Future foundations for giving
Released 30 / 11 / 2023
This report sets out the Commission’s draft findings and recommendations relating to motivations for philanthropic giving in Australia and opportunities to grow it further.
Future foundations for giving (Text version of slider story)
Philanthropy makes an important contribution to our way of life.
It brings communities together, funds innovation and supports people in need.
The proposed reforms would establish firm foundations for the future of philanthropy, so that the benefits of giving can continue to be realised across Australia.
Giving in Australia is going up
The real value of donations has increased by 217% since 2000-01.
If the trend in individual giving from 2010-11 to 2020-21 continued, giving would increase by 27% (in real terms) from 2020-21 to 2029-2030.
The number of people giving is going down
The proportion of taxpayers who donate has declined.
The average donation has become larger
People with income of over $1m claimed an average donation of $194,296.
Tax-deductible giving is largely driven by high income earners
49% of people in this income bracket claimed a tax-deductible donation.
A tax deduction is likely to be the most cost-effective way for the Government to incentivise giving
If a taxpayer gives $100, a 1% decrease in the price of giving is associated with an increase of giving between 87 and 92 cents - based on preliminary estimates with all other factors held equal.
Current eligibility for DGR status
The arrangements that determine which charities can access deductible gift recipient (DGR) status are not fit-for-purpose – they are poorly designed, overly complex and have no coherent policy rationale.
- Charities that support care for animals.
- Charities that focus on relieving poverty or helping a particular group of people in need.
- Charities that promote the prevention or control of diseases.
- Charities that advocate for animal protection.
- Charities that focus on preventing poverty or general community wellbeing.
- Charities that promote the prevention of injuries.
- Charities that support groups of people like women, Aboriginal and Torres Strait Islander people, or LGBTQIA+ people.
A simple, transparent and fair DGR system
We are proposing a principles-based approach to develop a simple, transparent and fair system for determining which charities can receive tax-deductible donations that will refocus donations towards activities that provide the greatest net benefits to the community as a whole.
Our proposals would have the following outcomes
The status quo is maintained for ...
Charities retaining DGR status
Most charities that currently do have DGR status, such as public benevolent institutions and health promotion charities.
Charities not gaining DGR status
Charities undertaking activities including advancing religion and advancing industry.
Changes to DGR status for ...
Charities gaining DGR status
Charities that currently do not have DGR status, such as those focused on advocacy and prevention.
Charities with DGR status withdrawn
Mainly charities that have DGR status for school building funds.
Changes to the DGR system are part of three reform pillars
Reform the DGR system
- Reform policies that determine which charities can receive tax-deductible donations
- Help donors direct support to where there is likely to be the greatest net benefits.
Strengthen the regulatory system
- Enhance the Australian Charities and Not-for-profits Commission’s powers and create regulatory architecture
- Improve coordination and information sharing among regulators.
Improve public information and enhance access
- Improve public information on charities and giving
- Support the establishment of an Aboriginal and Torres Strait Islander philanthropic foundation.
We are also proposing an independent philanthropic foundation led by Aboriginal and Torres Strait Islander people to strengthen their capacity to access philanthropy ...
“The stories and experiences shared with us have shaped a proposal for the establishment of an Aboriginal and Torres Strait Islander philanthropic foundation, to facilitate new partnerships with philanthropy that further the goals and aspirations of Aboriginal and Torres Strait Islander communities.”
Deputy Chair Alex Robson
“Governments should consider how changes to policies and programs affect volunteers. This includes adopting measures that may mitigate any adverse effects on volunteer participation and identifying opportunities for volunteers as part of policy or program design.”
Commissioner Julie Abramson
... And reforms to make information on charities and giving more accessible to donors and the wider public.
“The design of the Australian Charities and Not-for-profits Commission charity register should be shaped by the needs of donors, helping ensure it’s a useful tool for guiding their giving decisions.”
Associate Commissioner Krystian Seibert
Building the future foundations for giving in Australia
The Productivity Commission has proposed an overhaul of the system that determines which charities can receive tax-deductible donations. This is part of a package of reforms proposed in the draft report of their philanthropy inquiry.
“Australia is a generous nation. We donated more than $13 billion to charities in 2021 and over 6 million of us volunteered in 2022. Our draft recommendations would strengthen the foundations for philanthropy so that the benefits of giving can be realised into the future,” said Productivity Commission Deputy Chair Dr Alex Robson.
The draft report analyses trends in giving and shows that while the overall amount donated to charities has been increasing, fewer people are donating. Volunteering is widespread in Australia, but the formal volunteering rate has declined over the past decade.
