Philanthropy – Who / What / When / How
Specialist Advice Solutions

Tristan Bowman, Partner

Australians donate $13 billion a year to charitable causes, and that number is growing annually. As the philanthropy industry in Australia matures, donors now have more ways in which to gift capital to their chosen cause. This flexibility ultimately makes for better outcomes, both for the donor and for those beneficiaries.
Posted 20 March 2024

A more prosperous global society makes for a more charitable one. As countries develop and grow wealthier, so too do philanthropic efforts. Along with the rise of charitable efforts, the philanthropy world has become more professional and developed; in this, the US leads the way. Two trends we are seeing in the US are redefining the field:

  1. The rise of “no strings attached giving”. Novelist and philanthropist Mackenzie Scott is leading the charge of this somewhat ‘new’ version (i.e. not tying the capital to a particular program), having donated more than US$16 billion from 2019 to 2023; and

  2. An increasingly professional industry, making philanthropy simpler for private individuals.

The increasing professionalism is having a profound impact in the way private individuals can manage their philanthropic efforts, particularly in enabling greater longevity in their gifting programs. With proper investment management and guidance, individuals are now able to better manage donations over time, in terms of both tax efficiency and investment strategy.

What to give / where to give it

Whether it is given via your time or your hard-earned money, consider the cause to which you are giving. Choose something that is meaningful to you and your family. Common areas of philanthropic efforts are:

- Health

- Education

- Social welfare

- Religious causes

- Human rights

- Animal welfare

Maximise tax effectiveness

Donations to deductible gift recipients (DGRs) are tax deductible in the name of the donor. Registered charities usually qualify as a DGR, but some community organisations will not. Before making a donation, it is worth checking the status of the charity or organisation you are gifting to.

If the donation is deductible, the deduction should be made in the name of the family member with the highest marginal tax rate to ensure the donation is tax effective.

Give with a warm hand, not a cold one

Philanthropy efforts can sometimes be deferred until the death of the prospective donor, with their Will directing the flow of part of the estate to a charitable organisation.

However, to get the most out of your gifts and donations, consider gifting capital or part of your income in your lifetime rather than leaving it to your executors to handle. This has two principal benefits:

1.      You can see the impact of your donation in your lifetime.

2.      Any tax deduction for the donation can reduce taxable income in your lifetime.

Interplay with estate plan

Your estate intentions should reflect your philanthropic objectives and your historical philanthropic endeavours. Through your Will, you can include specific bequests to causes close to you, or alternatively establish a Private Ancillary Fund (detailed below). However, be wary of ensuring your Fund meets the various regulatory requirements, such as having at least one founding director meet the ‘responsible person’ requirements.

If you actively gift to your chosen charities during your lifetime, make sure your Will takes account of previous donations so that other beneficiaries’ entitlement is not inadvertently reduced.

Private fund v public ancillary fund

For private philanthropists with capital earmarked for charitable causes, there are two ways to establish a privately-directed charitable giving program:

1.      Private Ancillary Fund, or

2.      Public Ancillary Fund.

Key elements that distinguish the two Fund types are outlined below.

Generally, the quantum of the philanthropic capital will determine whether a public or private ancillary fund will be most suitable to your needs.

The number of Private funds has increased steadily since the turn of the century. There are now over 2,000 private ancillary funds in existence, compared to near zero in the year 2000, clearly indicating more widespread awareness.

Investment management of corpus

Increasing professionalism of the philanthropy industry dictates a more professional approach to the management of philanthropic capital. A ‘Cash + Term Deposit’ approach may not be the right fit. Donors need to consider purpose and longevity as part of the investment strategy.

Setting the strategy for a private charitable fund is similar to the approach to personal capital, but can be more prescriptive in asset-liability management. Our approach involves planning, setting objectives, constructing an investment policy, and then operating the strategy to a defined program. It is a methodical approach that is tailored to suit philanthropic investors.

Cameron Harrison’s approach to managing philanthropic capital provides a meaningful solution for private investors seeking to establish a legacy with longevity and purpose. Our framework is outlined below.

As partners in your philanthropic journey, it is important to plan for success to achieve your charitable objectives.

Speak to one of our advisers to learn more:

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