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Back to the future – Philanthropy helps to feed Australians

4 June 2020

Author: Emma Sakellaris, Executive General Manager of Trustee Services

It is truly a time of unprecedented change, uncertainty and disruption to the lives of all Australians. The breadth and depth of the economic shock associated with this global pandemic is simply beyond comprehension and will continue to impact us all for many years to come.

A key impact currently evident is the simply devastating struggle so many Australians are now experiencing with regard to feeding their families each day – it is heart-breaking to know that some families are not able to support remote learning with their children as they have needed to make the decision between an internet connection and purchasing food staples.

Philanthropy challenges during COVID-19

Prior to the pandemic, high net worth individuals had focused their philanthropic giving on solving ‘whole of society’ issues and establishing multi-generational legacies, across areas such as medical research and climate change. In this sense, philanthropy had made the shift towards social innovation – delivering value to the community in line with complex global or societal needs, as opposed to meeting the needs of a limited cohort of individuals. As a result of this shift, we’ve seen increased donor interest in concepts such as impact investment.  

However, many grass-roots charities have been hit hard because of this shift and continue to be reliant on consistent grants through charitable foundations, structured giving and bequests. But with the current economic crisis, the pool of donors able to provide funds  to charitable organisations has significantly shrunk. This is despite an exponential increase in the number of people needing support1.

Even prior to the economic fall-out of COVID-19, lower-income families were often forced to prioritise food at the expense of other necessities such as education and medical costs. Now with social distancing, school closures, significant income disruption and job losses, it has created more extreme economic hardship for families. With unemployment forecast to rise dramatically, the number of families needing urgent support to meet basic needs will not be able to be met through existing charitable capacity across the sector. 

Can middle-Australia rise to the philanthropic challenge?

The COVID-19 crisis highlights the desperate need to re-focus regular donations to grass-roots charities, that provide meals and other urgent support to families and vulnerable individuals who are at such a high risk of being truly left behind. Despite the global shift to social innovation, philanthropy was never the exclusive domain of the extremely wealthy, and now more than ever, the contribution from middle-Australian donors will be critical for the ongoing continuation of charities. 

Many more individuals who are part of ‘middle Australia’ are appreciating that they are comfortably well off, have retained much of their wealth and are wishing to give back during this critical period. Based on our experience, although most will still provide for their children in their Will, many do not intend to leave everything they own to the family, who are often comfortably well off in their own right. Instead we have seen the priority become structured charitable giving - either during their life or as bequest in their Will.

Charitable trusts and tax concessions

A charitable trust can be established with Australian Unity Trustees with an initial donation of $20,000 to an existing public Foundation (known as a Public Ancillary Fund or “PuAF”)2. While this may seem a reasonable amount, the tax deduction from the initial donation can be spread over five years, and all subsequent donations made to the trust are tax deductible.This option allows the gift givers to “dip their toe” in the water of charitable giving and create a formal, structured process of giving while maintaining capital within the trust to continue into perpetuity (and continue to give to future generations).

Similarly, where individuals or families wish to establish their own Private Ancillary Fund (or a “PAF”, essentially a stand-alone charitable trust)3, these can be established with Australian Unity Trustees with an initial donation of $200,000. The tax deduction from the initial donation can still be spread across five years also and all future donations are also tax deductible. This option is often utilised by individuals or families who have recently sold a business and are wishing to minimise the tax that is payable following that transaction as well as seed their philanthropic legacy. 

Unlike ad hoc donations or even recurring donations, charitable trusts are designed to grow capital over time, whilst generating sustainable income for granting. The donor, family and in some circumstances, friends can all donate to the trust, and claim the tax deduction, which will further grow the capital and therefore further grow the income generated for distribution to eligible charities.

All charities depend on donations and are very appreciative of them. However it is regular, recurring giving that provides the most benefit.

Important information

This information is provided by Australian Unity Trustees Ltd ACN 162 061 556, AFSL 483220. Australian Unity Trustees is a wholly owned subsidiary of Australian Unity Limited.

Any advice on this site is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making any decisions. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. Information on this site is intended for Australian residents only and any access to this material via the internet is subject to the Terms and Conditions of Use of our website and our Privacy Policy. Please refer to our Financial Services Guide and Fee Schedule.

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