Back to the future – philanthropy helps to feed Australians

Grassroots charities rely on consistent grants through charitable foundations, structured giving and bequests – with philanthropy looking to focus on “whole society” issues, it is up to “middle Australia” to support these charities, writes Emma Sakellaris.

The sudden and destructive economic shock associated with the COVID-19 global pandemic is beyond comprehension and will continue to impact us all for many years to come. It is however the most vulnerable members of our community who will feel its reverberations long after many of us.

A key impact currently evident is the devastating struggle many Australians are now experiencing with regard to feeding their families each day – it is heart-breaking to know that some families were not able to school their children from home having been forced to make the decision between internet connections and purchasing food.

Prior to the pandemic, philanthropy was undertaking a global evolution towards social innovation – delivering value to society as a whole rather than a limited cohort of individuals. Emphasis transitioned to sustainability and social benefit, with substantial donors contributing directly to the delivery of impactful community and global projects. 

Throughout the pandemic, many high-net-worth individuals have continued to focus their wealth to solve “whole society” issues and establish multi-generational legacies, including the Bill and Melinda Gates Foundation, which committed more than $300 million to the global COVID-19 response. 

Many grassroots charities have been hit hard as a result of this shift and continue to be reliant on consistent grants through charitable foundations, structured giving and bequests. However, again reflecting the scope of the current economic crisis, the pool of donors able to provide funds to charitable organisations has significantly shrunk and will most probably shift further over the year ahead.  

Whilst the donor pool has effectively shrunk in Australia, the number of individuals and families now desperately needing support to feed their families and pay basic bills has increased exponentially and will continue to increase over the year ahead.

While philanthropy was never the exclusive domain of the extremely wealthy, now, more than ever, the contribution from middle-Australian donors will be critical to the ongoing operation of charities. Many individuals who are part of “middle Australia” and have retained their wealth during this period may wish to give back during this critical period. Large, or small, every contribution makes an impact, but it is regular, recurring giving that provides most benefit.

Two of the most strategic structures that can be set up to support vulnerable families and individuals in the long-term are charitable trusts and private ancillary funds.

Charitable trusts 

Established with an initial donation of $20,000 to an existing public foundation (known as a public ancillary fund), the donation is tax deductible and can be spread across five years. All future donations are also tax deductible. Through this option, gift givers can “dip their toe” in the water of charitable giving and create a formal, structured process of giving while maintaining capital within the trust to continue into perpetuity. 

Private ancillary funds 

Private ancillary funds can be established by families or individuals with an initial donation of $200,000. With tax deductions from the initial donation able to be spread across five years, this option is often utilised by individuals or families who have recently sold a business and are wishing to minimise the tax that is payable following that transaction, as well as seed their philanthropic legacy. 

Unlike ad hoc donations or even recurring donations, charitable trusts are designed to grow capital over time, whilst generating sustainable income for granting. The donor, family and friends can all donate to the trust, and claim the tax deduction, which will further grow the capital and therefore further grow the income generated for distribution to eligible charities.

All charities depend on donations and are very appreciative of them. However, it is regular, recurring giving that provides the most benefit.