Good afternoon everyone and thank you for inviting me to address you today. I am delighted to be here to celebrate the first anniversary of the Workplace Giving initiative.
Often I am called upon in my capacity as Minister for Revenue to speak about tax. But it's a refreshing change to be able to speak today about how the tax system can make such a profound difference to the lives of ordinary Australians - by facilitating charitable donations.
In looking at how successful the workplace giving program has been over the last 12 months or so, I came across an interesting quote from an American mathematician - Dan Bennett:
'Real charity doesn't care if
it's tax deductible or not'
As a mathematician Mr Bennett is presumably a rather pragmatic person so while he may be right, perhaps I could add a postscript to his quote: Real charity doesn't care if it's tax deductible or not, but it makes the process smarter, faster and more efficient for the charities involved.
As most of us in the business community know, you can spend most nights of the week attending functions for benevolent organisations.
Increasingly the business of fundraising has become just that – a fairly sophisticated operation requiring enormous amounts of effort from the organisation involved and increasingly competitive marketing campaigns.
The genesis of the Workplace Giving initiative had a simple premise. If we could somehow facilitate a greater flow of donations to charities in a more efficient manner then charities could get back to the coalface and concentrate on their core business.
An article on Australian Charities Fund in BRW last week noted that Australians give an average of $200 in tax-deductible donations a year – about half the United States level.
I agree with Greg Hutchison's sentiments that this does not make Australians 'mean-spirited' but it does validate the need for an infrastructure for giving. 'It's got to be easy, tax-effective and efficient'.
Despite its unpopularity, the taxation system is the economic underpinning of every Government action – whether it's securing our borders, encouraging business or providing a safety net for those that slip through the cracks in this otherwise prosperous nation.
The Economic Underpinning of Giving:
Although Australia is a wealthy nation and many of us enjoy high living standards compared to people in other countries, there are still those who struggle to make ends meet and many who face hardships and need.
The fact that we have an estimated 100,000 homeless Australians is a matter of concern to us all. And this is only one of the challenges.
There is clearly still much to be done.
This Government is keen to work with all those who can see a way to improve outcomes for those in need.
And the Government is committed to doing what it can to produce better outcomes for all Australians including those who need additional assistance.
This includes formulating policies that ensure a stable, productive and growing economy. Policies to encourage philanthropy and that support charities and policies that help families in their work and parenting responsibilities.
Expenditures aimed at providing services for the long-term unemployed and those on disability support pensions.
Policies in tune with longer term priorities such as welfare reform and retirement savings, and policies designed to help manage the inevitable challenges presented by the ageing of our population.
As a Treasury Minister it would be remiss of me not to identify economic policy as a central foundation to the Government's ability to assist those in need.
Clearly, sound, responsible economic policy is inextricably linked to the social and financial well-being of all Australians.
Strong economic growth is the basis of any government's capacity to enable its citizens to build their own wealth and independence, to support the services and structures vital to a fair society and to fund the social initiatives necessary for those who require assistance.
The Howard Government takes pride in its sound economic management, not just to facilitate rising living standards but also to ensure that the disadvantaged in society are not left behind, so the prosperity flowing from sound and sustained economic management is fairly distributed and shared throughout the community.
The Tax System: Facilitating Giving
The Government is committed to the charitable sector and has recently extended the common law meaning of a charity to include certain child care and self-help groups, and closed or contemplative religious orders.
This builds on the Government's response to the Report of the Inquiry into the Definition of Charities and Related Organisations that was announced on 29 August 2002.
There are several specific measures that are targeted at supporting charities and the charitable sector. The Government makes a generous contribution to the philanthropic sector by allowing taxpayers to claim a deduction for qualifying donations of $2 or more to deductible gift recipients.
This deduction helps deductible gift recipients to attract the financial support necessary for their important activities by providing an incentive for people to donate.
This contribution by the Government is uncapped and has been steadily growing from $230 billion in 1998-99 to $330 billion in 2001-02 and will continue to grow as community generosity grows.
However, as the cost of these concessions is uncapped, the Government is concerned to ensure that deductible gift recipient status is afforded to a closely targeted set of organisations.
