Not-for-profit Stewardship Group key messages 22 July 2021

Blueprint to Grow Structured Giving – Philanthropy Australia

A Blueprint to Grow Structured Giving – Philanthropy AustraliaExternal Link was launched at the Philanthropy Australia National Conference on 21 April 2021.

The Blueprint builds on the practice of generosity and altruism in Australia, a feature of First Nations culture stretching back thousands of years. It sets out a roadmap for growing structured giving in Australia, specifically large scale planned giving and mass market giving. The aim of the Blueprint is to support growth of giving, a love of humanity and community – it is framed around the joy of giving.

Data shows the following trends in giving:

• The dollar amount of giving is increasing while the number of people giving is reducing. This is also evident in the higher income brackets.
• COVID-19 has impacted giving.
• Overall corporate philanthropy is on the rise, with reports of anecdotal growth.

Regulatory frameworks and policy settings are vital in supporting giving. Culture, norms, practices and policy all impact giving.

The aspiration is to double the level of structured giving by 2030, for example, increase corporate giving from $2.5 billion to $5 billion.

Extensive consultation with the philanthropic sector was undertaken in the development of the Blueprint. Research and consultation highlighted that, to affect increased giving in the ultra-high wealth individual segment, there may be a need for:

• shifts in culture and norms
• policy change
• strategies aimed to protect, enhance and target.

To progress the Blueprint, we need to consider enablers and initiatives including:

• capturing part of excess superannuation at time of death
• reviewing barriers for individuals giving their superannuation to charities.

Some initiatives are ready to go but require advocacy and lobbying with partners, while other initiatives need more work for co-design and production.

For the next stage of the Blueprint, Philanthropy Australia is looking for behavioural insights to determine the type of connections and relationships that will drive giving for different markets. There is a need for a diverse approach to engage Private Ancillary Funds, as one size does not fit all.

Members' comments

Members noted that this is a great report and made the following observations:

• Intergenerational wealth transfer has been flagged previously, however the inhibitors were not clear. This may be due to a lack of conversations or because it is not a key priority.
• The data shows a low rate of giving.
  • There is a need for a range of different options, such as advisers talking to clients about giving when drafting a will or running a national giving program.
  • Previous campaigns have been run through media, like the 'Life be in it campaign' which focused on giving.
  • There is the option of using binding nomination forms to add charities as beneficiaries, however death nominations are hard because of the current intersection of laws.
  • There is a lack of awareness, and financial planning associations can work on educating their members. A change to superannuation law could be considered by government.
  • Across the board, from large to small charities, people give because of a relationship or connection to a charity. It is rare to find an individual giving to a charity that they have no connection with, even for high net-worth individuals. Generally, giving is based on passion or an existing social connectedness.
   
• Philanthropy Australia is looking at incentivisation. They will be working with others to refine initiatives outlined in the Blueprint.
• Community and connectedness have significant impact on giving. Data out of the USA indicates that peer-to-peer relationships have the greatest influence, particularly in wealthy circles. The way a person gives has a compelling impact on those they talk with.
• As regulators, the ATO can influence behaviour by instilling trust and confidence in the sector. The role of the ATO and The Australian Charities and Not-for-profits Commission (ACNC) is important to ensure the system works well, and there is a high level of confidence in charities.
• While the Blueprint is focused on more giving, it is also about better giving – exploring what we do now, could be doing better, and the way not-for-profits (NFPs) may be supported, particularly with administrative costs.

Gifts and donations – exploring opportunities to prefill individual tax returns

The ATO is exploring what type of data might be available, including data held by Deductible Gift Recipients (DGRs) to make it easier for taxpayers to complete their returns. Some of the known issues include:

• Six out of 10 taxpayers claiming a deduction for a donation make a mistake.
• Prefilled data eliminates errors and streamlines the preparation of tax returns.
• The use of prefilling ensures clients are getting all the deductions they are entitled to.
• Reviews have shown there is a higher error rate in claiming a lower value tax deduction.

We would like to explore the practicality of prefilling with NFPs, and work together to understand if there are any opportunities to simplify or make it easier for clients to claim deductions correctly. We are looking to:

• establish a small working group to explore the collection of data from DGRs
• seek support from the NFP Stewardship Group to gain a better understanding of NFPs' operating environment
• explore opportunities in the individual tax system to influence giving behaviour.

This work will progress under the current administrative constraints and framework. Any law reform, if identified and appropriate, would be captured and progressed separately. The intent is to understand the barriers and operating environment unique to NFPs and related issues.

All members are invited to provide feedback and participate in an out-of-session systems-led design discussion.

Members' comments

• When this idea was raised a few years ago it was not well received, largely due to the NFP sector not being well equipped to collect and store private data.
• There is a potential for DGRs to provide data. This would involve using a data collection platform that NFPs subscribe to and pay an administration fee for access.
• Data collection platforms charge subscription fees, which would be borne by the DGR, not the donor. Most of the 26,000 DGRs are small, not big multinational charities, and this represents an additional cost. The needs of large and smaller operators must be considered.
• The ATO works with platform developers and industry partners to ensure any data captured meets ATO data prefill requirements.

Action item	NFPSG 06-21
Due date	15 September 2021
Responsibility	Not-for-profit Stewardship Group Secretariat
Description	Gifts and donations – exploring opportunities to prefill individual tax returns   Email members seeking feedback on opportunities and barriers for DGR donations to be prefilled on individual tax returns. Organise an out-of-session meeting for interested members.

Shaping the system

As part of our key priorities in 2021–22, the ATO is committed to developing a strategic roadmap for NFPs. The roadmap will outline the specific projects and activities required to meet this objective.

A key outcome is to start forming a collective sense of the key elements of a shared vision, and what is needed to shape an efficient and effective administration in the future.