The draft report finds that the ‘deductible gift recipient’ (DGR) system, which determines the charities that are eligible for tax-deductible donations, is not fit for purpose.
“Tax incentives influence giving – but the DGR system is poorly designed, overly complex and excludes many causes without a coherent policy rationale,” said Associate Commissioner Krystian Seibert.
Currently, a charity preventing illnesses in children would fit the eligibility criteria to receive tax-deductible donations, but not a charity that tries to prevent injuries in children. A charity with a general focus on social wellbeing can miss out because its activities are too broad to be considered poverty relief.
“Distinctions like this defy common sense and community expectations – a clear sign that reform is needed,” said Associate Commissioner Seibert.
The report proposes a simpler, fairer and more transparent process for determining which charities can receive tax-deductible donations.
“This is evidence-based tax reform that will support giving to a more diverse range of causes, refocusing the system toward activities that deliver broader community benefits,” said Dr Robson.
The inquiry also recommends the Australian Government support the establishment of an Aboriginal and Torres Strait Islander philanthropic foundation.
“Some Aboriginal and Torres Strait Islander communities are furthering their own goals and aspirations through partnerships with philanthropy. The foundation would facilitate new collaborations between philanthropy and Aboriginal and Torres Strait Islander communities that support their ambitions,” said Dr Robson.
The draft report also recommends reforms that would improve the regulatory framework for charities, supporting the role of the Australian Charities and Not-for-profits Commission’s (ACNC) charity register in providing further useful information for donors.
“The regulatory and information-sharing role of the ACNC can be strengthened, including through enhanced collaboration and cooperation with state and territory regulators, so that Australians can continue to donate with confidence,” said Commissioner Julie Abramson.
Given a lack of accurate and comparable information on corporate giving in Australia, the draft report also proposes that listed companies be required to publicly report information on their donations of money, goods and time to charities with DGR status.
Read the full draft report and provide a comment or submission at www.pc.gov.au
02 6240 3330 / email@example.com
Philanthropy contributes to a better society by providing money, time, skills, assets or lending a voice to people and communities who would otherwise receive lower quality, or have less access to, goods and services.
- Many Australians give money, other assets, or their time. Over $13 billion was donated to charities in Australia in 2021 and 6 million people volunteered in 2022.
- Philanthropy, particularly volunteering, can help build social capital by contributing to social networks, building trust within communities, and diffusing knowledge and innovations through communities.
- Philanthropy can also provide untied, flexible or long‑term funding for more innovative and riskier projects compared to what government funding can offer.
- The Productivity Commission’s draft recommendations would establish firm foundations for the future of philanthropy, so that the benefits of giving can continue to be realised across Australia. The proposals would enable greater donor choice and ensure that regulation continues to support trust and confidence in charities.
The Commission's proposed reforms aim to make the deductible gift recipient (DGR) system simpler, fairer and more consistent.
- All Australian taxpayers co-invest in charities through the DGR system, but the arrangements that determine which entities can access DGR status are not fit for purpose – they are poorly designed, overly complex and have no coherent policy rationale.
- Reform is needed to simplify the DGR system and direct support to where there is likely to be the greatest net benefits to the community. If adopted, the Commission’s draft recommendations would mean that more charities overall would be able to access tax-deductible donations.
- In contrast, the personal income tax deduction for giving does not need substantive reform. Preliminary estimates by the Commission show the personal income tax deduction is likely to be an effective mechanism for encouraging donations of money and other assets.
- The Australian Government should support the establishment of an independent philanthropic foundation controlled by – and for the benefit of – Aboriginal and Torres Strait Islander communities to enhance the arrangements linking philanthropic and volunteer networks and funding to Aboriginal and Torres Strait Islander organisations.
The regulatory framework for charities is complex and reforms to enhance the role, powers, functions and enforcement tools of the Australian Charities and Not-for-profits Commission (ACNC) are needed to support the high level of public trust and confidence in charities now and in the future.
- The Australian Government should establish a National Charity Regulators Forum with state and territory regulators to create a more formalised regulatory architecture.
- The Australian Government should create more value for the public from the data collected about charities by improving the ACNC charity register, and collecting and publishing additional data on ancillary funds, corporate giving, volunteering and charitable bequests.
The philanthropy draft report has considered:
- Aboriginal and Torres Strait Islander people (PDF 233 KB)
- Aboriginal and Torres Strait Islander people (Word 1.4 MB)
- The deductible gift recipient system (PDF 311 KB)
- The deductible gift recipient system (Word 1.4 MB)
Printed copies of this report can be purchased from Canprint Communications.
You were invited to make a submission by 9 February 2024.