To date, the Commissioner of Taxation has provided deductible gift recipient status to around 18,000 organisations.
Deductible gift recipient general categories include organisations such as public benevolent institutions, public universities, public hospitals and approved research institutes, cultural and environmental organisations, school building funds, voluntary organisations providing family counselling and overseas aid funds.
The Government has recently added two new general categories in recognition of the changing activities of the charitable sector.
In exceptional cases where organisations are clearly deserving of deductible gift recipient status, I have sought an amendment to the Income Tax Assessment Act 1997 to have these organisations specifically listed by name as deductible gift recipients.
This allows these organisations to receive tax deductible gifts even though they don't meet the requirements of the general categories.
The Government has also encouraged environmental philanthropy by providing a tax deduction incentive for landholders and environmental philanthropic organisations to enter into agreements to conserve land in perpetuity, helping to maintain the environmental value of the land for all Australians, both now and into the future.
And from 1 July 2004 the Government will provide a tax deduction for a donation made to a deductible gift recipient that has an associated minor benefit.
Under current law if a deductible gift recipient holds a fundraising dinner, none of the cost of attending the dinner is deductible even if some of the payment is intended as a donation. Again, this is encouraging greater philanthropy by those who can and will make donations.
A new Era of Giving:
Workplace giving completes the Government's approach to supporting charities and facilitating donations.
As everyone here today is no doubt aware, workplace giving allows employees to elect to give a portion of their wage to selected charities through payroll deductions.
It might only be $2 or $5 per week: the cost of a cup of coffee or a magazine and some employers make matching contributions.
For instance I note that corporations involved with the Australian Charities Fund including onesteel, Diageo, Caliburn, Aviva, AGL and British American Tobacco among others match all or a significant proportion of donations made by employees.
Workplace Giving is a simple yet effective idea, through which many charities can raise money. And, as is often the case, it has a connection to the tax system - with employees receiving tax benefits immediately and not having to wait until the end of the financial year to claim.
There are a wide range of organisations involved in the workplace giving program and represented here today and you give more than money to some of the charities that you support.
The corporations and employees involved with Australian Charities Fund enjoy a close relationship with the charities they sponsor, often taking an active role in the development of specific programs.
I know that some corporations also offer pro bono work and volunteer assistance to further assist their chosen charities. This is the ultimate embodiment of charity – that it leads to a greater connection with the plight of the underprivileged or endangered.
I am pleased to report that the Workplace Giving concept is finding some success in the Government sphere as well as private organisations.
In a little over a year since the program was launched by myself and the Tax Commissioner Michael Carmody, ATO employees have raised almost $150,000.
There are currently 11 approved charities and a staff survey is being conducted at the moment to gauge which other charities staff would like to see added to the program. It is anticipated that there will be a further 20 charities for people to donate to.
The Department of Treasury has also implemented the program along with another 11 Government departments and agencies. I look forward to updating you again in the near future about the success the program has had in the public sphere.
A Collaborative Approach:
No national government can successfully pursue its economic priorities in
isolation from its social policy concerns. There is a clear interdependence
between the two.
A nation's economic progress depends ultimately on the condition of its
society – its stability, its cohesiveness, its fairness and its avenues
for individual self-fulfilment and equality of opportunity.
In turn, the strength of any society depends critically on the capacity of its economy to provide growth, incentives and jobs, and to fund assistance programs for those in need.
Society cannot function without trust, transparency, responsibility, self-reliance, cooperation and respect for individual dignity.
Economic growth is necessary but not sufficient for a strong society. That is why the Government takes careful account of the social implications of economic policy making and the economic consequences of social policy initiatives.
The Government's approach recognises and welcomes the essential support of social functions and institutions such as families, community groups, religious organisations, carers and volunteers, and welfare and charitable organisations.
I thank each and every one of you for your commitment to Workplace Giving and the broader principles of philanthropy.
To conclude with a quote from Francis Maitland Balfour:
The best thing to give to your enemy is forgiveness; to an opponent, tolerance;
to a friend, your heart; to your child, a good example; to a father, deference;
to your mother, conduct that will make her proud of you; to yourself, respect;
to all men, charity.