Australia’s Productivity Commission has released its Future Foundation for Giving Inquiry Report and made recommendations on how to increase philanthropic giving.
The Commission commenced its review in 2023 and published a draft report later that year. It then conducted public hearings and incorporated public sector submissions and consultations on the draft, releasing the final Inquiry Report on 18 July 2024.
In the final report, there were nine significant findings and 19 recommendations for reforms for the government to adopt. The recommendations cover a wide range of issues across the philanthropic sector, with four key areas of focus:
- An improved deductible gift recipient (DGR) system
- Better access to philanthropic networks for Aboriginal and Torres Strait Islander people
- An enhanced regulatory framework for charities and ancillary funds
- Improved public information on charities and donations.
As we noted in our January article on the draft report, any reform of philanthropic giving and DRG rules might necessitate changes in accounting processes, so Australian NFP organisations should seek professional advice regarding potential impacts, particularly with reforms related to DGR status and corporate giving.
Public contributions to the report
Many charitable organisations took up the invitation to respond to the draft report. Feedback from Inquiry participants took the form of 1611 public submissions, 1593 brief comments, more than 120 consultations, 10 roundtables plus 6 days of public hearings held in February 2024.
The final report captures the views of those who made submissions and comments, including more than 50 interest groups. Some comments of interest included:
• On defining whether or a not certain charities are PBIs, Justice Connect (sub. 269, p. 4) commented: “PBI requirements ‘can only be fully understood by reference to 90 years’ worth of case law and a lengthy ACNC Commissioner’s Interpretation Statement’.”
• On the DGR, the Community Council for Australia commented: “We would say very strongly, as we have said for over a decade, the DGR system is an absolute mess, it’s dysfunctional, it’s counterproductive, it favours the wealthy over the poor, the politically connected and powerful over the disadvantaged, and it’s not understood, it’s not well administered, and it doesn’t, I think, provide the kind of benefit that it could was it more effectively established and eligibility was clearer, and the processes around DGR were more transparent and equitable. And I think the measures that you’ve put forward are certainly a big step in that direction. So we applaud the report, we applaud what we see is the key recommendation.” (trans., p. 286)
Report highlights
Some central findings and recommendations highlighted in the 468 page final report were:
• The deductible gift recipient (DGR) system is not fit for purpose and should be reformed – 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 from subsidised philanthropy. If adopted, more charities overall would be able to access tax-deductible donations.
• Explicitly consider the effects on volunteers when designing policies and programs – To support volunteering, Australian, state, territory and local governments should consider how changes to policies and programs would affect volunteers.
• Reforms are needed to enhance the regulatory framework for charities and to support high levels of public trust and confidence in charities now and into the future – Establishing a National Charity Regulators Forum comprised of Australian, state and territory charity regulators “would formalise the regulatory architecture to embed coordination and cooperation”.
• The framework must keep pace with societal trends and developments – These include changes in transaction technologies and new ways of giving.
• The Australian Government should create more value for the public from the data collected about charities and giving, including by publishing aggregate information on corporate giving and by requiring listed companies to be more transparent to stakeholders about their giving.
DGR status
Changes needed to Deductible Gift Recipient (DGR) status, including proposed reforms to simplify access to the DGR, are a significant development. Predictably DGR issues attracted many comments in the report. It is estimated that with DGR simplification reforms, the number of charities gaining DGR status would increase from about 25,000 to 30,00–40,000 charities, and some participants raised concerns about the increased competition. For example, “the Sydney Children’s Hospitals Foundation (sub. DR457, p. 4) was concerned that a proliferation of small charities with overlapping objectives would increase inefficiency and lessen the ‘impact of charitable donations’.”
The report confirms that DGR status continues to be a key point of reform, so, as we noted in our recent article, charities should prepare themselves for ongoing DGR requirements.
Volunteering
Finding 3.2 highlights that while volunteering remains prevalent in Australia, the formal volunteering rate has declined. In 2022, around 6 million Australians volunteered for organisations, but nearly double that number engaged in informal volunteering—helping individuals outside their families and beyond the structure of formal organisations or groups.
The report observes that broader social, economic, and demographic shifts have influenced volunteering participation. Increases in real wages and workforce participation over recent decades have raised the opportunity cost of volunteering. People are staying in the workforce longer, and there has been a rise in female labour force participation.
The report suggests policy options to enhance volunteering, such as simplifying the process through behavioural economic strategies. This might involve technology that more efficiently connects potential volunteers with opportunities.
Regarding government tax incentives for volunteering, the Commission believes that targeted government grants addressing specific needs would likely offer greater net benefits to the community than tax incentives, provided they are well-targeted and evaluated.
Recommendation 7.7 advises considering the impact on volunteers when designing policies and programs, including addressing any negative effects on volunteer participation and exploring volunteer opportunities within policy or program development.
Recommendation 9.4 calls for the Australian Bureau of Statistics (ABS) to enhance the relevance and utility of public information sources related to volunteering.
National regulation of charities
Recommendation 7.5 proposes the creation of a National Charity Regulators Forum, which would include regulators from Australian states and territories. This Forum would represent a move towards a “joint stewardship” model for charity regulation. Its terms of reference would be defined in an intergovernmental agreement.
The Forum’s objectives would be to clarify roles and responsibilities, enhance collaboration and information sharing, advance reforms in charity law and regulation, manage regulatory risks, and coordinate responses to significant misconduct.
The report also suggests reforms to strengthen the Australian Charities and Not-for-Profits Commission (ACNC). It emphasises that these reforms are more likely to succeed if the ACNC is equipped and resourced to take a more assertive regulatory stance while continuing to support charities through education and guidance.
Keeping pace with changes in giving
The Commission recognises that the “philanthropic and volunteering landscape” is continually evolving. Donors now have a wider range of choices and are influenced by new transaction technologies in their giving habits. Innovations like QR codes and peer-to-peer giving platforms are emerging as popular methods.
The report raises concerns about whether the current system is adequately prepared to address the challenges posed by these new online giving trends. It highlights that the rise of online giving platforms could introduce new regulatory risks, which must be proactively monitored to sustain trust and confidence.
Reporting and publishing evaluations
The Commission addressed the issue of reporting and publishing evaluations, noting that while there are benefits to governments publishing effectiveness evaluations, these do not outweigh the associated costs and risks. Significant risks include the potential for biasing donors towards certain types of interventions that are easier to measure and towards charities that can afford evaluations. Additionally, there is a risk that such information could lead charities to alter their activities to appear more successful based on specific metrics rather than focusing on the needs of their beneficiaries (Finding 9.1).
The Commission also highlighted voluntary initiatives to support not-for-profit (NFP) organisations in measuring and reporting outcomes and impact, such as Chartered Accountants Australia and New Zealand’s ‘Measuring Social Impact for Better Reporting’ guidance (CA ANZ 2023). These initiatives offer valuable resources to enhance performance reporting without imposing the costs of mandatory reporting requirements on all organisations.
The Inquiry Report and the Overview can be accessed here.
If you would like to discuss any of the issues raised in this article, get in touch with our team today.
