Government Right to Dump ‘In Australia’ Legislation

The decision not to proceed with the so-called In Australia legislation supports international giving whilst maintaining appropriate safeguards, writes Krystian Seibert, the advocacy and insight manager at Philanthropy Australia.

December has been a busy month for Australian charities, and the week of 4 December saw a number of big announcements including deductible gift recipient (DGR) framework reform, legislation to ban foreign donations and a new ACNC commissioner.

Amidst all this activity, you may have missed a very positive decision announced as part of the DGR framework reform package – that the Australian government will not proceed with the so-called In Australia legislation. The controversial proposal has been around for a long time, having first been put forward by the Rudd Government as part of the 2009-10 Budget, but was yet to be legislated.

This is a very welcome outcome, and one which Philanthropy Australia has been advocating for since 2015.

In the past, Australia has placed many barriers in the way of international giving.

In a 2015 assessment of cross-border giving frameworks, the Index of Philanthropic Freedom placed Australia’s framework behind those of Georgia, Serbia and the Philippines. The Netherlands, the United States and Sweden led the pack.

These barriers previously included a strict In Australia requirement for DGRs such as public benevolent institutions (PBIs). This required DGRs to be established and operated in Australia, and have their purposes and beneficiaries in Australia. There were some exceptions, such as overseas aid funds, but in general it meant that most DGRs could only spend their funds within Australia.

This made things very difficult for charities and donors wanting to make a difference beyond our borders.

Various developments in the last three years made things easier. In the 2014 case of Commissioner of Taxation v Hunger Project Australia, the full Federal Court held that PBIs don’t need to directly provide relief themselves in order to be DGRs, as long as there is a sufficient link with other organisations which are providing the relief.

This helped prompt a re-think of the so called In Australia requirement by the Australian Taxation Office (ATO). The ATO changed its position and released some helpful guidance to clarify that DGRs no longer had to have their purposes and beneficiaries in Australia. This meant that these DGRs could send operate more freely and send funds to partners and project overseas much more easily.

Here are two examples of the impact of this change:

The Against Malaria Foundation

A few years ago, the Against Malaria Foundation set up an Australian based arm of the organisation, and sought to obtain DGR status through the Overseas Aid Gift Deduction Scheme (OAGDS) administered by the Department of Foreign Affairs and Trade – the approach most overseas aid funds use to obtain DGR status.

The Australian based arm of the organisation would have fundraised for the foundation’s activities around the world, so all or most of its funds would have been sent overseas, and therefore the complex and cumbersome OAGDS scheme was the only option available to the foundation at that time.

However, it’s application for DGR status was knocked back – meaning that Australian donors were unable to obtain a tax deduction for donating to a charity which international website GiveWell assessed as one of its top rated charities. This was a very poor reflection on our framework for supporting international giving.

Because of the more recent changes outlined above, the foundation was able to obtain DGR status for the Australian arm of the organisation as a PBI.

Partners for Equity

Private (PAF) and public (PuAF) ancillary funds are not able to directly distribute any funds overseas, but must grant them to a DGR. In the past, the only option for these funds is to give through other DGRs approved under the OAGDS. This created duplication and added costs.

Because of the changes outlined above, an organisation called Partners for Equity has been established as a PBI by a group of philanthropists in Australia, through which distributions from PAFs are directed towards overseas projects. This has made it much easier for them to undertake their philanthropy, reducing the red tape that previously made the giving process more complex and costly.

These are just two examples, however there are many other organisations following the same path of the Against Malaria Foundation in particular, making it easier for Australians to give to innovative and impactful charities operating overseas.

The so-called In Australia legislation, which until the recent announcement was still government policy, would have placed all of this at risk. It would have turned back the clock and reinstated the previously restrictive requirement that DGRs must have their purposes and beneficiaries in Australia and can only spend their funds within Australia.

It would have cut organisations such as the Against Malaria Foundation and Partners for Equity off at the knees. Donors would have had much less choice, and would have again faced barriers to making a difference beyond our borders. That’s why it’s such good news that the In Australia legislation will not be proceeded with.

Instead of progressing the In Australia legislation, the government will develop External Conduct Standards under the Australian Charities and Not-for-profits Commission Act 2012 (Cth), which will provide for safeguards around charities’ international activities and the flow of funds overseas.

Given some of the increased risks associated with sending funds overseas, this is a sensible way forward, and follows a recommendation in the Australia’s and NPO sector risk assessment report released by the ACNC and AUSTRAC earlier this year.

Given Philanthropy Australia’s advocacy on this issue over many years, we greatly appreciate that the Minister for Revenue and Financial Services, Kelly O’Dwyer, has listened to stakeholders on this issue and made a decision which supports international giving from Australia whilst maintaining appropriate safeguards.

It is our hope that it will lead to even more examples of the kind of innovation discussed in the examples above, so donors have more choice and flexibility, and can more easily make a difference beyond our borders.

About the author: Krystian Seibert is the advocacy and insight manager at Philanthropy Australia.