Charitable Trusts Amendment Bill 2006
Reverend the Hon. Dr GORDON MOYES: I speak on behalf of the Christian Democratic Party to the Charitable Trusts Amendment Bill. Probably no other bill that has come before the House has given me greater pleasure to speak about because I have been involved, as I will indicate, for the last several years working with the Federal Government to make this legislation appropriate in the various States. The object of the bill is to amend the Charitable Trusts Act 1993 to enable trustees of charitable trusts to make gifts to eligible recipients even though the recipients are not charitable at law. As honourable members may know, I have spent my whole life involved in charitable activities and organisations.
Australians are giving more than ever before to charities. In 1996-97 the Prime Minister set up the Community Business Partnership, on which I was invited to be a board member. I retain my board membership of that partnership until this day. Board members meet regularly from across Australia to seek to encourage giving by individual Australians and businesses to charities. Under the chairmanship of Mr David Gonski, the partnership became involved in a very long-running taxation issue with the current Treasurer, Mr Peter Costello, as a result of which ways were found to change the Commonwealth Taxation Act to support charitable giving to various philanthropies.
We produced a report entitled “Giving Australia: Research on Philanthropy in Australia” and found that in 2004the value of individual giving was $5.7 billion, an increase of 88 per cent since 1997 when the Community Business Partnership was established and I became a board member. That is an astonishing amount of money and it indicates the generous and open spirit of our people. We are all very aware that in times of crisis, such as a bushfire or a tsunami, Australians are very generous of heart. But we wanted to do more than make just charitable gifts on odd occasions. We wanted to set up ways in which organisations, companies, individuals and communities could give on a regular basis to help community developments. The Prime Minister’s Community Business Partnership has been very successful in that regard.
The report made a number of key findings, and I would like to refer to some of those findings as they specifically outline the manner in which the level at which individuals and businesses have given to worthy causes. It is because of this that this bill is before the House. We needed to amend the law in each of the States to bring them into line with the new Commonwealth taxation provisions and the opportunities for companies and corporations to give.
About 10.5 million Australians lend their support annually by participating in raffles, lotteries and fundraising events, which provides about $2 billion to worthy causes. Approximately 87 per cent of all adult Australians—equivalent to 13.4 million people—donate an average of $424 each throughout a year.
Business giving has more than doubled since 2000-01. Businesses were a primary aim of the members of the Prime Minister’s Community Business Partnership because we felt there was much that businesses and corporations could do to help in the charitable section of our community. As I said, business giving has doubled in the past five or six years, with more than 500,000 businesses—in other words, 67 per cent of all businesses and corporations in Australia—giving $3.3 billion in money, goods and services during 2003-04.
Melbourne and Sydney were responsible for nearly half of all the individual donations—47 per cent—but Adelaide had the highest giving rate, with donations from more than 90 per cent of all of its adults. On another note, the number of hours donated by volunteers has risen 16 per cent since 2000, with 41 per cent of adult Australians volunteering some 800 million hours per annum.
These extraordinary and compelling facts reinforce the idea that Australians are a generous people. We have often spoken of the fact that philanthropy has become a way of business and individual life in the United States of America. However, one reason Australians are able to give so liberally is that legal platforms have been established by both the Federal and State governments to facilitate that giving. As I said, under the chairmanship of David Gonski, I headed a special task force to see how we could change the Federal tax law. That was successfully done, and now we want each State to bring its laws into line with that of the Commonwealth. The Charitable Trusts Amendment Bill is the direct outcome of the work we put into action from 1997 until recently.
The introduction by the Federal Government of further tax initiatives to encourage giving has greatly assisted the plight of many commendable causes. One tax initiative was the 2005 amendment to the Income Tax Assessment Act 1997 to allow a prescribed private fund [PPF] or an ancillary fund to donate to any deductible gift recipient, regardless of whether or not it is a charity. These PPFs or ancillary funds and deductible gift recipients are all covered under the Income Tax Assessment Act 1997. However, I will make some brief remarks about each of these entities for the purpose of this speech.
