How the Wealthy Give -New Research
Wednesday, 30th March 2005 at 1:03 pm
How the Wealthy Give –New Research
Australian philanthropist Daniel Petre has funded new research which shows that the wealthy in Australia are not contributing as generously as they could and arguably as generously as they should and urges Government action!
Called “How the Wealthy Give”, the research says that Australians with a taxable income of more than $AUS1 million contribute less that 2% of their income, compared to Canadian millionaires who in average contribute 3.2% of their pre-tax income and US millionaires who on average give more than 3.5%.
The research was prepared by Denis Tracey and Christopher Baker from the Asia Pacific Centre for Philanthropy and Social Investment in Melbourne on behalf of the Petre Foundation.
Sydney-based Daniel Petre received Australia Day Honours in 2005 for his services to community. He is a former co-founder and chairman of the Internet company, e-Corp and long-time Microsoft executive and founder of The Petre Foundation.
His commissioned research describes options for encouraging the wealthy to give in the form of ‘carrots’ and ‘sticks’.
It says the growth of Prescribed Personal Funds (PPFs) suggests that wealthy people will respond to philanthropic opportunity when appropriate solutions are available.
It suggests re-examining tax arrangements, including an incentive of a tax deduction of more than 100%, may be timely.
But it suggests that a more controversial way to encourage philanthropy would be by punishing those who do not give, through inheritance taxes or death duties.
In the US death duties remain in place but can be offset by philanthropic donations!
The research also says that there is strong evidence that many professional advisers – financial planners, lawyers and accountants – do not have a good knowledge or understanding of philanthropy or especially of the recent changes to its legal and tax aspects.
The research concludes that wealthy individuals and families in Australia are less obviously generous than their US counterparts.
It says that with few exceptions many Australians who are known to be wealthy are not generous and it may be time to introduce new ways of rewarding those who give.
It says while the Prime Minister’s Community Business Partnership is having some success in developing a culture of Corporate Social Responsibility in Australia, perhaps a comparable campaign directed towards private philanthropy could be introduced!
The research says that the average Prescribed Private Fund corpus in Australia is less than $0.5m. If Australia’s 200 wealthiest each contributed 5% of their net wealth to a PPF the average corpus for this group would be just short of $20million. At 6% per annum the aggregate corpus would generate earnings of approximately $235m.
It appears as though there are more than 3,000 people with a net worth of more than $20 million.
Petre says that if you have $40 million or more, you could easily allocate 10 per cent. A person with $40 million of assets could live just as comfortably on $36 million, providing $4 million to a charitable foundation that could then allocate approximately $200,000 per year, every year!
He says that at the top end, someone with $1 billion could easily allocate $100m to a charitable fund and therefore be giving around $5 million every year with no change in their life but a dramatic impact on charitable causes.
He says the reality is that if we could have every wealthy person allocate 10 per cent of their wealth to charitable foundations (that would produce annual income for charities) we would see an incredibly significant uplift in resources available for the needy across Australia and the world.
He adds that this change would be brought about without any modification in the lifestyles of our rich and famous.
Part two of the research explores ways of increasing philanthropy in more detail.
Daniel Petre presented the research to the Prime Minister’s Community Business Partnership in Canberra last week.
Both research papers can be downloaded at the Petre Foundation web site at