Look how far we’ve come: Philanthropy

“[We] are now starting to really celebrate and acknowledge the importance of private philanthropy. It is a democratic asset… It’s been a game changer.”

The past two decades have seen a massive shift in who gives and how. While everyday Aussies are giving less, there is now a growing cohort of the nation’s wealthiest rolling up their sleeves, stepping out of the shadows and into the limelight. Philanthropy has increasingly become the domain of mega-donors, private ancillary funds and corporate giving. 

This has fed concerns about elite philanthropy and its potential to entrench inequality in some areas. Yet demands on the sector to solve some of our most complex problems have never been greater. Faced with the fallout of COVID-19, it is philanthropy that may prove a saviour for many not for profits, but overall giving levels are set to drop back to where they were a decade ago.

As Pro Bono Australia celebrates its 20th birthday we reflect on some of the key moments that have shaped philanthropy since 2000.

That was then

April 2000. NSYNC is top of the Aria charts, the nation is gearing up to host the Olympics, and Philanthropy Australia delivers the sector’s very first technology conference, “Putting the dot in philanthropy”. The keynote focuses on how the sector can understand and make best use of the “World Wide Web”. Facebook is yet to be invented.

Giving is dominated by the general public. But admittedly we don’t have much in the way of data to tell us who is giving, or through what means. Plus, all the states work separately so there is no sense of a collective movement. A pioneer of the not-for-profit sector, Mark Lyons, says one of the distinguishing features of Australian philanthropy is its secretiveness. But change is coming.

Two important financial wins prepare the ground for change.

Despite initial sector concerns about the introduction in mid-2000 of the goods and services tax (GST), Philanthropy Australia gets a win in the shape of a private ruling from the Australian Tax Office exempting members’ grants from GST.

The government also decides to allow excess imputation (or franking) credits to be refunded to registered charities and tax deductible organisations, making millions more dollars available each year for disbursement by foundations.

Meanwhile, over in the US, the faces of Bill Gates, Lily Kanter, Steve Case, Martha Ingram, Pierre Omidyar and Paul Allen smile out from the cover of Time Magazine above the words “The New Philanthropists”. Bill and Melinda Gates have just formed a foundation. These are the multimillionaires of the tech boom who are now giving something back. They are hands-on and they want results. Soon their Australian equivalents will be reshaping the landscape at home.

This is now

For a long time, there was just a smattering of stars in Australian philanthropy, the brightest among them The Ian Potter Foundation and the Myer Foundation. But in recent years, there has been an influx of new players (think Ramsay, Forrest, Minderoo and Stan Perron) that is changing the top end of giving. We are starting to look more like the US in terms of having mega donors – and mega foundations.

Today, foundations are the main vehicles for philanthropy in modern Australia. And most notable are the private ancillary funds (PAFs) – a form of charitable trust that can be used for strategic long-term giving, and that offers donors tax deductibility, exemptions from income tax and an absence of public fundraising requirements (unlike public ancillary funds). More on how PAFs have transformed Australian philanthropy below. But their rise reflects the bigger picture of giving in Australia, in which small numbers of wealthy Australians give more – much more – while everyday donors drop away.

Corporate philanthropy is also thriving. In 2015-16 businesses gave $17.5 billion in community partnerships, donations and non-commercial sponsorships. JBWere’s Support Report estimated that one-third of support for not for profits comes from corporates.

What do we know about these new philanthropists? We know they want more control over how their dollars are spent. This new generation is more professional and more demanding, with donors seeking a closer relationship with those they are giving to – less transactional and more focused on outcomes. 

We know that technology has changed how philanthropists give – how they access and share information, how they communicate with grantees and partners, and how they measure their work.

And we know who they are and how much they give. Since the formation of the Australian Charities and Not-for-profits Commission in December 2012, we have had access to financial data from charities, including on giving. We have also had two government-funded Giving Australia surveys, one in 2005, the other in 2016. 

