Future Foundations for Giving: Key Findings and Impacts on Australian Not-For-Profits

Future Foundations for Giving: Key Findings and Impacts on Australian Not-For-Profits

The Productivity Commission’s recent “Future Foundations for Giving Inquiry report,” tabled in Parliament on 10 May 2024, marks a significant step in understanding and enhancing philanthropy in Australia.

Report No. 104 delves into the current state of giving and offers comprehensive recommendations to optimise the philanthropic landscape.

Here’s a summary of the Report’s key findings, recommendations, and their implications for not-for-profit organisations (NFPs) across Australia.

Key Findings of Report

Rising Income and Wealth Drive Donations

Tax-deductible donations have tripled in real terms from 2000-01 to 2020-21, despite only a 38% increase in taxpayers. This rise is attributed to increasing income and wealth among donors. Notably, fewer people are making donations, but those who do are giving more.

Decline in Formal Volunteering

Although about 6 million Australians volunteered in 2022, the formal volunteering rate dropped from 36% in 2010 to 25% in 2020. Contrarily, an observed increase in informal volunteering highlights a shift in how people choose to give their time.

The Complexity of the DGR System

The current deductible gift recipient (DGR) system is overly complex and lacks coherent policy rationale. It requires a comprehensive overhaul to ensure fairness, simplicity, and efficiency in determining which entities can receive tax-deductible donations.

Impact of Government Incentives

Government incentives, particularly income tax deductions, play a crucial role in encouraging donations. The system needs refinement to motivate giving effectively without creating excessive fiscal costs or administrative burdens.

Enhancing Philanthropy for Aboriginal and Torres Strait Islander Communities

The report emphasises the need to strengthen philanthropic networks for Aboriginal and Torres Strait Islander communities. Establishing an organisation like Indigenous Philanthropy Connections, led and controlled by Indigenous people, is recommended to bridge gaps and enhance cultural safety and effectiveness in philanthropy.

Regulatory Reforms for Increased Trust

Maintaining high levels of public trust and confidence in charities is essential. Regulatory reforms are recommended to ensure charities operate transparently and efficiently, including enhancing the powers and coordination of the Australian Charities and Not-for-profits Commission (ACNC).

Structured Giving Vehicles

Improving the effectiveness of structured giving vehicles, such as private and public ancillary funds, by setting a minimum distribution rate and encouraging the development of distribution strategies.

Key Recommendations Identified in Report

Simplified and Refocused DGR System

Amend the Income Tax Assessment Act 1997 to reform the DGR system, focusing on activities with greater community-wide benefits while excluding primary, secondary, and religious education activities without specific equity objectives.

Transition Arrangements

Provide a five-year transition period for entities losing DGR status to adjust their fundraising activities. Develop alternative funding mechanisms concurrently.

Regulatory Enhancements

Strengthen the ACNC’s powers to require necessary information, assess federal regulation status, evidence distribution of net assets, and seek court orders to protect charitable assets. Establish a National Charity Regulators Forum for better coordination among regulators.

Public Campaign for Philanthropy

Launch a government-funded public campaign to promote philanthropy, adhering to sound program design and evaluation principles to ensure effectiveness.

Indigenous Philanthropy Connections

Establish an independent organisation controlled by Aboriginal and Torres Strait Islander people to strengthen the capacity of philanthropic organisations to be culturally safe and enhance Indigenous access to philanthropic networks.

Structured Giving Vehicles

Set a minimum distribution rate for ancillary funds between 5% and 8%. Ancillary funds should develop distribution strategies to support eligible entities and raise public awareness through additional information.

Implications for Not-For-Profits

1. Simplified Access to Tax-Deductible Donations
   • Reforming the DGR system will allow more NFPs to access tax-deductible donations, potentially increasing funding opportunities for smaller grassroots charities.
2. Enhanced Volunteering Framework
   • Addressing barriers to formal volunteering and recognising the value of informal volunteering can help NFPs attract and retain volunteers more effectively.
3. Increased Transparency and Trust
   • Regulatory reforms will enhance the transparency and accountability of NFPs, fostering greater trust among donors and the public, leading to increased donations and support.
4. Support for Indigenous Organisations
   • The establishment of Indigenous Philanthropy Connections will aim to create a more inclusive philanthropic environment, benefiting Indigenous NFPs through increased access to philanthropic networks and culturally safe funding opportunities.
5. Structured Giving and Distribution Strategies
   • NFPs could see more consistent and strategic funding from ancillary funds, improving financial planning and project execution.

Conclusion

The “Future Foundations for Giving Inquiry report” provides a roadmap for strengthening the philanthropic sector in Australia. By addressing key issues such as the complexity of the DGR system, the need for regulatory reforms, and the importance of supporting Indigenous philanthropy, the report aims to create a more efficient, transparent, and inclusive giving environment.

Not-for-Profits stand to gain significantly from these changes, with increased access to funds, volunteer support, and public trust. Embracing these recommendations will be crucial for NFPs to enhance their impact and continue contributing to the welfare of the Australian community.

How We Can Assist

At The Breakthrough Office, we are dedicated to supporting not-for-profit organisations in navigating the evolving philanthropic landscape. Here’s how we can assist:

• DGR System Navigation: We offer expert guidance on understanding and navigating the reformed DGR system to maximise your funding opportunities.
• Regulatory Compliance: We provide comprehensive support to ensure your organisation meets all regulatory requirements, enhancing transparency and trust with your stakeholders.
• Strategic Funding Planning: Our services include developing effective distribution strategies to secure consistent and impactful allocation of funding.

Contact us today to learn more about how we can support your not-for-profit organisation in achieving its mission.