Strengthening Taxation Incentives for Philanthropic Collaboration: Unlocking Australia's Potential

Introduction

In the face of pressing social and environmental challenges, philanthropy holds immense potential for driving impactful and sustainable change. However, philanthropists in Australia find themselves hindered by significant barriers to effective collaboration, ultimately limiting their ability to achieve the desired impact.

This blog serves as a subset of my submission to the Australian Productivity Commission's inquiry into philanthropy in Australia. It highlights the urgent need to amend the Australian Charities and Not-for-profits Commission (ACNC) Act 2012, aiming to strengthen taxation incentives and facilitate collaboration among philanthropists.

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The importance of collaboration in Philanthropy

The COVID-19 pandemic has underscored the critical need for collective action and collaboration in addressing societal challenges. According to the Australian Communities Foundation in their report "Philanthropy and COVID-19 in Australia" 2020; a staggering 86% of philanthropic foundations in Australia have recognised the importance of collaboration in their endeavours. However, existing taxation policies and regulatory frameworks have inadvertently impeded this collaboration, inhibiting the potential of philanthropy to drive meaningful change.

Complex and restrictive tax incentives

A review of the ACNC Act 2012 in 2020 shed light on the current state of tax incentives for philanthropy in Australia. The findings revealed a convoluted and restrictive system that impedes the ability of charities and not-for-profit organisations to collaborate effectively. This complexity creates unnecessary hurdles, discouraging philanthropists from exploring collaborative initiatives. To unleash the full potential of philanthropy, it is imperative to streamline and simplify tax incentives for collaboration.

Research supporting the need for change.

Research conducted by the Centre for Social Impact has echoed the urgent need for changes to the ACNC Act 2012, particularly in terms of taxation incentives for philanthropy collaboration (source). The study highlighted the growing demand for more flexible and streamlined tax frameworks, emphasising the benefits of enhanced collaboration among philanthropists. By facilitating easier resource allocation and knowledge sharing, streamlined tax incentives can significantly amplify the impact of philanthropy in addressing social and environmental issues.

Call to Action

As decision-makers, we cannot afford to ignore the pressing need for change. The time has come to remove the barriers preventing philanthropists in Australia from effectively working together towards common goals. By improving resource allocation and fostering collaboration, we can harness the full potential of philanthropy to address the most complex challenges facing our society.

Philanthropy Australia's 2021 Budget Submission serves as a strong call to action, urging for amendments to the ACNC Act 2012 to provide enhanced tax incentives for philanthropy collaboration. This proposal warrants careful consideration, as it presents a viable solution to unlock the full potential of philanthropy in Australia.

International evidence

Australia is not alone in recognizing the significance of tax incentives in fostering collaboration among philanthropists. Several international examples provide evidence of the positive impact such amendments can have.

United States: The United States boasts a long-standing history of philanthropy and has implemented tax incentives that promote collaboration among philanthropists. Through mechanisms such as donor-advised funds, charitable trusts, and private foundations, philanthropists have greater flexibility in pooling resources and coordinating their efforts for maximum impact.

United Kingdom: The United Kingdom has witnessed remarkable results by incentivizing philanthropic collaboration. The introduction of Social Impact Bonds, which offer tax incentives to investors supporting social projects, has attracted a significant influx of capital to address pressing social issues. This approach demonstrates how targeted tax incentives can encourage collaboration between philanthropists and investors, fostering innovative solutions.

Canada: Canada has taken proactive steps to streamline tax incentives and facilitate collaboration among philanthropists. By offering tax credits for donations to public foundations, the country has successfully encouraged pooling of resources and expertise. This collaborative approach has been instrumental in tackling social challenges and driving systemic change.

By studying these international examples and adopting best practices, Australia can leverage the power of taxation incentives to create an environment conducive to collaboration and collective impact.

Conclusion

Philanthropy possesses the power to drive impactful and sustainable change in Australia. However, current taxation policies and regulatory frameworks act as significant obstacles, hindering collaboration and limiting the potential for philanthropic impact. Through the amendment of the ACNC Act 2012 to strengthen taxation incentives, we can facilitate collaboration among philanthropists, enabling them to work together towards common goals, allocate resources more efficiently, and address social and environmental challenges effectively.

It is crucial that decision-makers take heed of the urgent need for change and seize this opportunity to unlock Australia's full potential for philanthropic impact. To read the complete submission, please visit the Australian Productivity Commission's website. Together, we can foster a culture of collaboration and achieve meaningful and sustainable change.