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Philanthropic Giving for all Australians

Financial advisers, accountants and estate planning lawyers are starting to encourage clients to consider structured giving as practising philanthropy becomes more accessible.

The philanthropic sector is being reshaped by contradictory forces. Deductible donations have increased as a share of total income, but the percentage of taxpayers making donations has fallen.

The COVID‑19 pandemic, natural disasters, and the rising cost of living have underlined the crucial role played by charities even as social capital has declined, with people becoming more insular.

But professional advisers, including financial planners, accountants and estate planning lawyers, are beginning to help change the situation. Awareness is rising about more accessible ways to create sustainable philanthropic strategies amid a push by government to double current levels of philanthropic giving by 2030.

“Clients are often surprised to learn about other ways to give,” says Equity Trustees National Manager, Estate Planning, Michael Crowe. “They love that they can give into perpetuity rather than just making a one-off gift.”

A previous study found that three-quarters of advisers in 2014-15 viewed philanthropy positively but were held back from promoting it by a lack of organisation and professional association support. But as education is rising, so too are client discussions around giving intentions and often an opportunity around inter-generational philanthropy.

“Some of the questions we encourage advisers to ask is: are clients giving already?” says Equity Trustees Relationship Manager, Active Philanthropy Denise Cheng.

“Do they give at tax time, support their local community, support the kids school, or are they volunteering – if they’re already giving the chances are there's some altruistic tendencies.

“The main triggers to wanting to give are often a windfall such as selling a business and they need a tax deduction, or a change of status, such as getting married, divorced, or a loved one passing away.”

One-off donations around the end of financial year are popular because of tax deductions, but structured giving can provide a greater impact for the community and connection for donors through a more sustainable philanthropic structure.

Yet structured giving only comprised about one-fifth (20 per cent) of total charitable giving in 2017-18 (the latest data available), according to Philanthropy Australia.

Structured and non structured giving in Australia pie charts

Source: Philanthropy Australia Blueprint

Many of the avenues within structured giving have traditionally been more suited to high net worth Australians, who have the assets to set up private ancillary funds or leave substantial charitable trusts in their wills.

However, there is rising interest in creating a sub-fund within a larger Public Ancillary Fund (PuaF), such as the Equity Trustees Charitable Foundation, which recently cut its initial tax-deductible starting donation for philanthropists from $20,000 to $5000.

“We want to democratise philanthropy and make it more accessible for the everyday Australian to participate in,” Cheng says.

A client can name their sub-fund within the Public Ancillary Fund and each year direct a minimum of 4 per cent of the value of the sub-fund towards charities (with deductible gift recipient status) of their choice. The sub-fund’s assets are invested and grow over time in a pooled investment structure, creating a charitable vehicle that gives in perpetuity.

“We have seen a rise in clients who are ‘road testing’ a sub fund (within a public ancillary fund) during their lifetime,” says Crowe. “The intent is when they die, they'll top up their public ancillary fund account from their estate.”

Clients benefit from lower administrative costs compared to running a private ancillary fund but can still tap into the over-arching scale of the $240 million Equity Trustees Charitable Foundation. Equity Trustees has developed a giving portal for clients which lists all DGR1 charities for them to choose, accessible on their device, making it faster, easier and more efficient for them to give their money away.

“I've had clients that really liked this approach to giving, because when they receive mail or phone calls requesting donations, they can explain they’re giving strategically from their family structure. Everything is conveniently held in the portal and simple to track year on year.”

The Productivity Commission is also likely to come up with new pathways to make supporting philanthropic causes easier as part of its current review, which is evaluating motivations for philanthropic giving and identifying new opportunities for growth.

Philanthropy Australia has produced a Professional Adviser Guide to Giving 2023 guide which is available to download here.