The Global Philanthropy Environment Index – Getting Australia into the Top Tier

Krystian Seibert outlines his ambition for Australia to reach the top tier when it comes to the philanthropy environment.

As reported by Pro Bono News, the Indiana University Lilly Family School of Philanthropy recently released the 2018 Global Philanthropy Environment Index.

The index assesses the environment for philanthropy across the globe, comparing how countries stack up against each other and identifying some overarching trends.

Each country is given a rank from one to five (the higher the better) in five categories, which averages out into an overall score.

Australia does quite well, scoring 4.17 overall and getting 4 or above in every category.

However we don’t place in the top tier of counties, which includes the United States alongside six European countries.

I’m ambitious for Australia – I want our environment for philanthropy to place us in the top tier! So here are some suggestions for how we can get there.

Reform our deductible gift recipient framework

I’ve said it before, and I’ll say it again, our DGR framework is in need of comprehensive reform.

It’s a factor which drags down Australia’s score when it comes to tax incentives.

The framework has developed in an ad hoc manner, with bits added on here and there over time. Only around half of all registered charities are eligible for DGR status, and some of the boundaries are very arbitrary.

If you’re a charity trying to prevent a disease in children – you can get DGR status. But if you’re trying to prevent injuries in children – you’ll miss out.

So what’s the solution?

In 2013, the Not-for-profit Sector Tax Concession Working Group recommended expanding DGR status to all charities. It recommended limits on the activities DGR funds can be used for in order to keep the reform affordable. For example, charities whose purposes are the advancement of religion, or education through child care or primary and secondary education, would only be able to apply DGR funds towards activities falling within other charitable purposes.

If we want to really improve the environment for philanthropy in Australia, we need to implement that recommendation.

#FixFundraising

The index highlights the problems with Australia’s inconsistent and complex approach to regulating fundraising.

It’s a factor which impacts Australia’s score when it comes to ease of operating.

Charities have been raising the issue for many years, and back in 2010 the Productivity Commission recommended reforms to harmonise fundraising regulation as well as clarify how it applies to new forms of online fundraising.

But like with DGR reform, we’re still waiting for action.

In 2016, the #FixFundraising coalition was formed, calling on fundraising to be regulated consistently across Australia under the Australian Consumer Law. Disappointingly, so far most of Australia’s governments have been reluctant to sign up to this sensible reform.

However, the current Review of the Australian Charities and Not-for-profits Commission Legislation has provided another opportunity to raise this issue – and Justice Connect has made a submission proposing that a “mandatory industry code” under the Competition and Consumer Act 2010 provides a way to deliver a consistent approach to fundraising regulation.

This approach has been endorsed by the Governance Institute of Australia, Philanthropy Australia, the Community Council of Australia and the Public Fundraising Regulatory Association.

Hopefully the review’s report may be a catalyst for government action.

Make international giving even easier

When it comes donating across borders, Australia’s ranking has improved since the previous index was compiled.

Back in 2015, Australia scored 3.8, but this year this has increased to 4.5.

This will largely be due to the relaxation of the “In Australia” requirements for charities. A combination of factors has led to this change.

In the 2014 case of Commissioner of Taxation v Hunger Project Australia, the full Federal Court held that public benevolent institutions 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. Previously, the ATO maintained that charities with DGR status had to be established and operated solely in Australia (with some exceptions) – but the ATO changed its view and issued guidance to that effect.

Most recently, the government confirmed in December that legislation to tighten these requirements is off the table.

So how could we improve things even more?

The requirements imposed on charities are still a little bit fuzzy. We have an odd situation where most charities with DGR status can operate quite freely beyond Australia’s borders, but charities which only have an income tax exemption must still spend 51 per cent of their funds in Australia. This needs to be fixed, with the requirements for charities with DGR status applying to all charities.

Also, public and private ancillary funds are currently restricted to giving to charities with DGR status, which means that they can’t make grants directly to organisations overseas.

One way to address this would be to allow public and private ancillary funds to give directly to organisations overseas, provided that they can attest that the organisations they give to would be eligible for DGR status were they in Australia. This is similar to the so-called “equivalency determination” option available to foundations in the United States.

These are three concrete steps which would improve the environment for philanthropy here – but there are also other things we could do.

We lack incentives for testamentary giving, and a variation of the charitable remainder trust structure that’s available in the United States could assist in that regard. And a national giving campaign could help grow the socio-cultural environment for giving in Australia.

Ultimately, it’s not the score we get in the next edition of the index that matters so much – but rather the fact that if we improve the environment for philanthropy in Australia, it will be the broader community which will benefit.

About the author: Krystian Seibert is an industry fellow at the Centre for Social Impact at Swinburne University of Technology and has a strategic advisory role with Philanthropy Australia.