsive to what those communities need.