Charity Tax System Needs Overhaul

Australia’s charity tax system is overly complicated and difficult to explain and defend, according to the Assistant Commissioner of the national charity regulator.

David Locke from the Australian Charities and Not-for-profits Commission (ACNC) told an audience in Canberra this week that despite spending four years working in charity regulation in Australia, he still struggled to understand the basis for how the charity tax system was arranged.

Speaking at the Philanthropy Meets Parliament summit, Locke, who helped set up the ACNC after being the Executive Director of Charity Services at the Charity Commission of England and Wales, said that 22,500 registered charities, around 37 per cent of all registered charities, had Deductible Gift Recipient (DGR) status in Australia.

Some charities are known to spend years waiting for their DGR status to be approved.

Locke said charities had to navigate an “incredibly complex” tax system in Australia and that other countries had developed simpler ways of doing things.

“Certainly I think it’s fair to say that when I came from the UK in 2012 and was starting to get my head around the tax concessions that are given in Australia to try and generate and encourage philanthropic giving, I was somewhat confused by how we’ve got to the situation we have at the moment,” Locke said.

“I don’t think any rational person given a clean sheet of paper would actually develop a system of tax deductibility that we actually have at the moment.

“Clearly it’s been developed over a long period of time for a whole variety of reasons and there’s been different policy changes with different governments, but we actually have 50 classifications here. It’s incredibly complex.”

Locke said the ACNC received 64 new charity applications per week, with many of them registering because they wanted to get DGR status.

“Trying to explain this to members of the public, often volunteer boards, about what’s involved, why certain organisations may qualify and why others don’t, is quite a challenging task,” he said.

“I still struggle frankly, four years on to understand the basis for some of the arrangements. I think far be it for me to advise or to recommend the Government with the regards to tax policy, but I do think there’s got to be a clearer way, there’s got to be a way of actually getting a system that promotes philanthropic giving, that is simpler and more coherent than probably what we have at the moment.”

Locke said research had previously suggested broadening out the classification or organisations that could be entitled to DGR status.

The audience clearly agreed with Locke’s sentiments as he received a round of applause when he suggested that the government look at making the system simpler.

“[To] have a system that's as complicated as we have at the moment, particularly with the additional registers and the requirements that go with that, is very difficult I think to justify,” he said.

“I do think those things are probably matters that the Government will look at in the future but I do think to put yourself in the perspective where we are where we’re actually getting 40,000 calls a year, 32,000 letters and emails and we’re talking to lots of small organisations, lots of people on the ground, trying to explain the current system, trying to defend the current system is very hard to do so.”