Introduction
Thank you.
And I would like to especially thank Philanthropy Australia for inviting me to speak today.
I am here today, first and foremost, to recognise the good work of Philanthropy Australia.
As the national peak body for philanthropy, Philanthropy Australia represents a sector that includes many highly principled Australian companies, families and individuals.
So I want to begin by first thanking you for your hard work in nurturing this important sector. I would specifically also like to thank the Council of Philanthropy Australia, led by your President, Bruce Bonyhady and of course your CEO Gina Anderson for their advice and hard work.
Philanthropy Australia has as its motto "Promoting Giving" – and isn't that a goal you can be proud of.
Making a real and positive change to people's lives is one of the central reasons why I became a politician and your vision of a giving and caring nation is one that the Rudd Government, and I'm sure all of us here this morning, strongly believe in.
In particular, today I wanted to recognise Philanthropy Australia's special encouragement of private philanthropy.
The next step in your support for private giving is being made this morning with the announcement and release of the Private Ancillary Fund Handbook — and I will say some more about the Handbook shortly, after I have put a bit of context around private ancillary funds, and the recent changes.
History of private philanthropic trust funds
One of the major developments in private philanthropy in recent years has been the creation of private ancillary funds (PAFs), or as they were previously know, prescribed private funds (PPFs).
These are, in essence, trust funds that can be set up by families or businesses as a vehicle for private philanthropy.
These funds are tax advantaged as donations to them are tax deductible and the funds, once prescribed, are income tax exempt entities.
The sole purpose of private ancillary funds is to give to other charities, that is to donate monies to those charities that are at the coalface, that are out in the community doing charitable works.
That is, private ancillary funds give to a kind of charity known as a 'deductible gift recipient'.
Of course, many philanthropists – as you all know – work very closely with the charities that they support so this arrangement is by no means simply a technical monetary support mechanism.
There are currently around 25,000 deductible gift recipients in Australia, across nearly 50 categories of organisations.
Organisations that are deductible gift recipients include:
- cultural organisations – such as public museums and art galleries;
- environmental organisations;
- public hospitals;
- universities;
- children's charities, and other organisations that relieve poverty, destitution or suffering; and
- many other categories of organisations that provide a broad public benefit.
The pool of assets collected into private ancillary funds is effectively stored up for the future benefit of just these kinds of organisations; stored up for the wider public good.
The growth in the size and number of private philanthropic trusts since their inception in 2001 is one of the sure signs that philanthropy in Australia is coming of age.
I am pleased to confirm this morning that there are now over 800 funds in existence and that the size of the total pool of assets held in this funds has increased by an average of almost 60 per cent per year.
What that means is that in the short time since 2001, private ancillary funds have received donations of over $1.3 billion made distributions for the public good of over $300 million.
With over almost half a billion dollars in donations and $117 million in distributions in the 2007/08 year financial year alone.
This massive growth in donations, has created a growing asset pool that is now delivering well over $100 million annually to public hospitals, children's charities, environmental organisations and other groups to help those most in need in our community.
I say congratulations to all those in this room and to all of those in the wider community who play a role.
The 2008-09 review
In the 2008 Budget the Rudd Government announced its plan to work with the sector to improve the regulatory framework for these funds.
The Government's overriding intention was to ensure public confidence in private philanthropy that is supported with tax concessions remains strong into the future.
And as you all know, this new framework became effective on 1 October 2009.
Three rounds of public consultation examined different parts of the regulatory framework as it evolved.
Starting in November 2008 with a discussion paper, consultation also covered legislation and new guidelines.
There is no doubt that Philanthropy Australia's effort to collect the sector's views, and pass these to myself and my predecessor, led to better regulations which are more attuned to the realities of the sector today, and its needs as you grow into the future.
It was also clear that respondents held Philanthropy Australia's views in high regard, with many opting to simply endorse Philanthropy Australia's comments.
Your advocacy sat well with the Government's strong commitment to listen to you and to get the content right before making our final decisions.
Private Ancillary Fund reforms
And I strongly believe that together we got it right.
The new framework of rules for private ancillary funds builds upon, and improves, the old framework.
The new distribution rules are simpler – with a new minimum distribution rate of 5 per cent of a fund's wealth per year, or $11,000, whichever is the greater.
However, flexibility has been preserved for smaller funds that would be wound down quickly if they were required to distribute $11,000 per year.
These funds can choose to be subject to only the 5 per cent rate if they meet their running costs from outside the fund.
These rules cut red tape by removing the need for complex accumulation and distribution plans – this means more money going to those who need it most.
The endorsement process has been streamlined, with the Tax Commissioner now solely responsible for endorsing funds. This brings the administration of private ancillary funds into line with most other kinds of deductible gift recipients.
