Philanthropists Urge Changes to International Giving

National peak body Philanthropy Australia has written to Prime Minister Tony Abbott ­calling for a better tax regime to support international philanthropy.

The letter, signed by some of the country’s leading philanthropists, claims Australia’s regulatory and taxation framework for international giving “imposes some of the highest barriers to international philanthropy in the world”.

“This framework represents a form of red tape that results in fewer funds being available to support important charitable causes in countries within our region and beyond, and means that Australian philanthropy is less able to support the achievement of Australia’s foreign policy objectives,’’ the letter said.

The letter is signed by the Chair of Philanthropy Australia Alan Schwartz along with leading philanthropists including Allan English and Maureen and Tony Wheeler.

The letter points out that currently, "income-tax exempt" trusts and foundations are required to pursue their objectives and incur their expenditure principally in Australia.

“In practice, this means that a majority of their grant-making must be within Australia, which is problematic if a trust or foundation wishes to focus their efforts on international philanthropy," the letter said.

“In the case of trusts and foundations with ‘deductible gift recipient’ status, such as Private or Public Ancillary Funds, the restrictions are even more problematic. These must be established and operated only within Australia.

“In practice, this means that the only way in which a Private or Public Ancillary Fund can support charitable causes overseas is by distributing to another organisation in Australia which operates an approved overseas aid fund.

“Using such an arrangement involves paying a fee, in the range of 7-10 per cent of the amount distributed, to the organisation operating the approved overseas aid fund. Therefore, this red tape results in less funds being available to support charitable causes.”

A recent report by the Council on Foundations in the US into the legal framework for global philanthropy cited Australia as an example of one that is particularly restrictive.

In addition, the letter said philanthropists were concerned with proposed legislation which will seek to “restate and centralise the special conditions for tax concession entities” by:

• "re-stating" the "in Australia" special conditions for income tax exempt entities, ensuring that they generally must be operated principally in Australia and for the broad benefit of the Australian community (with some exceptions), and
• "codifying" the "in Australia" special conditions for deductible gift recipients ensuring that they must generally operate solely in Australia, and pursue their purposes solely in Australia (with some exceptions, such as overseas aid funds, some environmental organisations, some touring arts organisations and medical research institutes).

“We believe this proposed legislation would affirm Australia’s unduly restrictive and inflexible regulatory and taxation framework for international philanthropy, and further inhibit the wider contribution that Australian philanthropy could make beyond our borders. It would also impose new and additional red tape burdens on philanthropic entities and other charities,” the letter said. 

“We therefore ask that the Australian Government explore ways to implement an enhanced framework for international philanthropy. This framework should provide certainty and support rather than inhibit the contribution which Australian philanthropy can make beyond our borders, whilst maintaining appropriate safeguards to ensure funds distributed overseas are used for the charitable purposes for which they are intended.

“As the national peak body representing trusts and foundations, businesses, families and individuals who want to make a difference through their philanthropy, Philanthropy Australia would welcome the opportunity to engage as part of such a process.”