Deductible gift recipients, known as DGRs, are entities that generally have charitable purposes and functions. Some DGRs may be philanthropic rather than charitable in nature. Although both philanthropic and charitable organisations have merit-worthy purposes and are of benefit to society in different respects, they must be distinguished. Prescribed private funds are charitable trusts whose sole purpose is to give funds to DGRs. These vehicles were established in 2001 and have become one of the most effective ways to vest gifts and donations. I am absolutely amazed how the change to the tax Act to allow prescribed funds to be established has become so successful in the Australian community.
PPFs as they are more commonly known have been on the increase. Recent statistics indicate that as of November 2005 there were 312 such funds established by the Government. Indeed, 340 PPFs have been established since 2001. These funds now have a corpus under investment of more than $334 million and have made grants of $52 million to other charitable organisations. If honourable members are not sure about what a PPF looks like, I only have to mention names like the Myer Foundation, the Clitheroe Foundation—Paul Clitheroe made his money writing books and talking about finance on television—and the Greaterox Foundation, which was established by a close friend, Dr David Greaterox.
Ancillary funds, which have existed since the 1960s, are another type of charitable trust. An ancillary fund is a type of public philanthropic trust fund that acts as a conduit between members of the public who make tax deductible donations to it and certain DGRs. Much of my early life when I came to Sydney 30 years ago was spent back in Melbourne, which was the philanthropic centre of Australia. Every three months I would knock on the doors of various companies in Collins Street, because they were the headquarters of most charitable entities in Australia. I would introduce myself and request funds to support the charitable work at Wesley Mission in Sydney. I found the Melbourne companies most generous. However, this has become a national issue; it is no longer an issue only in Collins Street, Melbourne.
The Income Tax Assessment Act 1997 originally allowed tax exemptions only when a PPF or ancillary fund made gifts to DGRs that were charities. The Prime Minister’s Community Business Partnership board discussed this at great length because many fine organisations that are not charities still need the charitable dollar. This was not a fight among charities; it was a fight to expand the interests of Australians in supporting all kinds of philanthropic and charitable work. Honourable members may not know that all DGRs are charities although they may have a philanthropic role at heart. For example, the Sydney Opera House Trust is not a charity. The Powerhouse Museum would not be able to receive gifts from ancillary funds or PPFs because it is not a charity although it is a DGR.
With the 2005 changes to the Income Tax Assessment Act 1997 to allow PPFs and ancillary funds to make donations to DGRs regardless of their status—whether or not they are a benevolent charity, that is, giving individual support to individual people who need benevolence—changes would need to be made to the trust deeds of PPFs and ancillary funds in all States to allow such donations to occur and to give a tax benefit to companies and donors. This is because the trust deeds of most PPFs and ancillary funds do not allow the trustees to donate to entities that are not charitable at law. We had to overcome that hurdle, and this amendment bill will overcome that problem. If trustees make donations in accordance with these amendments to the Income Tax Assessment Act 1997, they are likely to be in breach of their duties as a trustee.
Generally, trustees are unable to enlarge the net of potential donees and thus are hindered in being able to donate to non-charity DGRs. This charitable trust amendment will overcome that problem. This bill will give trustees of existing and future PPFs and ancillary funds, referred to in the bill as “prescribed trusts”, the power to give to any DGR recognised by the Commonwealth legislation. Under the bill, these DGRs will be referred to as “eligible recipients”. An eligible recipient is defined as a “deductible gift recipient within the meaning of the Commonwealth Income Tax Assessment Act 1997“. This includes entities that are not technically charitable at law, such as entities with a connection to the Government.
The bill will allow the trust instruments of new prescribed trusts to contain a power to give to those recipients and the distribution power of existing prescribed trusts to give to DGRs. Importantly, in cases where the trust deed expressly prohibits the provision by trustees of funds to an eligible recipient, the amendments will not violate that intention.
I conclude simply by saying that the Australian philanthropic sector, made up of more than 1,200 trusts and foundations, is estimated to distribute about $500 million a year to various charities. With the amendments brought about by this bill we will witness increasing funds provided for philanthropic purposes. I look forward to the positive benefits that will be brought about by this bill, which brings New South Wales into line with the law in other States and federally. On behalf of the Christian Democratic Party I have a great deal of pleasure—and indeed on behalf of the Prime Minister’s Community Business Partnership I have some pride—to commend this bill to the House.