SPEAKER_00 0:37

Hello, you're listening to the Philanthropisms Podcast. This is the podcast where we try to put philanthropy in context. I'm your host, as ever, Rodri Davis, and this week we are in conversation with Christian Seibert. Now, Christian is an associate commissioner with the Productivity Commission in Australia. You'll hear a bit more from Christian in a moment about what the Productivity Commission actually is. But Christian is a philanthropy expert in Australia and has been for a long time, and I've known Christian for many years now. He used to work at the Centre for Social Impact at Swinburne University of Technology, where he's an industry fellow. And before that, he worked at Philanthropy Australia, which is the main infrastructure body for philanthropy in Australia, or Peak Body, as they call it over there. And he also was an advisor to Philanthropy Australia for quite a while after that. And Christian, as you'll hear, joined the Productivity Commission specifically to work on a big inquiry that they've been doing into philanthropy in Australia, which had uh relatively recently produced uh a draft report at the back end of last year. And that's kind of what I sat down to talk to Christian about. Um so we talked a bit about how that whole inquiry by the Productivity Commission came about, uh, and then we sort of dived into some of what was in uh that draft report, which I think is really interesting for anyone who is interested in the whole question of government's role in supporting and encouraging a culture of philanthropy, how you go about doing that, what some of the rationale is, and that kind of thing. Um, so we talked uh a bit about uh things like tax incentives. Um obviously the context in Australia is quite different from how it is in the UK or in the US, although there are similarities. Um, but we talked about the sort of underlying question of the uh the rationale that a government might have for wanting to offer tax relief on donations, um, which the report really kind of digs into, and then what that means in terms of the form within which you offer uh those donations, uh those tax uh incentives. We talked a bit about the kind of broader question of how you can actually use uh policy making to encourage philanthropy, whether there are limits to that, you know, what government's role is in relation to philanthropy, whether it is essentially to kind of get out of the way and remove barriers, or whether it needs to take a more proactive role. Um we talked uh about the importance of data and what some of the recommendations in uh the report were around that. Uh, we talked about uh these things called private ancillary funds, which are essentially the kind of Australian tax legal designation for foundations and some of the sort of specific rules uh around those that I thought were quite interesting. Um and then we also talked about one of the I thought the most fascinating um recommendations in the report, which is about the creation of a new philanthropic fund designed to be owned and controlled by Aboriginal and Torres Strait Islander communities. So Christian and I talked a bit about you know what the background to that was, what the rationale was, what that policy recommendation was designed to achieve, um, you know, what the reception to it had been and where it might go in the future. And then we talked a bit about what the plans were next for for the report, what the process was and what the kind of the ambitions were and where things might go next in terms of philanthropy in Australia. Um so without further ado, let's get into the conversation. Um, I thought it was a really, really interesting one. Um, you know, if you don't know much about the context for philanthropy in Australia, I think there's a huge amount just to learn about that, but also I think it kind of has a lot of relevance for anyone listening in the UK, the US, uh uh Europe, Canada, and elsewhere. I think there's some pretty kind of fundamental shared truths about the uh the role that government can play in trying to encourage um a culture of philanthropy within a country. Um so I will be back at the end of the podcast for the usual bit of housekeeping. Okay, great. Well, I'm here with Christian Seibert. Hi there, Christian. Hi, Rodri, how are you going? I'm good, thank you. And yeah, for those of you listening, probably already have heard, Christian is an associate commissioner with the Productivity Commission uh in Australia, um, who've just brought out a really interesting draft report uh on philanthropy following a whole investigation they've been doing with kind of submission calls for evidence um and lots of uh kind of really fascinating stuff in there. So that's what we uh here to talk about today. Um so maybe the best place to start is for you to just tell everybody a bit about, you know, what the Productivity Commission is, because people outside Australia probably aren't aware of that, um, how the investigation into philanthropy came about and and what some of the things, you know, the kind of key headlines from the draft report so far are.

