Philanthropy

Final report of philanthropy inquiry released

The Australian Government has tabled the final report of the Productivity Commission’s inquiry into philanthropy in Australia: Future foundations for giving.

The report makes several recommendations to strengthen the foundations of philanthropy, supporting the Government’s goal of doubling giving by 2030.

These include an overhaul of the Deductible Gift Recipient (DGR) system, which determines the charities that are eligible to receive tax-deductible donations.

“The system that determines which charities can receive tax-deductible donations has grown in an ad hoc way over decades and has no coherent policy rationale. The complexity and inconsistency of the system sees many charities that create clear community benefits miss out,” said Deputy Chair Dr Alex Robson.

Charities that work to prevent poverty, animal welfare charities, and charities that work across DGR categories in support of groups like women, young people and Aboriginal and Torres Strait Islander people are just some of the groups facing barriers to inclusion in the current system.

“Our report proposes an overhaul of the DGR system that would make it simpler, fairer, and focused on activities that are likely to generate the greatest net benefits for the community,” said Dr Robson.

It is expected that the recommended changes would increase the number of charities that can receive tax deductible donations from about 25,000 charities to around 30,000 to 40,000 charities.

The report also proposes the establishment of a new organisation that would improve access to philanthropy for Aboriginal and Torres Strait Islander people.

“Some Aboriginal and Torres Strait Islander communities are furthering their own goals and aspirations through partnerships with philanthropy. The foundation would facilitate new collaborations between philanthropy and Aboriginal and Torres Strait Islander communities that support their ambitions,” said Commissioner Julie Abramson.

The report recommends reforms that would improve the regulatory framework for charities, supporting the role of the Australian Charities and Not-for-profits Commission’s (ACNC) charity register in providing further useful information for donors.

“This report has been informed by consultation and submissions from thousands of Australians in the charity sector and the wider community. We are confident our recommendations would create a stronger, fairer foundation for Australian philanthropy to support giving into the future,” said Dr Robson.

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• Philanthropy contributes to a better society by providing money, time, skills, assets or lending a voice to people and communities who would otherwise have lower quality outcomes or have less access to goods and services.
  • Many Australians give money, other assets or their time. Over $13 billion was donated to charities in Australia in 2021 and 6 million people volunteered in 2022.
  • Philanthropy, particularly volunteering, can help build social capital by contributing to social networks, building trust within communities, and diffusing knowledge and innovations through communities.
  • Philanthropy can also provide untied, flexible or long-term funding for more innovative and riskier projects compared to what government funding can offer.
• Philanthropy in Australia is increasing and government policies are supporting this growth. The Productivity Commission’s recommendations reinforce the foundations for philanthropy in Australia, so that the benefits of giving can continue to be realised into the future.
• The deductible gift recipient (DGR) system is not fit for purpose and should be reformed.
  • The arrangements that determine which entities can access DGR status are poorly designed, overly complex and have no coherent policy rationale.
  • All Australian taxpayers co-invest in charities through the DGR system, so reform is needed to simplify the DGR system and direct support to where there is likely to be the greatest net benefits to the community from subsidised philanthropy. If adopted, the Commission’s recommendations would mean that more charities overall would be able to access tax-deductible donations.
• An independent organisation should be established to strengthen relationships between Aboriginal and Torres Strait Islander organisations and philanthropic networks.
  • Provisionally called ‘Indigenous Philanthropy Connections’, it should be led and controlled by Aboriginal and Torres Strait Islander people and be funded by an endowment provided by the Australian Government.
• Reforms are needed to enhance the regulatory framework for charities and to support high levels of public trust and confidence in charities now and into the future.
  • Establishing a National Charity Regulators Forum comprised of Australian, state and territory charity regulators would formalise the regulatory architecture to embed coordination and cooperation.
• The Commission has designed policy principles to inform the minimum distribution that ancillary funds are required to make each year to charities for the benefit of the wider community.
  • Guided by these principles, the Australian Government should set the minimum distribution rate for ancillary funds between 5% and 8%, following further consultation with the philanthropic and charitable sectors.
• The Australian Government should create more value for the public from the data collected about charities and giving, including by publishing aggregate information on corporate giving and by requiring listed companies to be more transparent to stakeholders about their giving.

• Preliminaries: Cover, Copyright and publication detail, Transmittal letter, Terms of reference, Disclosure of interests, Contents, and Acknowledgments
• Overview
  • Key points
  • Government’s role in supporting philanthropy
  • The deductible gift recipient system needs major reform
  • Improve access to philanthropy for Aboriginal and Torres Strait Islander people
  • Regulatory arrangements that support donor confidence
  • Structured giving vehicles could be enhanced
  • Supporting donor choice and public accountability
• Recommendations and findings
• 1. About the inquiry
  • 1.1 Background
  • 1.2 The Commission’s approach to the inquiry
• 2. Philanthropy and the role of government
  • 2.1 The role of government in philanthropy
  • 2.2 Are policy settings meeting government objectives?
  • 2.3 Assessing reform options
• 3. Philanthropy in Australia
  • 3.1 Giving patterns in Australia
  • 3.2 Recipients of giving
  • 3.3 Why do people choose to give?
  • 3.4 Why do people choose not to give?
  • 3.5 Implications for policies to increase giving
• 4. How governments can incentivise giving
  • 4.1 How does the Australian Government incentivise giving?
  • 4.2 People respond differently to incentives for giving
  • 4.3 Design of the tax incentive for giving
• 5. An assessment of the deductible gift recipient system
  • 5.1 The operation of the DGR system
  • 5.2 The DGR system is not fit for purpose
  • 5.3 Tax concessions for charities
• 6. Reforming the deductible gift recipient system
  • 6.1 How should access to DGR status be determined?
  • 6.2 The proposed scope of the DGR system
  • 6.3 Integrity measures to support the DGR system
  • 6.4 Implementation arrangements to support reform
  • 6.5 The expected effects of reforming the DGR system
• 7. A sound regulatory framework
  • 7.1 There is a role for governments to regulate charities
  • 7.2 The regulatory framework for charities is complex
  • 7.3 Coverage of the regulatory framework
  • 7.4 Assessing the powers and capacity of the ACNC reveals a mixed scorecard
  • 7.5 Is the regulatory framework overly burdensome?
  • 7.6 Is the regulatory system fit for the future?
• 8. Structured giving vehicles
  • 8.1 Role for government in supporting giving vehicles
  • 8.2 Assessment of ancillary funds
  • 8.3 Public information on ancillary funds
  • 8.4 Assessment of charitable trusts
  • 8.5 Other giving vehicles
• 9. Public information about charities and giving
  • 9.1 The role of public information on charities and giving
  • 9.2 Public sources of information on charities and giving
  • 9.3 Should public information on charities be enhanced?
  • 9.4 Enhancing public information on giving
• 10. Access to and participation in giving
  • 10.1 Measures to improve access to philanthropy
  • 10.2 Policies to encourage giving
  • 10.3 Policies that make giving easier
• A. Public consultation
• B. Technical paper
  • B.1 Do donors respond to changes in price and income?
  • B.2 Estimating the price and income elasticity of giving
  • B.3 Results
  • B.4 Full results of the Commission’s analysis
• Abbreviations
• Glossary
• References

Printed copies of this report can be purchased from Canprint Communications.