The future of giving: where Australians are donating

A recent study by Philanthropy Australia (PA) looked into the five major themes expected to dominate philanthropic giving in 2023 and beyond. They were:

1.       solving the affordable housing shortfall

2.       integrating climate awareness into giving strategies

3.       reducing the stress experienced by groups vulnerable to economic downturn

4.       issues affecting First Nations peoples

5.       addressing the underlying causes of economic inequality and poverty

" Many philanthropists also plan to be more targeted with their donations, offering fewer grants, but with higher average values and focusing their money on specific causes.”

The research also found that while Australians are generally optimistic about the state of giving, there are several opportunities to drive better outcomes for the community.

Specifically, philanthropists want to shift the power imbalance with recipients to create a truer sense of partnership. Philanthropists also revealed a desire to collaborate with and learn from other philanthropists and to move from transactional to longer-term relationships.

Philanthropists also want to get the voices of beneficiaries into board and leadership structures and foster a growing interest in impact measurement. The research also suggests making it easier for not-for-profits to meet deductible gift recipient restrictions.

Many philanthropists also plan to be more targeted with their donations, offering fewer grants but with higher average values, and focusing their money on specific causes.

Shifting attitudes

The impetus to donate to important causes has been consistent among ANZ Private’s clients but often the second or third generation make the biggest investment. In most cases, this reflects an eagerness to uphold the values of their forebears.

The inclination may be stronger within that group because they want to continue the legacy while also giving back to others.

The causes ANZ Private’s clients choose to support vary but typically philanthropic families will have a personal connection to the cause they’re supporting.

People don't want to give money to a charity ‘black box’. They want their money to solve problems they're familiar with.

That is also part of our role at ANZ Private – to help people get their money into giving structures that allow them to be more thoughtful with their grants. So money gets to the groups they're most interested in helping.

The growing interest in impact investing – investments creating beneficial social change as well as generating returns – also bodes well for the future of Australian philanthropy.

Research by the Responsible Investment Association Australasia (RIAA) found assets under management allocated to impact investing hit $30 billion in 2021 – up from the $29 billion funds under management record in 2020.

This trend suggests Australians are becoming more interested in how their money is used. Increasingly they want it to deliver positive outcomes for their communities.

Different structures

Australians who want to become active in philanthropy can use several different vehicles and financial structures. The two most common are private ancillary funds and public foundation sub funds.

A private ancillary fund is described by the Australian Charities and Not-for-Profits Commission (ACNC) as a special fund linking “people who want to give … and organisations that can receive tax deductible donations as deductible gift recipients”.

This gives philanthropists greater control and flexibility over how the money they donate is used. Whereas public foundation sub funds feed into another master fund supporting the chosen organisation – making them easier to operate but giving donors less control.

Would-be philanthropists should plan their donations carefully because once money is placed into one of these structures it needs to be used for the specified charitable purpose.

Importantly, each of these structures come with certain obligations that donors, as directors of the funds, need to comply with.

Changes afoot

The rules and expectations governing philanthropy and not-for-profit organisations are set to undergo several changes this year. One of the most well-documented changes is the introduction of new tax rules for not-for-profits.

From July 1, 2023 any non-charitable not-for-profit organisation with an Australian business number must lodge an annual self-review to maintain its income tax exemption. This rule was introduced in the 2021-22 Federal Budget in a bid to “enhance trust and confidence in the sector”.

Sports clubs, community service groups and health, education, or scientific research not-for-profits all fall under the ‘non-charitable’ banner.

According to the Australian Taxation Office (ATO), this change will ensure only not-for-profits eligible for the tax exemption will be able to access it. Organisations that fail to lodge the self-review with their return will not only be at risk of losing tax exemptions but could also face penalties.

Currently, there are no disclosure obligations regarding these organisations’ tax status, so philanthropists will need to conduct their own due diligence to get this information.

Elsewhere, the Federal Government signalled further changes. Last year, Charities Minister Andrew Leigh pledged to double Australia’s philanthropic giving by 2030.

More recently, Dr Leigh said the government is considering streamlining how charitable organisations register themselves with the ATO. Under the current rules, certain charities are required to make their case to the responsible minister before receiving deductible gift recipient status, while others simply need to file paperwork with the ATO.

The proposed changes would allow more charities to apply directly to the ATO. However, some charities – such as those administering foreign aid – will still need to undergo ministerial reviews to ensure compliance with anti-money laundering legislation.

David Lipari is Director of Financial Advice at ANZ Private Bank