Discussion Paper on Tax Deductible Gift Reform Opportunities

Discussion Paper on Tax Deductible Gift Reform Opportunities (deadline for submissions Friday, 4th August)

The government has released a Discussion Paper on Tax Deductible Gift Reform Opportunities which considers potential reforms to the Deductible Gift Recipient (DGR) tax arrangements and outlines a number of proposals.

Whilst we are disappointed that the proposals contained in the Discussion Paper do not address a significant issue for community foundations, the release of the paper creates a unique opportunity for our sector to reaffirm the need for a new deductible gift recipient category for community foundations.

ACP has outlined our arguments with respect to the above in the draft submission. We are asking community foundations for their support by:

* Making their own submission
* Engaging with their local federal members / senators on this issue

Making your own submission
A copy of ACP’s draft submission is available from ACP (email kate.buxton@australiancommunityphilanthropy.org.au).

You can use this as guide for your submission. If you are able to, please include your own examples of how the current DGR framework is negatively impacting your community foundation (see ACP’s draft for the case studies we have used).

You may also wish to make local DGRs and local organisations in your catchment aware of the Discussion Paper and encourage them to make their own submissions, particularly if the current framework has created issues around them receiving funding from the community foundation.

To download the Discussion Paper and for information on making submission go here:

Please feel free to give Kate Buxton a call on 0419 350 240  if you would like to discuss the above further.

ACP’s Position

There is growing acceptance that the complex and difficult problems facing communities around Australia can only be addressed with an integrated, multi-faceted place-based response.

As a valuable and unique form of community infrastructure, community foundations empower communities to address local challenges themselves. They seek to build social capital, catalyse development and strengthen community; they engage with their constituents as donors, advisors and volunteers. Community foundations are responsive to the challenges facing their communities and leverage their deep local knowledge to respond to need through their purposeful grant-making.

And yet, community foundations – which harness local resources, strengthen community and build local capacity – are fettered by a regulatory framework that creates significant barriers. The existing tax laws are inhibiting the growth and impact of community foundations.

Community foundations generally operate a ‘public ancillary fund’ (an ‘Item 2’ deductible gift recipient) – which imposes significant restrictions on their operations:

  • Community foundations cannot accept donations from one of the most common forms of private foundation, ‘private ancillary funds’, as private ancillary funds are also an ‘Item 2’ deductible gift recipient – this cuts them off from a significant source of philanthropic funding and precludes Private Ancillary Funds from leveraging the expertise and community knowledge of community foundations.
  • As an ‘Item 2’ DGR community foundations are limited to funding DGR 1 charities from their Public Ancillary Funds. This creates an obstacle for locally responsive organisations with relevant experience, particularly in rural and regional areas where there are fewer local DGR1s, undermining community resilience and creating unnecessary dependency on external organisations and government.

Australian Community Philanthropy believes that a new deductible gift recipient category within Division 30 of the Income Tax Assessment Act 1997 (Cth) specifically for community foundations is needed to remove these barriers, reduce red tape and enable community foundations to focus on generating impact in their communities.

We expect that the revenue forgone from the change would be minimal. This would be an affordable reform, which will grow community philanthropy and strengthen community resilience in Australia.