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 released yesterday 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.

Download the full draft report here. The Productivity Commission is now seeking further feedback by 9 February 2024.


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