I am pleased to announce that yesterday's meeting of the Prime Minister's
Community-Business Partnership (PMCBP) put the finishing touches on two
new tax initiatives to encourage greater corporate and personal philanthropy
in Australia. These initiatives are based on the work of the PMCBP's Taxation
Working Group, chaired by David Gonski.
The initiatives confirm the leadership provided by the Partnership in
making Australia's taxation system friendlier to individuals and companies
who want to give.
New Averaging Provision for Donations of Property
The first measure will make it more attractive for individuals or businesses
to donate property by allowing income tax deductions for all donations
of property to deductible gift recipients to be spread over five years.
This measure builds upon the package announced in March 1999 that allows,
among other things, the apportionment of deductions for certain gifts
to cultural, environmental and heritage organisations.
Extending eligibility to all deductible gift recipients will encourage
property donations for other worthwhile activities such as health, medical
research and education.
Apportionment, or allowing income tax deductions to be spread over five
years, will assist potential donors of property who might otherwise be
unable to realise the full benefit of the income tax deduction in a single
year.
Donations of property valued at more than $5,000, as determined by the
Commissioner of Taxation, will qualify. The new arrangements will apply
from 1 July 2002 and involve an estimated revenue cost of $2 million in
the first year, rising to $10 million per year from 2007-08 onwards.
Guidelines for Private Charitable Funds
The Government has also taken a further significant step to encourage
private philanthropy, with the release today of guidelines for Prescribed
Private Funds, which will become a new form of charitable trust enjoying
tax deductibility for donations made to it. These guidelines will be followed
up with a model trust deed, to be released early next week. The establishment
of Prescribed Private Funds was part of the package announced in March
1999.
These new trusts will provide businesses, families and individuals with
greater flexibility to start their own trust funds for philanthropic purposes.
Funds that comply with the guidelines and the model trust deed will be
prescribed in Regulations as gift deductible entities under the Income
Tax Assessment Act 1997. This means that donations made to the funds will
attract tax deductions.
This measure will open up a new vehicle for private philanthropy, similar
to that existing in the United States, so that families and individuals
can donate to a trust of their own, which then disburses funds to a range
of other gift-deductible recipients. By creating opportunities for private
philanthropy, the Government is building up the social coalition, in which
government, business, community organisations and individuals work together
on social issues.
The guidelines released today specify the criteria by which private funds
will be prescribed in the regulations as gift deductible. They also prohibit
any payments from the funds that directly or indirectly benefit the donor
to the fund.
Limits will apply to the accumulation of money within the fund, such
that investment income can only be accumulated at a rate equivalent to
the CPI, with the rest disbursed to public philanthropic funds. In addition,
funds will be required to provide a simple annual return to the Tax Office
outlining the source of funds, and the payment of funds to various gift-deductible
public funds as well as the extent and recipients of management fees.
These guidelines will ensure that tax deductibility will only be given
where private charitable funds are used for the purposes for which they
are intended - providing money for philanthropic purposes. The guidelines
and model trust deed strike the right balance between maintaining the
integrity of the tax system, at the same time as providing tax incentives
for private giving.
Guidelines
For Prescribed Private Funds (including a Model Trust Deed) - Australian
Taxation Office