Reforming Philanthropy: Navigating The Future Foundations Report

The Australian Productivity Commission’s recently released final report, Future Foundations for Giving, offers a comprehensive examination of Australia's philanthropic landscape, presenting a plethora of recommendations aimed at reforming the system to better serve the community. However, it also highlights significant challenges and contentious proposals, particularly around the deductible gift recipient (DGR) status of certain charities and private schools in Australia.

Key Findings and Recommendations

Trends in Giving

The Productivity Commission giving report identifies a notable trend: while the total value of giving has increased, the number of individuals donating has decreased in Australia - mirroring global trends. This paradox suggests that higher-income individuals are driving the growth in philanthropy, raising questions about the inclusivity and reach of charitable giving in Australia.

Policy and Regulatory Reforms

Central to the report was the call for a reform of the deductible gift recipient system. The Commission highlights the need to simplify and refocus the DGR system to maximise community benefits, aiming for a fairer distribution of resources among charities. This overhaul could potentially increase the number of charities with DGR status from 25,000 to up to 40,000, thereby supporting grassroots and community-based organisations more effectively.

The report also stresses the importance of strengthening regulatory frameworks as part of any major philanthropy reform to build trust and confidence among donors, taxpayers, and beneficiaries. Recommendations include enhancing the powers of the Australian Charities and Not-for-profits Commission (ACNC) and establishing a permanent National Charity Regulators Forum to improve coordination and information-sharing among various regulatory bodies.

Structured Giving Vehicles

Recommendations for structured giving vehicles, such as ancillary funds, include renaming them to reflect their purpose better and increasing transparency through improved reporting. The proposed minimum distribution rate of 5% to 8%, with periodic reviews, aims to ensure that funds are effectively utilized to support charitable causes.

Positive Aspects of the Report

The report’s call for a reform of the DGR system could indeed be seen as a crucial step toward making charitable giving more equitable and impactful. Simplifying the DGR framework and focusing it on activities that generate the greatest net benefits for the community would indeed help ensure a fairer distribution of resources among charities in the longer term despite it having the potential to end the charitable status of over 5,000 private schools around Australia. The proposed increase in the number of charities eligible for DGR status, particularly those at the grassroots and community levels, could democratise philanthropy and foster a more inclusive charitable sector.

Additionally, the emphasis on supporting First Nations philanthropy is a highly welcome recommendation. Establishing Indigenous Philanthropy Connections could significantly enhance the capacity of Indigenous organisations to access philanthropic networks, promoting culturally safe and effective giving practices. This move aligns with broader efforts to address systemic inequalities and support self-determination within Indigenous communities.

Controversial Proposals and Government Response

One of the more contentious recommendations in the report was the proposed removal of DGR eligibility for certain categories of charities, such as private school building funds. The Commission argued that the current system allows some institutions to benefit disproportionately from tax-deductible donations, potentially at the expense of charities focused on preventing harm or hardship.

However, the Australian Federal Government has quickly ruled out this specific change, allowing private schools to continue collecting tax-deductible donations for major building programs. This decision has sparked a mixed response. On one hand, it ensures that private schools can maintain their fundraising capabilities for infrastructure development, which can directly benefit their educational environments. On the other hand, it perpetuates a system that some argue privileges already well-resourced institutions over those serving more vulnerable populations.

Balancing Equity and Efficiency

The Australian Government’s decision to retain DGR status for private school building funds, despite the Commission’s recommendation, reflects the complex interplay between policy, equity, and practicality. While the report rightly identifies the need for a more equitable system, the practical implications of stripping DGR status from private schools could have unintended consequences, such as reduced investment in educational infrastructure and greater reliance on taxpayers to foot the bill.

Moreover, the broader reforms suggested by the report, such as enhancing the regulatory framework and improving transparency, are essential steps towards building a more trustworthy and efficient charitable sector. These measures could help address concerns about fairness without undermining the ability of various organisations, including private schools, to raise funds for important projects.

Response to Report

The Hon Dr. Andrew Leigh, Assistant Minister for Competition, Charities, and Treasury, has acknowledged the report's potential to guide future governmental actions towards doubling giving in Australia. Philanthropy Australia’s CEO Maree Sidey has also welcomed the report, highlighting the critical decisions the Australian Government will need to make in response to its recommendations.

As stakeholders digest the comprehensive findings of Future Foundations for Giving, the focus will undoubtedly be on implementing reforms that not only increase the quantity of giving but also enhance the quality and impact of philanthropic practices in Australia. The coming months and years will be crucial in determining how these recommendations are translated into actionable policies that can shape a more robust and inclusive philanthropic landscape.

A Path Forward

The Productivity Commission’s Future Foundations for Giving offers us a valuable roadmap for reforming Australia’s philanthropic system. While some recommendations may be contentious, they prompt necessary conversations about the role and impact of philanthropy in society. Balancing the need for equity with practical considerations will be key to ensuring that the charitable sector can both grow and serve the diverse needs of the Australian community effectively well into the future.

Additionally, it is imperative for educational institutions and not-for-profits to continue to double down on doing the fundraising basics well. This includes building strong donor relationships, effectively communicating impact, diversifying fundraising streams, and leveraging technology for deeper donor engagement. By focusing on these fundamental aspects, organisations can enhance their fundraising efforts and better navigate the evolving philanthropic landscape in Australia, ensuring sustainable growth and impact.

In conclusion, while the decision to allow private schools to retain DGR status for building funds may be seen as a setback by some and a big win for others, it also underscores the importance of thoughtful, inclusive, and practical policy-making in the realm of philanthropy. As we move forward, it is crucial to keep refining these policies to foster a more equitable and impactful giving environment in Australia - ultimately for the benefit of all its citizens.

*Alastair Lee, an internationally acclaimed thought leader, has been a driving force in the Australian education advancement sector for three decades. His extensive experience spans various pivotal leadership roles in corporate marketing, alumni relations, and fundraising within the education and not-for-profit domains.

As the Founding Director of AlumGrow Consultancy, Alastair leads a specialised firm dedicated to nurturing growth in enrolments, fundraising revenue, and alumni and supporter engagement for education institutions and not-for-profit organisations.  

Like, share and comment on this article too

If you enjoyed this article don't keep all these insights to yourself - like it, leave a comment, and share it with your advancement colleagues.

Subscribe To Our Free Monthly AlumGrow's Insights Newsletter

Sign up today for free at alumgrow.com.au/insights. 

AlumGrow Consultancy: Your Award-Winning Advancement Consulting Experts

AlumGrow stands as your expert award-winning advancement consulting partner. We specialise in guiding educational institutions and not-for-profits of all sizes on their growth journey, leveraging cutting-edge frameworks and offering expert program and project consultancy services in marketing, fundraising, and alumni relations. 

To explore our tailored services and innovative programs or arrange a free no obligation consultation visit alumgrow.com.au.