How to give back:
Australia is a giving country, but we often give in kind rather than financially.
Whenever there is a disaster here or overseas, Australians rush to donate their time, household goods and cash. However, we lag behind other countries when it comes to structured charitable giving which means we may not be taking advantage of the tax benefits of donating.
According to Philanthropy Australia, our total financial giving as a percentage of Gross Domestic Product is 0.81%, compared with 0.96% for the UK, 1% for Canada, 1.84% for New Zealand and 2.1% for the US.i
Currently the number of Australians making tax deductible contributions is at its lowest levels since the 1970s.ii Despite this, the Australian Tax Office reports that deductible donations claimed by individuals rose from $0.74 billion in 1999-2000 to $3.85 billion in 2019-20.iii
Considering an estimated $2.6 trillion will pass between generations over the next 20 years, the opportunities for increasing our financial giving abound. Philanthropy Australia wants to double structured giving from $2.5 billion in 2020 to $5 billion by 2030.iv
Many ways to give:
There are many ways of being philanthropic such as small one-off donations, regular small amounts to say, sponsor a child, donating to a crowd funding platform or joining a giving circle.
For those with much larger sums to distribute, a structured giving plan can be one approach.
Structured giving:
You can choose a number of ways to establish a structured giving plan including through a public or private ancillary fund (PAF), a private testamentary charitable trust or giving circles.
Whichever way you choose, there are attractive tax incentives to encourage the practice.
The type of vehicle will depend on:
– the timeframe of your giving
– the level of engagement you want
– whether you want to raise donations from the public
– whether you want to give in your lifetime or as a bequest
– whether you want to involve your family to create a family legacy.
Private ancillary fund:
A private ancillary fund (PAF) is a standalone charitable trust for business, families and individuals. It requires a corporate trustee and a specific investment strategy. Once you have donated, contributions are irrevocable and cannot be returned. To be tax deductible, the cause you are supporting must be a body identified as a Deductible Gift Recipient by the Australian Tax Office.
The benefits of a PAF are that contributions are fully deductible, and the deductions can be spread over five years. The assets of the fund are also exempt from income tax.
The minimum initial contribution to a PAF is at least $20,000. The costs of setting up a PAF are minimal and ongoing costs are usually around 1-2% of the value of the fund.
Each year you must distribute 5% of the net value of the fund to the designated charity.v
Testamentary charitable trust:
An alternative to a PAF is a testamentary charitable trust, which usually comes into being after the death of the founder. The governing document is either a trust deed or the Will.
With a testamentary charitable trust, trustees control all the governance, compliance, investment and giving strategies of the trust. The assets of the trust are income tax exempt. The minimum initial contribution for such a fund is usually $500,000 to $2 million.vi
Philanthropy through structured giving still has a long way to go in Australia. The latest figures for total giving in Australia is $13.1 billion, of which $2.4 billion is structured giving. Currently the number of structured giving entities stands at just over 5,400.vii
As the baby boomers pass on their wealth to their families, there is a wide opening for some of this money to find their way into charities and causes through structured giving.
If you want to know more about structured giving and what’s the right vehicle for you to help the Australian community at large, then please give us a call to discuss.
A cause close to our hearts:
As we step into this festive season, Clear Sky Financial is proud to share our recent partnership with Friends with Dignity and their Back-to-School Drive. Friends with Dignity is a national charity dedicated to aiding individuals – men, women, and children – displaced by domestic violence. Their Back-to-School campaign aims to gift children living in refuge with a new beginning, which resonates with our commitment to help unlock brighter futures for those in need.
Our Team fully embraced the initiative and, in addition to a monetary donation from Clear Sky Financial, dedicated their time and resources to personally fill 30 backpacks with essential school supplies.
Every child deserves access to education in a safe and nurturing environment. Our support of Friends with Dignity aligns with our belief in the transformative power of education and its pivotal role in breaking cycles of adversity.
As we celebrate the joyous spirit of this season and look ahead to the New Year, we extend our sincere thanks to everyone who contributed to this meaningful cause. Together, we remain steadfast in our commitment to making a positive impact and fostering a community where everyone can thrive.
For further information on the many ways to give to Friends with Dignity, please visit: https://www.friendswithdignity.org.au/
i, iii https://www.philanthropy.org.au/wp-content/uploads/2022/11/7480-PHA-Giving-Trends-and-Opportunities-2023-1.2.pdf
ii https://www.socialventures.com.au/sva-quarterly/insights-to-grow-philanthropic-giving-for-not-for-profits/
iv https://www.philanthropy.org.au/our-impact/a-blueprint-to-grow-structured-giving/
v, vi https://www.philanthropy.org.au/guidance-and-tools/ways-to-give/choosing-the-right-philanthropic-structure/
vii A Blueprint to Grow Structured Giving 2021 – Philanthropy Australia
Information contained in this document is considered to be true and correct at time of publication. In addition, the information provided is general information only, and does not take into account any individuals’ objectives, financial situation and needs. Before acting on any information contained herein, you should consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.