SPEAKER_02 5:21

Yeah, so the Productivity Commission, it's a it's an independent Australian government body um that provides policy advice to the Australian government to assist them with making well-informed policy decisions. So it's an independent um commission. Um, so it's different to a say a department, it's an independent um standalone statutory commission. Uh it's a permanent statutory commission. And yeah, basically it undertakes public inquiries on major economic, social, and environmental policy issues at the request of the government. It also self-initiates research on topical issues and contributes to public debate to encourage informed policy discussion. And really, it's about trying to advance and promote evidence-based policies developed through extensive engagement with stakeholders to improve policy outcomes for the community as a whole. So, a really notable aspect of the Commission and its approach is that it doesn't just look at what could benefit a particular sector, but it looks at the community as a whole and what's in the interests of the community as a whole. So, yeah, it's it was established in 1998 and it's been responsible for many significant um reforms in terms of developing the ideas and proposals. And then it's up to government to decide what to do. The commission makes recommendations to um the government, and then the government decides whether to accept them or not, and what to do. Um, but yeah, it's it's a really interesting organization and it covers a whole range of different topics and areas in its inquiry. And one of the inquiries that it's doing right now is the the philanthropy inquiry, and in terms of how the philanthropy inquiry came about, so um my previous roles, I was at two previous roles. I was an academic at a research centre here in Melbourne called the Centre for Social Impact at Swinburne University of Technology, but I was also at Philanthropy Australia, the peak body for philanthropy in Australia for many years. And one of the projects I was involved with at Philanthropy Australia was during COVID developing the so-called blueprint to double structured giving in Australia by 2030. And it was a kind of a comprehensive um policy um manifesto, effectively, um, for um growing structured philanthropy in Australia. And the current Australian government, when they were in opposition before May 2022, they um basically adopted that that target to double um giving by 2030, but giving broadly more broadly defined rather than just structured giving through foundations. So yeah, they adopted that that that target, that objective. And when they won the 2022 election and came into government, um they were thinking about well, how can they sort of you know um try and achieve that that target, that objective? And yeah, that's how the commission inquiry came about. So this inquiry, it started in February last year, February 2023, when the terms of reference were given to the commission when I was appointed by the Australian government as an associate commissioner. So I'm an associate commissioner, I've got two other commissioners with me that are co-leading or jointly leading um the inquiry, and we've got a team of very capable, hardworking staff with diverse backgrounds, economics, um in other frameworks and fields, um, that are the team that are the working on the inquiry together.

SPEAKER_00 8:57

Yeah, it's really interesting to hear. And and you sort of gave a bit of a sense of it there in terms of how how this came about. Um, you know, it's an ambitious goal to double giving, uh, certainly within any space of time, but within a relatively short period of time. In terms of what the starting point is, just to give people a sense, what what does the the current environment for giving and philanthropy in in Australia look like? And obviously that's a pretty you know difficult, nebulous question, and you can feel free to use a you know a big broad brush. But you know, are we talking about you know a sector that's dominated by high net worth giving or mass market giving? How much corporate giving are we talking about? That kind of stuff.

SPEAKER_02 9:37

Yeah, and so it's actually really important to point out too that the the our terms of reference um are very broad in terms of they include sort of donations of of money, but also donations of time, volunteering. So they're very obviously very different things and they're influenced by by different um levers, etc., and and can face different challenges. So it's it's quite broadly defined in terms of sort of where Australia is at um in terms of of giving. So the the the charities sector in Australia, there's 60,000 charities in Australia, and about 7% of their um their annual revenue, based on the most recent data, comes from um donations. So their annual revenue is 190 billion Australian dollars, which is around US 125 billion, just under 100 um billion pounds. Um and yeah, about 7% of that comes from from donations. And the split is really sort of most most of it, like 40 sort of 43, 44 percent is from individuals, um, including sort of the mass market. Um around 14% is from uh trusts and foundations. Bequests make up a relatively small proportion, 4%. And then corporates they make up about 39%, but the challenge we've got that good data on some of these things, which is one of the things that we address um in the draft report. But yeah, it's um it's uh the the the giving is not sort of you know the the main source of of revenue for uh for for charities, but it's it's still an important source and it can be used for particular things. And there's also it's also interesting that there are particular dynamics in the sense that like um obviously the largest 10% of charities receive the vast bulk of donations. I think so the largest 10% receive 4% of all donations. But interestingly, smaller charities uh tend to be more dependent on donations rather than larger ones that might have grants from government and and and contracts or do trading to further their purposes as well.

SPEAKER_00 11:42

Yeah, that's interesting. That certainly echoes, I think, some of the trends that we see here in the UK. Um, one thing that struck me in this talk when you were talking as well, in terms of how this might relate to wider debates that are going on in around kind of philanthropy and giving in in other places. Is there any sense of a narrative in Australia about concerns that giving might be in decline or that you know kind of participation in giving is down and that there's any sort of hollowing out of mass market giving and an over-reliance on on uh on larger donors? Because I know that's certainly something that's a very big cause of concern in the US and to some extent in the UK as well.

SPEAKER_02 12:19

Yeah, well, some of the trends that we see elsewhere are are being mirrored in Australia, in that um we've had quite strong growth in donations of of money. Um volunteering's another matter, so we've seen sort of formal volunteering declining, but growth in sort of um donations of money um has been going up quite strongly and quite consistently as well. But based on the data we've got, participation in that form of giving is actually going down. So, for example, in um a few years back in 2021, um 28% of taxpayers claimed a deduction, which is not a perfect measure for a um a donation to a charity, whereas um in 2010-11, sort of 10 years before that, 38% were claiming um a deduction. So I think we're seeing growth in giving, um, but less participation. We are seeing the growth in um high net um worth um giving and more foundations um being established, which in Australia are called private ancillary funds, which are similar to the private foundations in say the US and probably in the the UK as well.

