Charitable giving stalls despite increases in wealth

Author: Shamal Dass*

Australians are donating less and less each year to the 56,428 Australian charities.1

The number of individuals claiming tax deductible donations in their returns to the Australian Taxation Office (ATO) has risen only 6% over the past 10 years, despite an 18% rise in the number of tax payers.
 

As a percentage, charitable donations represent just 8.7% of all deductions, similar to clothing and self-education tax claims combined2. This means that, despite population growth, the proportion of people claiming tax deductible donations has stagnated. Although the percentage has stalled, those that do give are giving more, especially in the more populous states.

 

Average donation claimed by state 1996-2015


Source: ATO Taxation statistics, JBWere Philanthropic Services 2018  

 

While our overall population is giving comparatively less, the latest JBWere philanthropic Support Report research found that the number rises to 15% for giving by high net worth individuals (HNWIs - those earning over $1 million a year).

 

Donors claiming donation in tax by income 1996-2015



Source: ATO Taxation statistics, JBWere Philanthropic Services 2018

 

This makes HNWIs the fastest growing segment of donors.
 

HNWIs’ increased focus on philanthropy is in part due to Federal Government’s introduction of Private Ancillary Funds (PAFs). Since the PAF legislation was introduced in 2001, there has been substantial growth in their number across Australia.


A PAF is a trust that allows tax deductible donations to be made by the founder and associates, such as family and friends, and then distributes a minimum of 5% of the capital annually to eligible recipients. The funds sit in a tax-exempt environment and must be invested according to an investment policy.


Our research forecasts PAF giving to grow to around 17% of all giving by 2036.


The attraction of PAFs for many HNWI donors is the ability to establish an ongoing philanthropic giving vehicle that can involve their family and enable control and responsibility to be passed on through generations.


Burgeoning bequests

The research also forecasts growth in structured giving, bequests and corporate support.
 

The number of charitable bequests is expected to increase as Baby Boomers age and pass away. There are approximately 10,000 bequests made each year with an estimated average value of $40,000-$50,000 each.
 

The combination of an ageing population, the ‘baby boomer bulge’ and increasing asset values with significant gains in property prices suggest there will be even stronger gains in bequest values over the next two decades.
 

The growth could be even stronger if the Federal Government considered the creation of ‘living bequest’ structures, as has been developed in the United States. ‘Living bequests’ enable the donor to enter into a contract with the charity agreeing to leave a bequest on their death, and in exchange, the US Internal Revenue Service provides a calculated level of tax deduction.
 

JBWere’s Support Report also notes that when valued in dollar terms, volunteering represents more than 60% of all support provided to the non-profit sector.
 

Volunteering needs to be managed proactively as we see this type of support falling in Australia – representing a key risk to many operating models.
 


* Shamal Dass is Executive Director and Head of Philanthropic Services at of HNWI wealth manager JBWere.

1. ACNC website 3 August 2018.

2. According to the latest available tax data year (2016).



About JBWere

JBWere is one of Australia’s oldest and most trusted financial services brands. The company has been assisting families grow and protect their wealth since 1840.  As at 30 March 2018, JBWere had $28.1 billion in funds under management and $52.3 billion in funds under advice, including $6bn for purpose driven organisations and families.

 


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