See also our timeline of key events of the philanthropy sector from 2000 to now

John McLeod, co-founder of JBWere Philanthropic Services, credits this new transparency with enabling the Australian Financial Review to launch its Philanthropy 50 list in 2017. This in turn has sparked discussion and normalised giving among the wealthiest. McLeod, who compiled the list, now hopes the AFR’s top 50 corporate givers list launched in December last year, will be able to do the same thing for corporate giving.

Meanwhile, in the face of this growing concentration and corporatisation of Australian giving, efforts are underway to make philanthropy more accessible and democratic. Peer-to-peer giving models have reduced dependence on traditional institutions. Giving circles – where everyone has an equal say in deciding how contributions are donated – and crowdfunding have helped to open up philanthropy to people from all walks of life. 

Recent research suggests that collective giving has the potential to substantially increase philanthropy and build stronger communities in Australia. But while new models have given donors more ways to give, they have not necessarily encouraged more people to give.

Challenges

So, back to that decline in mass market giving. When it comes to the general public, a smaller proportion of Australians are giving now than 10 years ago. ATO data from 2016-17 shows just 4.52 million Australian taxpayers (33 per cent) claimed a donation to charity, compared with 4.62 million a year before. 

This suggests that donating to traditional charities may have peaked. With everyone chasing the same dollar, the cost of fundraising is increasing – donors become more precious, charities must work harder and spend more money to attract and keep them.

And some stand to lose more than others. The mass market gives to very different causes, for example religion and international aid, compared with the biggest private and corporate givers, which favour universities, medical research and the arts. The implication is that if you are fundraising for an international aid organisation, it is time to start looking elsewhere. 

The other big challenge for the sector has been the growing critique of big philanthropy, and the question of how philanthropy should be viewed in the wider context of global inequality. Critics such as Anand Giridharadas and Rob Reich argue that giving by wealthy elites is undemocratic, on the basis that if the wealthiest people control the vast majority of philanthropic wealth, they can set the social impact agenda in yet another way.

The rise of the mega donor also raises questions as to how that money is made in the first place – with a growing consensus that some donations are “tainted” (consider the controversy surrounding giving by the Sackler family or MIT’s handling of contributions from Jeffrey Epstein).

Others wonder whether philanthropists would be helping more by paying their taxes.

Achievements

The introduction of PAFs in 2001 has reshaped philanthropy in Australia. 

Formerly known as Prescribed Private Funds (PPFs), PAFs started life under the Howard government as part of a move to boost philanthropy in Australia. Today there are close to 1,800 PAFs. In 2015-16, they held $8.3 billion in assets and made grants of just under $457 million. Philanthropy Australia CEO Sarah Davies says the outcome has been “one of the all-time great gets for the country.”

What’s next?

COVID-19 has upended the sector. Figures over the past couple of years had shown philanthropy growing at about 5.4 per cent each year. Based on the growth in PAFs, corporate giving and bequests, this was expected to rise another 1 per cent or so in the next 20 years, offsetting what was expected to be a continuing contraction in mass market giving. But the COVID-19 crisis and downturn in the economy have changed all that. 

A sobering report from JBWere suggests that total giving in Australia could drop nearly 20 per cent by the end of 2021, down to 2012 levels. The report notes that, as with the fallout of the GFC, the growth in the number of new PAFs is also likely to slow.

But all is not doom and gloom. The crisis has brought wonderful examples of philanthropists stepping up, and served as a reminder of what philanthropy at its best can do and the important place it holds in society.

We are also on the cusp of the biggest transfer of wealth we have ever seen. All signs point to the new cohort of Gen X and millennial donors becoming the most significant philanthropists in history. Some are calling it a new “Golden Age of Giving”.

Given this, we can expect questions around the crossover of power and wealth to continue well into the next 20 years.

This article is part of a series looking at how far the social sector has come since 2000.

Read our introduction to the series: Look how far we’ve come.

See the full series here: 20 years of social change