OPINION: The Productivity Commission applied its characteristic neo-liberal economic thinking to reform of the philanthropy sector, which is why the inquiry’s final report Future Foundations for Giving passed on ambitious proposals to double giving. Instead the Commission served up the usual fare of market-based reform and deregulation, which it admits will have only a modest impact on overall giving.

The final report did retain the much-needed overhaul of the complex and poorly designed DGR system. Key changes from the draft report included:

• a 5 year DGR transition period for school building funds and religious and ethics education in government schools which would lose DGR eligibility
• a higher minimum distribution rate for PAFs and PuAFs of 5-8% so the benefit of tax deductible donations flows to the community more quickly
• another inquiry to simplify and harmonise fragmented fundraising regulations
• a new body to strengthen relationships between indigenous groups and the philanthropic sector while ensuring cultural safety

“The system that determines which charities can receive tax-deductible donations has grown in an ad hoc way over decades and has no coherent policy rationale. The complexity and inconsistency of the system sees many charities that create clear community benefits miss out,” said Deputy Chair Dr Alex Robson.

Charities that work to prevent poverty, animal welfare charities, and charities that work across DGR categories in support of groups like women, young people and Aboriginal and Torres Strait Islander people are just some of the groups facing barriers to inclusion in the current system.

The Commission found DGR status for school building funds created a “material risk” that donations substitute school fees and create private benefits. In other words, wealthy parents of children at elite schools are getting a nice taxpayer subsidy. It also stuck to its guns on refusing DGR status for religious and ethics education in government schools.

Charities Minister Andrew Leigh immediately ducked a political fight with the private school and (a bit later) the religious education lobby.

“Our view is that school building funds generally (benefit the wider community), often providing additional assets which will outlast a particular child’s time at a school,” Leigh told Canberra’s 2CC

DGR reform, if implemented, will increase choice for donors with up to 15,000 additional charities eligible to receive tax deductible donations. But the impact on overall giving will be to move funds around.

“We’re very open to the Productivity Commission suggestions about how we bring more organisations into that deductible gift recipient status and allow more philanthropy,” said Leigh, hopefully.

Philanthropy Australia had called for government to foster a culture of giving that would match the Albanese government’s own self-declared ambition to double giving by 2030. It included:

• reform to simplify the giving of bequests from Superannuation funds
• a voluntary choice to donate as part of the annual tax return process
• a strategy to grow Australia’s community foundations
• a National Giving Campaign to raise community awareness
• collaboration with government and business to increase giving

It’s no surprise that the Commission believes government’s role is primarily taxes and regulation. Its modelling showed tax incentives do increase giving, however it found no compelling benefit-cost case for change. And it says the philanthropic sector itself can collaborate to influence the culture of giving.

Superannuation funds are maintained solely for the provision of retirement benefits or death benefits. So while simplifying the process for making a bequest to charity is a good idea, the Commission says it should be part of wider reforms to the binding death nomination process. It also dismissed any further superannuation tax concessions for bequests.

Chief Executive Officer of Philanthropy Australia, Maree Sidey responded by pledging to work with the not-for-profit sector to help shape the policy choices made by government. But for a government with a backlog of legislation and a federal election on the horizon, its ‘double-giving’ ambition looks like a Norwegian Blue kippin’ on its back.