This shared vision will be validated in smaller focus groups in the coming months.

Key areas for consideration

• What does an efficient and effective tax and super system look like for NFPs in five years?
• What roles do we each play in building trust and confidence that NFPs are meeting their obligations and operating for purpose and are eligible to access concessions?
• When we look at the NFP ecosystem, what are the fundamentals we need to have right and are they currently working?
• What does the role of a tax and super regulator and administrator look like, in 2026 and beyond?
• What support, advice and guidance is needed, and what should it look like in 2026 and beyond?
• How might we work, across government, and with key stakeholders, to reduce complexity and red-tape costs in 2026 and beyond?
• What will strengthening integrity and increasing certainty look like in 2026 and beyond? What does it mean for the sector?

Members' comments

• NFP is a diverse sector and it’s difficult to identify all the players in the NFP ecosystem.
• Intermediaries and peak bodies play a vital role in supporting the sector.
• There are changes in the for-profit and not-for-profit distinction. For-profits are increasingly doing what was traditionally charitable work, and many are avoiding a charitable structure to enable more business-like administration.
• As the community embraces technology, NFPs must keep up. However, smaller organisations simply do not have the resources to purchase or implement technology-based solutions, or to build the capability required to run them. There is also public criticism when administrative costs rise. This makes it difficult in the short-term to fund more costly long-term solutions.
• Mission drift is emerging. Cash pressures and turnover of staff are driving NFPs to become more corporatised and, in order to survive, NFPs behave more like commercial businesses. This can lead to a disconnect between head-office and on-the-ground operations with disillusionment and a morale drop amongst staff and volunteers.
• NFPs are not taking-up COVID-19 grants due to the burden of regulation and the need to account for every cent. Grants, if received, do not provide for these administrative costs. While larger NFPs are better set-up to absorb such costs, smaller organisations will see an increase to their reporting requirements, and this often outweighs the benefits for applying for the grant.
• Over the past year many NFPs have dipped into financial reserves in order to keep operating. This is impacting NFPs now, and current pressures on NFPs are leading to a commercialisation of activities in order to generate funds. This can present an issue with division 50/50, which requires organisations to apply income and assets solely for the purpose for which the entity is established. How much an organisation can keep in financial reserves into the future needs to be considered.
• Regulatory burden on NFPs is an issue. We need to consider how we might work across government to reduce red tape.
• Regulators like the ATO are really making a genuine effort to engage with NFPs.
  • NFPs feel comfortable engaging with the ATO. It leads to a better environment for all.
  • Regulators have a role in recommending changes to improve the NFP sector better.
  • The way the ATO engages with the sector, even in meetings like this today, is the hallmark of a good regulator.
   
• The ATO has the right culture and should continue to build on this, including
  • This meeting is an example of genuine collaboration and working with the sector.
  • Red-tape reduction is important. The certainty that the GST for Grants ruling refresh will provide is an example of this.
  • When you ask the sector to do something, think first about what the purpose is, do we really need it, and what the impact will be on the sector.
  • Look for administrative solutions to issues, outside of Tax and Charity legislation.
  • Advocate for the sector to influence policy making and understand policy intent.
  • ATO sets the gold standard and influences the culture and behaviours of other regulators.
  • Education is key to helping encourage and convince the sector that the ATO is not here to harm them. Light-touch approaches to compliance will really help.
  • Online reporting obligations (for example, business activity statements, single touch payroll, ancillary fund return) might be positive to the ATO but can come at a cost to smaller organisations who do not operate electronically.
  • NFPs would like reduction of taxation red tape, certainty of grants and GST impost.
   
• Regulatory imposts are often part of government grant agreements, and these arrangements require impetus for change outside of the ATO.

Attendees

Attendees list

Organisation	Member
ATO	Jennifer Moltisanti, Private Wealth
Arnold Bloch Leibler	Joey Borensztajn
Australian Charities and Not-for-profits Commission	Anna Longley
Australian Federation of Disability Organisations	Ross Joyce
Australian Institute of Company Directors	Phil Butler
Centre for Social Impact, Swinburne University of Technology	Krystian Seibert
Clubs Australia	Simon Sawday
Community Council for Australia	David Crosbie
CPA Australia	Ram Subramanian
Giuntabell	Nunzio Giunta
Justice Connect	Sue Woodward
Prolegis Lawyers	Anne Robinson
The Salvation Army Australia	John McIntosh (Co-chair)
The Tax Institute	Bridgid Cowling
Treasury	Jacky Rowbotham
University of NSW Business School	Fiona Martin

Guest attendees

Guest list

Organisation	Attendee
ATO	Adam O'Grady, Individuals and Intermediaries
ATO	Elizabeth Hynes, Private Wealth
ATO	Fran Gobel, Private Wealth
ATO	Gary Issar, Private Wealth
ATO	Gess Sottile, Private Wealth
ATO	John Churchill, Tax Counsel Network
ATO	Joy Tillman, Private Wealth
ATO	Len Hertzman, Tax Counsel Network
ATO	Melinda Knight, Private Wealth
ATO	Reveka Kotsiaris, Enterprise Strategy and Design
ATO	Rowan Fox, Policy, Analysis and Legislation
Charity Law Association of Australia and New Zealand	Seak-King Huang
Treasury	Karen Dunn
Treasury	Michael Atfield

Apologies

Apologies list

Organisation	Member
ATO	Belinda Darling (Co-chair), Private Wealth
Australian Council for International Development	Joe Zabar
Judy Sullivan Consulting	Judy Sullivan
Law Council of Australia and New Zealand	Jennifer Batrouney
Treasury	Jacky Rowbotham

Information about the key topics discussed at the Not-for-profit Stewardship Group meeting 22 July 2021.