The Productivity Commission conducted an inquiry into the deductible gift recipient (DGR) system and published a final report (‘Future Foundations for Giving’) on July 18, 2024
The report recognises philanthropy in Australia is influenced by rising income and wealth. It recognises the Government has incentivised giving by allowing tax-deductible donations, which is particularly effective for higher-income individuals.
However the report highlights that the current DGR system is complex and lacks coherent policy rationale.
The report recommends reforms for fairness and consistency through:
- Regulatory improvements, including transparency and consistency in charity regulation
- Strengthening the enforcement powers of the Australian Charities and Not-for-profits Commission by conducting review of charities law and improving clarity in the regulatory architecture
- Better coordination among regulators
- Improving the effectiveness and performance of ancillary funds by enhancing public information on charities and introducing better disclosure and reporting of corporate giving
- Increasing participation in giving, especially through Indigenous Philanthropy Connections
The recommended changes (if implemented) are expected to increase tax-deductible charities from 25,000 to 30,000-40,000.
Given the significance of the DGR system to the TaxEd membership we have summarised the findings of report below and the full report can be viewed at here.
Ultimately though, and as with many Productivity Commission reports, it will be up to the willingness of the Government to implement the recommended changes that is now called into question.
The summary of findings (by report chapter) are reproduced below:
Philanthropy in Australia
- Rising income and wealth are the major reasons behind rising tax-deductible donations
- Volunteering is widespread in Australia, but the formal volunteering rate has declined
- People give or do not give for a range of personal reasons
How governments can incentivise giving
- People respond to incentives, with those on a higher income more likely to give
- A personal income tax deduction is likely to be an effective way to encourage giving
An assessment of the deductible gift recipient system
- The deductible gift recipient (DGR) system is poorly designed, overly complex and has no coherent policy rationale
Reforming the deductible gift recipient system
- A simpler, refocused deductible gift recipient (DGR) system that creates fairer and more consistent outcomes for donors, charities and the community
- Supporting reforms to improve the deductible gift recipient (DGR) system
- Transition arrangements to support reform of the deductible gift recipient (DGR) system
A sound regulatory framework
- A more transparent and consistent approach to regulating charities
- Strengthening the Australian Charities and Not-for-profits Commission
- Review of charities law by the Australian Law Reform Commission
- Increasing certainty about Australian Charities and Not-for-profits Commission regulation
- Regulatory architecture to improve coordination and information sharing among regulators
- Review of nationally consistent fundraising regulation reforms
- Explicitly consider the effects on volunteers when designing policies and programs
Structured giving vehicles
- Improving the effectiveness and performance of ancillary funds for the whole community
- Enabling distributions of funds to be smoothed over three years
- Improving public information on ancillary funds
Public information about charities and giving
- Administrative expenses are not an accurate reflection of the performance of a charity
- Enhance information published by the Australian Charities and Not-for-profits Commission
- Introduce enhanced disclosure and reporting of corporate giving
- Introduce enhanced disclosure and reporting of corporate giving
- Improve data on charitable bequests
- Improve the usefulness of public information sources on volunteering
Increasing participation in giving
- Establish Indigenous Philanthropy Connections
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This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.