As you also know, the guidelines have been updated and are now also legislated.
A more defined penalty regime has been introduced, with the Commissioner now being able to choose the most appropriate remedy from a range of options to deal with those few funds that choose to abuse the system.
And finally, important transitional rules give existing funds time to transition to the new arrangements.
The Handbook
To help new starters in the field, as well helping existing trustees transitioning into the new arrangements, Philanthropy Australia has again stepped up and developed the Private Ancillary Fund Handbook.
And it gives me great pleasure to today release the Handbook for the first time.
In particular, I want to thank David Ward for his foresight, and hard work, in putting together the Handbook, along with the other contributors.
And I'd like to mention the support of JBWere, ANZ Trustees, the Macquarie Group Foundation, Perpetual, UBS and Freehills.
The Handbook contains information that will help trustees determine their roles and duties and includes checklists and other information helpful to maintaining compliance.
The Handbook is a valuable addition to Philanthropy Australia's many other publications which already include The Trustees Handbook, The Australian Directory of Philanthropy, A Guide to Giving for Australians, and the Australian Philanthropy journal.
It is yet another example of Philanthropy Australia's commitment and contribution to the mission of representing, growing and inspiring an effective and robust philanthropic sector, and it is my pleasure to be here this morning to publicly launch it.
Philanthropy and social investment
Now I would like to say a few words on the broader issue of the role of philanthropy in the Australian community in the year 2009, but also on how private ancillary funds fit into this evolving picture.
Philanthropy continues to play a growingly vital role in Australian society.
Your website defines philanthropy as "the planned and structured giving of money, time, information, goods and services, voice and influence to improve the wellbeing of humanity and the community."
Philanthropy spans the bridge between the community and business sectors and philanthropy gives life to creative ideas.
It channels support to the most vulnerable and provides a way for individuals and businesses to connect with others in the community with whom they might otherwise not engage.
In recent times, especially given the current economic circumstances, there has been a shift away from ad hoc giving towards real social investment made through longer term partnerships – what has been called "engaged giving".
Private ancillary funds are important tool for this kind of giving as they can facilitate the building of long-term and involved relationships with charitable organisations. Through these partnerships, philanthropists can follow the impact of their efforts, and be part of the journey of change and share the passion.
This can lead not only to more philanthropy, but better philanthropy – a real investment in society.
I believe that private ancillary funds have an important part role to play in a new model of social partnerships that is critical to addressing challenges I have talked about.
Responsibilities and impact of investment
One important area of responsibility for private ancillary funds trustees, I would like to raise today, is around the investment decisions they make.
The importance and impact of these decisions will only grow as the size and numbers of these funds do.
As patient long-term holders of capital, a responsible or sustainable investment approach is critical.
It is clear, not only from recent times, that environmental, social and governance issues, can not only detract from the purpose of any fund of monies, they can and do pose core investment risks with the potential to impact heavily on the long-term viability of investments.
I see the consideration of these issues as an important part of a trustee fiduciary responsibility.
The Australian superannuation industry, while with considerably more funds under management, has demonstrated the importance of addressing these issues by embracing the United Nations Principles of Responsible Investment (UNPRI).
In support of this direction, I took the decision to fund the world's first Responsible Investment Academy, which has now partnered with the UNPRI to build the capacity of the financial services sector in this area.
While trustees have a responsibility to invest responsibly they are also presented with an opportunity to leverage the good they do by ensuring that the capital they invest is also an investment in society.
While I know many trustees work to ensure that investments contrary to the trusts purpose are not held, I think it is also worthwhile actively seeking invest opportunities that can make a positive difference.
"Impact investment" as it has become known – seeks financial return from investments that generate social and environmental good.
Whilst this type of investment is at its infancy in Australia, a committed private and public philanthropic funds sector, as it grows, could stimulate supply of these types of investment products.
As such, I believe trustees of private ancillary funds can play an important role in the development of this form of investment in Australia and the sector it would support.
I today call on private ancillary fund trustees to join with your counterpart superannuation trustees and step into this area.
Responsible investment of fund assets matches perfectly with the responsible goals you support.
This is an area the Government is keenly watching and I encourage you to explore the possibilities.
Conclusion
In conclusion, then, I want to once again thank Philanthropy Australia for supporting donors and philanthropists in Australia – and indeed for helping thousands of ordinary Australian's who are in need of help.
Philanthropy Australia's assistance to the giving sector, including the provision of various handbooks and other publications and resources, is truly of the highest value.
And with that I again repeat that it's my distinct pleasure to publicly launch and commend to all current and potential philanthropists the Private Ancillary Fund Handbook.
Thank you.