The value of philanthropy
Encouraging figures released by the tax office show that wealthy Australians are putting their hands in the pockets and giving back to community initiatives despite tax and regulatory burdens against them and the charities that receive the donations.
The latest figures from the Australian Tax Office’s Deductible Gift Recipient Listing (17/07/2014) highlight growing philanthropic investment by wealthy Australians with the largest number of new private ancillary funds (PAFs) being established since before the global financial crisis.
The good news is that 141 PAFs were established in the year ending 30 June 2014, bringing the total number of PAFs in Australia to 1,225.
PAFs are the fastest growing segment of philanthropy and also likely the largest. PAFs held $2.93 billion in funds as at 30 June 2012, and distributed $250 million to the community across welfare, education, culture, research and other sectors during 2011/12.
Chris Cuffe, Chairman and founder of Australian Philanthropic Services said the increase in the number of funds is evidence of a growing tradition of philanthropy among wealthier Australians.
“The continued success of private ancillary funds is crucial to engage the next generation of philanthropists,” he said.
“It is great to see increasing numbers of families sharing their wealth with the community and particularly encouraging to see increasing numbers of those listed in the BRW rich list also known for their philanthropy.”
Earlier in the year the Australian Charities and Not-for-profits Commission (ACNC) called on charities to share their experience of red tape in the sector through an online survey.
The survey, conducted by Ernst and Young, was part of a wider research project to measure the baseline of red tape imposed on the sector and to identify target areas for red tape reduction.
“Participants at the forum, including charities, told us the importance of measuring the amount of red tape affecting the sector and recommended that we commission research into this,” said ACNC Commissioner, Susan Pascoe AM.
The initial phase of the red tape reduction research looks into the regulatory and reporting burden on charities at the Commonwealth level.
Future research may look at the burden imposed by states and territories and the burden on the broader Not for Profit sector.
The research involves developing a conceptual framework, conducting case studies and mapping and costing red tape.
While these statistics of increasing philanthropic behaviour, along with research being done into the burden of red tape is encouraging, there is still a great deal of legislation to battle through, particularly for the receiving charities. Ease of this burden is required to encourage even further participation in worthy causes.
Australian Philanthropic Services is one of the key champions of the PAF model in Australia and provides independent, not-for-profit advice to individuals and advisers.
Since its launch in 2010, Australian Philanthropic Services (originally known as the Social Ventures Australia PAF service) has grown rapidly and is now establishing over 25% of all new PAFs in Australia.
Australian Philanthropic Services currently supports over 100 clients with their philanthropy, offering businesses, wealthy individuals and families the ability to donate tax effectively to a trust they have created. The trust can then disburse funds to a range of eligible not-for-profit organisations over a chosen timeframe.
The positive change has come via a shift in the regulatory environment, which up until a decade ago did not provide tax efficient philanthropic structures comparable with those available in the USA and UK.
While that is no excuse for not putting your hand in your pocket, it did make philanthropy or philanthropic efforts cumbersome.
In 2001, a Howard government initiative promoted family philanthropy, with the first Private Ancillary Funds being established as Prescribed Private Funds (PPFs). The business community had significant input, under the guidance of David Gonski.
In 2009, after significant consultation with the sector, the structure was reformed by the Rudd government, new Guidelines introduced and the structure renamed Private Ancillary Funds. Areas of compliance were tightened and processes streamlined, with these changes receiving bipartisan support.
It is important that progress continues to be made because philanthropy should be a lifestyle choice, without burden. The more help businesses and wealthy individuals can give to worthy causes and charities, the better off we all will be.