Building the foundations for future giving in Australia

The Productivity Commission’s philanthropy inquiry analysed motivations for philanthropic giving in Australia and opportunities to grow it further.

The inquiry was undertaken between February 2023 and May 2024, and its final report was publicly released by the Assistant Minister for Charities, Andrew Leigh, on 18 July 2024.

Established in 1998 and backed by its own Act of the federal Parliament, the Commission is the Australian Government’s independent research and advisory body on economic, social and environmental issues affecting the welfare of Australians.

Its work is grounded in rigorous and evidence-based analysis, drawing on economics and a range of other disciplines and frameworks, and its processes are open and transparent, informed by extensive stakeholder participation.

The Commission’s philanthropy inquiry

Having worked to shape public policy for the not-for-profit (NFP) sector and philanthropy for more than 10 years, I was honoured to be appointed as an associate commissioner for the inquiry.

Together with the Commission’s deputy chair Alex Robson and commissioner Julie Abramson, I was part of the team jointly leading the inquiry. We worked together with a group of smart and dedicated Commission staff.

I came to this relatively familiar with the Commission and its work – and my experience on the inquiry confirmed to me the importance of the Commission’s contribution as a key component of Australia’s policy making infrastructure.

The context for inquiry was the Australian Government’s goal to double giving by 2030. And the inquiry was, as far as I can tell, the most wide-ranging government-initiated inquiry into the policy settings for philanthropy – anywhere, ever (and I’m happy to be corrected on that).

There was, for example, the so called ‘Filer Commission’ in the United States in the 1970s – but that was not a government-initiated process. And there have of course been various significant inquiries examining the wider NFP sector both here and abroad, notably the Commission’s own 2010 Contribution of the Not-for-profit Sector study led by Robert Fitzgerald AM.

The inquiry’s engagement was extensive and deep. It included more than 120 consultation meetings, 10 roundtables and six days of public hearings. We received over 1,600 public submissions and nearly 1,600 brief comments.

A dedicated Indigenous engagement strategy aimed to ensure that the report was shaped by the voices and perspectives of First Nations people and organisations.

The ultimate output was a report of just over 450 pages, but the key points, themes, findings, and recommendation are captured in a 21-page overview at the start of the report.

Key recommendations and findings from the inquiry

The report includes extensive analysis of trends and motivations to paint a picture of the current state of giving in Australia, as well as the opportunities and challenges when it comes to encouraging giving.

It finds that giving in Australia is growing, and government polices such as the deductible gift recipient (DGR) system are supporting that.

But the foundations to grow giving into the future aren’t solid. Reform is needed to ensure they are firm, so that the benefits of giving can be properly realised in communities across Australia.

Hence the name of the report, Future Foundations for Giving.

It makes 19 recommendations and nine findings, setting out a roadmap for reform to the foundational elements of government policy support for philanthropy in Australia.

A focus on the foundations of giving

In the last few months since the report has been released, I’ve been speaking to people across the philanthropic and wider not-for-profit sector around Australia, asking them what they think of its proposals.

One thing I never, ever hear is "I’m not sure about the need to reform the DGR system, because it seems pretty good to me."

The system is, in effect, a way of providing a government subsidy to encourage philanthropy. But the report finds that it’s not fit for purpose and creates inefficient, inconsistent, and unfair outcomes for donors, charities, and the community. It needs reform.

This isn’t the first report to recommend an overhaul – it’s the fourth. Going all the way back to 1995, the predecessor Industry Commission’s Charitable Organisations in Australia report also recommended reform.

Policy choices reflect our values and priorities as a community – what we think is important and what we think is less important.

In a pluralistic democracy, there will often be different views about priorities, but governments are the ones that ultimately need to make these policy choices.

Such choices involve decisions to act, but also decisions not to act.

By leaving the DGR system as it is, a policy choice is made that has a disproportionate impact on community-run grassroots charities that struggle to obtain DGR status or miss out completely, such as neighbourhood houses or community gardens.

A policy choice that says it’s okay to have a system where a charity seeking to prevent illnesses in children is eligible for DGR status. But a charity seeking to prevent injuries in children is ineligible. This is non-sensical.

A policy choice that says it’s OK to have a system that literally means that a charity can win the Nobel Peace Prize, but it can’t obtain DGR status (and I refer you to submission no.44 to the inquiry).

The report puts forward a model for overhauling the DGR system that would simplify the system and expand eligibility. It goes into the detail and builds on the work of the Not-for-profit Sector Tax Concession Working Group back in 2012-2013.

DGR system reform is tax reform – and that’s not easy to achieve. But generally, I would say, we are not defined by the easy things we do. We are defined by how we lean into what is more difficult.

Building on the foundations in innovative ways

In the context of reform, there is a tension between how much you focus on ‘getting the basics right’ and how much you focus on proposing new and novel changes aiming to grow giving.

In my conversations in the sector over recent months, I’ve been keen to hear any and all views and perspectives on the report and its recommendations. And sure, I’ve had some people tell me that they don’t think it’s bold enough, and there aren’t enough new or big ideas for taking giving to the next level in Australia.

I am a creative person, and I get excited by new and big ideas. But I do think you need to first make sure you get the basics right – that should always be the priority.

It's just like when you’re looking to buy a house – you generally want to make sure that the foundations are strong, and then you think about other enhancements and improvements.

And the report certainly does propose some new and novel changes.

For example, it recommends that listed companies be required to publicly report their giving to entities with DGR status. This would enhance accountability to shareholders, consumers, employees and the broader public.

