Policy boldness needed to encourage philanthropy

Krystian Seibert does a deep dive into Philanthropy Australia’s policy priorities, ahead of the upcoming election.

On 15 April, Philanthropy Australia launched its Policy Priorities for a More Giving Australia document in the run up to the coming federal election.

Philanthropy Australia’s policy and research manager, Sarah Wickham, recently wrote about the policy priorities in an article for Pro Bono News.

In addition to my role at the Centre for Social Impact at Swinburne University of Technology, I also work in an advisory capacity with Philanthropy Australia and was closely involved with developing the policy priorities. In this piece I wanted to do a deep dive into a few of them.

Protecting advocacy by charities

Advocacy is an important approach charities use to address some of the most complex social and environmental challenges we confront as a society. By seeking to achieve policy change, it helps address the root causes rather than merely the symptoms of such challenges. It’s one reason that philanthropy is increasingly keen to fund advocacy, something that Philanthropy Australia has seen first hand and something that it has actively nurtured. We want this trend to continue.

But in recent years, we’ve seen attacks on the legitimacy of charities undertaking advocacy. It must be said that the current government has been at best lukewarm in its support for charities undertaking advocacy, with some Coalition backbenchers being openly hostile. This is unfortunate, as I know there are also many people within the Coalition who recognise the important advocacy role of charities.

Whatever the result of the election, we need a complete reset when it comes to this issue. Our government and all our elected representatives need to understand and respect the fact that advocacy by charities contributes to the vibrancy of our democracy.

In the policy priorities document, Philanthropy Australia sets out two recommendations in this area – amending the Not-for-profit Sector Freedom to Advocate Act 2013 to set out principles which will guide the Australian government’s approach to advocacy by charities and against which government departments and agencies would report against, and amending the Charities Act 2013 to confirm the intrinsic public benefit of advocacy by charities.

It’s time to #FixFundraising

Almost everybody recognises that the framework for regulating fundraising by charities in Australia is broken. Nobody even bothers to try defend the current tangled mish mash of outdated, inconsistent and ineffective laws stretching across the nation.

But we see relatively little action from governments to actually fix it. The case for change has been made by the #FixFundraising Coalition, and a bipartisan Senate Inquiry has recommended action. Sure, we need to work out the details, but that is not a roadblock to change. The time for action was yesterday. Whoever wins the election must show national leadership and deliver this important reform. The time for making excuses is over, let’s just get it done!

Deductible gift recipient reform

One topic which I have written about before is the need to reform our deductible gift recipient (DGR) framework. We need to simplify the framework, and broaden access to DGR status for the many charities who currently fall through the cracks.

The NFP Sector Tax Concession Working Group set out a sensible way forward in its final report back in 2013, and sector organisations have been advocating for reform for many years. It has been a key policy priority of Philanthropy Australia for some time.

I appreciate that this reform would involve a cost to the Australian government. That’s because expanding access to DGR status will mean more donations to charities, which can then be claimed as tax deductions. At the time of the NFP Sector Tax Concession Working Group’s final report back in 2013, this cost was estimated at around $120 million a year in forgone tax revenue.

As a starting point, whoever forms government should ask for an updated costing of the model proposed by the NFP Sector Tax Concession Working Group. Then let’s have an open discussion between the government and stakeholders about how this could be paid for and whether there are other lower cost options.

If broader DGR framework reform is not feasible for the time being, then a DGR category for community foundations is a less costly but much needed reform that can be delivered more easily. Community foundations play a key role growing grassroots philanthropy across Australia, but the current DGR framework holds them back.

Philanthropy and intergenerational wealth transfer

Australia will see a massive intergenerational wealth transfer over the coming decades. However giving by bequest in Australia is currently very low. In 2012 only 7.6 per cent of final wills had a direct charitable bequest, and charitable bequests accounted for only 2.7 per cent of the total value of estates.

We don’t have inheritance taxes in Australia, so other incentives are needed to grow bequests. One option proposed by Philanthropy Australia is a so called “Living Legacy Trust”. They provide a tax deduction for donors who place an asset in a trust for the benefit of a charity upon the donor’s passing, and in that way LL Trusts effectively introduce a tax incentive for charitable bequests.

Another option is to remove the tax currently imposed on bequest from superannuation. At the moment, if a person has superannuation remaining at their death (and it’s estimated that the median retiree will leave a superannuation inheritance of $190,000), any bequest to a charity from these funds is taxed up to 15 per cent plus the 2 per cent Medicare Levy (but because the taxation of superannuation is complicated, there are some variations to this). Getting rid of this tax would create a nudge to encourage more people to think about charities when making decisions about what to do with their superannuation.

These are just a few of the reforms set out in Philanthropy Australia’s Policy Priorities for a More Giving Australia. I encourage you to read the document to learn about the other policy ideas put forward which would help grow philanthropy in Australia.