Advocacy update: ‘First Steps’ in response to the Productivity Commission’s Philanthropy Report and final submission regarding Draft Ministerial Guidelines for Community Foundations

Announcement of Changes Flowing from the Productivity Commission’s Philanthropy Inquiry

On Thursday 5 December, the Assistant Minister for Charities, the Hon Andrew Leigh MP, announced a number of changes flowing from recommendations in the final report of the Productivity Commission’s philanthropy inquiry, Future Foundations for Giving.

Framed in the media release as the ‘first steps in responding to the Productivity Commission’s work’ the measures announced include:

• Removing the $2 threshold for claiming a tax-deductible donation to a deductible gift recipient (DGR)
• Renaming ancillary funds as ‘giving funds’
• Allowing ancillary funds to smooth their annual distributions over three years to provide greater flexibility to fund capital works or large projects for charities.

Philanthropy Australia welcomes these initial changes, and notes that as an initial set of commitments, they represent a positive signal of interest in the Productivity Commission’s recommendations for reshaping the policy environment for philanthropy in Australia.  However, they are not the significant reforms needed to grow giving in Australia, now and into the future.

Notably, there is no commitment to the key reform proposed by the Productivity Commission, a comprehensive overhaul of our deficient DGR system.

With the release of the Not‑for‑profit Sector Development Blueprint last week, there are now five major reports on record that have recommended reform of the DGR system, two of which have been released this year. The case for fixing the DGR system is clear, and Philanthropy Australia will keep advocating for this reform to be urgently prioritised. 

“Minor tweaks are simply playing around the edges of a giving system that is unnecessarily complex and puts the Australian philanthropic sector at a distinct disadvantage compared to other countries in terms of providing effective support to charities, says Philanthropy Australia CEO, Maree Sidey”.

The Assistant Minister for Charities also announced that the Australian Government will be consulting on a proposed increase to the minimum distribution rate for private and public ancillary funds. 

While the Productivity Commission noted that this was one lever the Government could pull, Philanthropy Australia would be reluctant to support this approach, especially in the absence of DGR reform. Philanthropy Australia’s submission in response to the Productivity Commission’s draft report recommended retaining the existing minimum distribution arrangements for this reason.

Philanthropy Australia CEO, Maree Sidey says, “Members have raised concerns about a potential increase in the minimum distribution for good reason. Ancillary funds help to encourage more and better giving for the benefit of the many Australian charities in our community, and the potential for unintended consequences of mandating an increase in distributions, without dealing with wider reform, is high.”

Philanthropy Australia looks forward to participating in the proposed consultation process on this issue. If members would like to share any views or perspectives on any of these proposals, they are encouraged to contact Philanthropy Australia’s Executive Director, Policy and Sector Development, Krystian Seibert ([email protected]).

Final Submission Regarding Draft Guidelines for Community Foundations DGR Category

On Tuesday 3 December, Philanthropy Australia lodged its final submission in response to draft ministerial guidelines for a new DGR category for ‘community charities’. The Guidelines are the final component necessary before the new DGR category can commence.

Secured through the advocacy of Philanthropy Australia, Community Foundations Australia and our members and partners, this significant reform will make it easier for community foundations to receive funds, including from private ancillary funds, and to facilitate granting to organisations and groups without DGR status.

Philanthropy Australia supports the Guidelines and believes that they provide a workable framework that underpins the new DGR category. We do, however, believe that a number of changes are necessary to simplify the Guidelines and address some practical issues.

These changes are specific and targeted, and they are feasible to action as part of promptly finalising the Guidelines following this consultation, to enable the commencement of the category as soon as possible.

Thank you to members and partners who provided input and feedback as part of developing this submission.

Philanthropy Australia will inform members of further developments regarding the commencement of this DGR category. If members have any questions they should contact Philanthropy Australia’s Executive Director, Policy and Sector Development, Krystian Seibert ([email protected]).