Currently, there is a lack of accurate and comparable data on corporate giving. Placing more of a spotlight on such giving could fuel competition between businesses, acting like a nudge to lift corporate giving further.

And once something has to be disclosed publicly, that’s when boards get really interested – so it could also help to elevate strategic discussions about philanthropic contributions within listed companies.

Confronting the trade-offs involved with policy choices

Not every good idea proposed to the Commission made it through to a recommendation. And under the proposed model for overhauling the DGR system, not every charity or class of charitable activity would be eligible for DGR status.

When you build foundations, you need to draw some lines. You make judgements about what’s inside the house and what’s not, because you have only so much land and building material available to you.

Similarly, policy choices also involve trade-offs.

Subsidising philanthropy through the DGR system encourages giving, but it also means that governments collect less tax revenue, which could otherwise be used to fund core services or fund charities directly. These so-called tax expenditures need to be accounted for when making changes to tax policy – proposals to reform the DGR system are not exempt from this.

Some may question this and not agree with the thinking behind it. But I’m a pragmatic person, firmly focused on making progress on reform, and I take it as a given and work within that constraint.

One of the benefits of independent policy advisory bodies like the Commission, is that they can shine a light on the presence of trade-offs in such contexts. In doing so, they can illuminate the policy choices that need to be made when resources, including those available to governments, are limited.

This is essential if you are looking to maximise the welfare of the community as a whole, rather than benefit specific sectors or groups. And this community-wide perspective is the lens through which the Commission seeks to make recommendations.

It is governments that ultimately make policy choices – but bodies like the Commission can undertake analysis, engage with stakeholders, and facilitate what can be difficult conversations about the reality of balancing costs and benefits in the presence of trade-offs.

Having difficult conversations as part of policy development

Because there is no free lunch when it comes to subsidising philanthropy, the report develops an assessment framework for analysing whether and how governments should provide such support. It adopts a principled approach for determining what should be within the scope of the DGR system.

When confronted by the reality of limited resources, and the need to make judgements about how they are used most effectively, it’s perhaps human nature to try and avoid the need to have what are, at times, difficult conversations. To pretend that everybody can always win and that nobody has to lose anything. Or that no group should lose anything it currently benefits from.

This seems to have become a defining characteristic of a lot of policy debate in Australia, making it much harder to progress reform, in general.

But the inquiry didn’t shy away from setting the table for difficult conversations. It openly engaged with stakeholders to have them.

The most obvious example is the debate about whether school buildings should be eligible for support through the DGR system.

The report recognised a role for government support for school infrastructure. But it found that tax-deductible donations are unlikely to be the best mechanism for allocating such support, and that there are substantive risks of such donations being converting into private benefits for donors.

One may not agree with this conclusion, but it is backed by detailed analysis and evidence, including from the many submissions made in response to the draft report and the views shared with us through public hearings. It also draws upon the work of academic researchers such as Emeritus Professor Ann O’Connell of the University of Melbourne, a former adviser on philanthropy and taxation to the Organisation for Economic Cooperation and Development.

The Australian Government is currently considering its response to the report, and it has stated that school buildings will remain eligible for support through the DGR system.

And that’s the way the process works – the Commission makes the recommendations, and the Government makes the decisions.

I am very proud of the fact that the inquiry did not avoid having a discussion about school buildings in the context of the DGR system, even if it was challenging at times. I think we need to have more of these difficult conversations in the context of policy development in Australia, and the Commission is well placed to facilitate them.

Having difficult conversations about philanthropic practice

An openness to conversations in other contexts is also necessary. For example, about the evolution of practices within the philanthropic sector – something very relevant to my work now back at Philanthropy Australia.

And the report didn’t avoid these conversations either.

One of the report’s themes is that the way philanthropic funding is provided is as relevant as the quantity of funding – it’s not just dollar amounts that are important, but how philanthropy is practised also matters.

Nowhere is this more relevant than in the context of the relationship between philanthropy and First Nations people and communities.

There is an ongoing discussion about what it means for philanthropy to support self-determination, and what actions are needed to shift control and power over philanthropic resources to First Nations people and communities.

The inquiry really appreciated the generosity of the many First Nations people and organisations who shared their stories and experiences with us. Through these important discussions the inquiry learned about the different perspectives and views on practices within the wider philanthropic sector, and how they need to evolve.

These contributions shaped the inquiry’s recommendation that the Australian Government provide funding to support the establishment of a new organisation, provisionally called Indigenous Philanthropy Connections.

It would work to reinforce efforts to shift practices within the wider philanthropic sector, strengthen relationships between First Nations organisations and philanthropic networks, and amplify initiatives supporting new and existing First Nations-led philanthropic organisations.

Conclusion

I will conclude with an observation about the important role of academic research in the context of developing NFP sector policy in Australia. It is vital, and we drew upon it extensively throughout the inquiry.

But investment in this critical research capacity – by universities, by governments, by the philanthropic sector – is inadequate, and I would say it’s actually going backwards. This is unfortunate – but it does not have to be this way. Different decisions can be made by all of these actors.

Alongside the researchers from overseas whose work we drew upon, the efforts of Australian researchers made a significant contribution to the inquiry’s thinking and the analysis, and ultimately the findings and recommendations.

Thank you for your work and your contribution.

Krystian Seibert is executive director for policy and sector development at Philanthropy Australia. He served as an associate commissioner for the Productivity Commission’s philanthropy inquiry between February 2023 and May 2024.

This is an edited version of a speech he delivered to the Australia New Zealand Third Sector Research (ANZTSR) Conference at Western Sydney University, in Parramatta on 21 November 2024.