Philanthropy is a cornerstone of our society: from delivering public services, to relieving suffering or unleashing advocacy, to encouraging social cohesion and community. Consequently, in many countries, including Australia, the Government offers tax deductions to individuals making donations to certain, regulated charities.

In 2023, the philanthropic sector was offered a once-in-a-generation opportunity to shape the future of giving in Australia through the Productivity Commission’s inquiry into Australian philanthropy. Driven by the Australian Government’s goal of doubling philanthropic giving by 2030, many Australian donors and leading organisations took up the opportunity and submitted their ideas, recommendations and insights to contribute to a more vibrant and thriving NFP and charities sector.

Of the 250+ submissions, a number of organisations highlighted barriers to international philanthropy. For example, many submissions noted that gaining DGR status (which allows NFPs to give their donors tax deductible receipts) is a cumbersome and complex process. In particular, the process is particularly complicated for NFPs that work across multiple sectors or issues, as they are required to jump through different bodies and hurdles, depending upon the nature of the diverse programs within their organisation (See AIDN’s “wrap up of the submissions” for more examples). Responding to this, a great number of submissions advocated that the DGR regime could be simplified and made more equitable by extending DGR status to all charities registered with the ACNC, provided they do not use tax deductible funds for purposes explicitly specified as not related to their charitable work.

Another issue highlighted specifically in relation to international giving was that, at present, Australian donors, Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs), are unable to give directly to an overseas charity (only certain charities registered in Australia with DGR). Therefore, overseas registered charities cannot receive donations from Australian donors, Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs) who require tax deductibility without intermediary support. In this context, a number of organisations proposed changes to the current legislation including: 1) that organisations with DGR2 status, such as Public Ancillary Funds, should be allowed to directly fund overseas charities, and 2) to expand the ability of organisations with current DGR1 status (such as Public Benevolent Institutions) to be able to give to dual causes, such as climate change and poverty alleviation, rather than be restricted to one cause.

Whilst there are strong arguments for giving donors a choice on how they want to support an overseas charity (and there are undoubtedly changes that need to be made to the DGR framework more broadly), I believe that the current parameters whereby DGR2s cannot directly fund overseas charities (without funding via an Australian registered DGR charity) is fit for purpose.

Image: Unsplash/ Ives Ives

This is because giving directly to an overseas charity can pose risks and, at present, outweighs the benefits for the Australian government of passing on the tax deduction. For example, there is potential for mismanagement or misuse of funds, as it can be challenging for donors to verify how their contributions are being utilized without proper oversight mechanisms in place. It can also be challenging for donors to navigate different legislative, cultural, and language barriers.

Whilst this is less of an issue for donors who have the capacity and resources to conduct their own due diligence or the confidence and expertise to engage in trust-based philanthropy, the same cannot be said, for donors with limited capacity, resources, and low-risk appetite for giving. For donors recommending that the system enable them to give directly to an overseas charity, it is worth noting that many developing/Majority World countries do not have a dedicated independent regulator to ensure charities are legitimate or disclosing operational or financial information.

Instead, there remains a case for trusted networks, intermediary organisations like Rotary Foundation Australia or Myriad Australia, or the local fundraising arm of an overseas charity registered with the ACNC to carry out philanthropic transactions on donors’ behalf whilst still providing the donor with a tax deductible receipt. In fact, opting to channel donations through an intermediary rather than directly supporting an overseas charity can provide several advantages for both donors and the recipient.

This is because Australian intermediary organisations and local fundraising entities must comply with the ACNC’s External Conduct Standards to promote transparency, ensure appropriate frameworks are in place to reduce the risk of funds being misused and protect vulnerable people overseas. Standards include control over their resources and activities, taking reasonable steps to protect vulnerable individuals, undertaking appropriate due diligence and mitigating the risk of fraud, bribery and corruption. 

The AIDN’s Compelling Case for Global Giving presents a strong argument for supporting overseas initiatives and communities. Moreover, with issues such as climate change and poverty increasing globally, the Australian Government needs to think urgently about how to complement it’s Overseas Development Assistance with private philanthropy overseas. However, if donors bypass Australian intermediaries or local fundraising arms to channel philanthropic funds abroad, the likelihood of funds being misused is higher. 

Undoubtedly, our system of determining which charities can receive tax-deductible donations requires an overhaul and it was fantastic to see proposed changes and extensions to the DGR system in the “Future foundations for giving: Draft report”. However, it is also crucial that Australian donors giving abroad not just recognise but actually feel empowered by necessary frameworks in place to protect and safeguard donations from generous Australians – all while receiving a tax deductible receipt for their donations.

Anita Toy

Anita Toy is the inaugural Executive Director of Myriad Australia, a DGR1 organisation enabling Australian donors to support charitable projects across the world.  Anita has over 14 years’ experience in corporate, private and international philanthropy.  Prior to joining Myriad Australia, Anita worked for the Australia and New Zealand Banking Group for 14 years where she managed the organisation’s community investment program across 32 countries and strategically partnered with charitable organisations to achieve social impact.

Myriad Australia (formerly Give2Asia Australia) is a founding member of the global network for philanthropy – Myriad, an Alliance dedicated to supporting cross-border philanthropy. In 2023, Myriad members collectively granted US$314 million to charitable programmes in 113 countries and across a variety of topics including education, the arts, disaster response, health services, climate change, and much more.

Feature image: iStock