SPEAKER_00 13:27

Yeah, absolutely. I want I want to get into the weeds a bit on some of the things around how uh donations are treated in the tax system and what you've you recommendations are about that. And just before I do, there's a couple of other things I think on this wider context point. And one that I was interested in is I guess the in terms of wider trends about about philanthropy worldwide. One is that I think certainly over the last decade or so there's been a much clearer environment in which there's kind of critical assessment and scrutiny of philanthropy. Again, a lot of it as ever kind of coming from the US and driven by specific concerns over there, many of which do have analogues elsewhere, some of which don't necessarily have as clear analogues, but that's that's not always taken into account. Um, but in in the Australian context, do you do you get a sense that some of those critiques of philanthropy that we see in the US resonate or are kind of having an impact on the way in which people think about or talk about philanthropy over there? And is that has that played any part in in the thinking that you've done uh in the Productivity Commission?

SPEAKER_02 14:27

Well, it it's certainly it's not as um pronounced as say it is in the US because I think you know there's a very different socio-political context there. Philanthropy and big philanthropy has played much more of a role there for much a much longer period of time. Whereas in Australia, obviously, similarly probably to the UK and and some other European countries, there's a government's traditionally had a bigger role. Um, and philanthropy has been there, but it hasn't probably been as prominent as say in the US. But that is changing. So over the last decade, we've had our first um philanthropic philanthropic foundations with sort of assets over a billion dollars being established, and we're seeing now sort of um wealth from um the the tech um sector as well being generated here. So the the landscape is changing. You do see sort of some of those critiques sometimes, and they did come through in our in our submissions, in some of our submissions. So we see over 270 submissions um earlier um in 2023 in response to our call for submissions, and you know, they raised a whole range of different things, but some of them did raise the point that, well, um, and this is you know the familiar point that's made that you know when when governments um have tax revenue and they fund things, well, there's some democratic oversight there, etc. Whereas when philanthropy supported through tax incentives, tax concessions, um it doesn't have the same democratic oversight, and yeah, the the policies and the the regulatory arrangements can have an impact on um on democratic governance as well. So it certainly came through in some submissions, and we do um sort of draw that out in um the draft report. We we really sort of want to look at um everything through that sort of so to speak critical lens, not to criticize, but to look at everything at in terms of its advantages, its disadvantages. Um so this is not about just going, oh, philanthropy is wonderful, everything about philanthropy um is good. Like, you know, we we we are really sort of analyzing the context, the different roles of government, of philanthropy, um, to really understand sort of yeah, those dynamics.

SPEAKER_00 16:46

Yeah, absolutely. And I guess that that gives us a natural point at which to come on to getting into the the weeds slightly on one of the issues that sort of looms large in in the report, which is around the system of tax relief on donations, um, which I think will be really interesting to people reading the report anywhere, um, because it's obviously what you say is specific to um to the Australian context, and it'll be interesting to sort of hear a little bit about what the sort of specifics of that context are. But because you do dig into the kind of underlying points about not just you know how the specific deductions or kind of incentives are structured, but what the underlying rationale is for governments offering just you know uh tax incentives in the first place, it has a much more universal feel to it. Um, maybe let's come on to that, that sort of slightly more theoretical stuff in a second. But I mean, just to give people a sense, what are we talking about at the moment in terms of what the system looks like for a donor when they're they're making uh donations and might want to get tax relief on it in Australia?

SPEAKER_02 17:45

Yeah, so in Australia, basically, um unlike say in in the UK or the US, where we're when you're a um uh a charity or a non-profit, uh 501c3 in in the US, you get that status, and then any donation to you is um is tax deductible. Here you you become a charity, a registered charity um with the the ACNC, the Australian Charities and Not for Profits Commission. But then in order to receive tax-deductible donations, you then need to still be um endorsed by our Australian taxation office. And not every charity is eligible for that. So that's different to say um yeah, the UK, um the US, where it's much broader the eligibility. Here, um, part of the problem is is that there's lots of charity, about half of charities don't actually um aren't actually eligible and can't receive tax-deductible donations. Um, and I'm happy to talk about sort of sort of why that's the case and how that arose and the issues with it. But um basically the ones that are eligible, and so say a typical sort of welfare charity would be eligible, etc. But the ones that aren't eligible can include, well, um the International Campaign Against Nuclear Weapons, which was a um organization that won the Nobel Peace Prize a few years ago. It started out actually in Melbourne, um, and now it's a global charity, but it's Australian arm, it can't actually, it's not eligible because um it's sort of an advocacy organization. Many advocacy organizations aren't eligible. But basically, if an organization is eligible, then a donor donates anything above two dollars to it and it's tax deductible. It's a marginal um tax rate deduction, um, unlike say Canada or New Zealand that have a credit, it's uncapped. So you can donate all your um income, get it down to zero, and pay no tax if you wanted to do that. Um whereas, say, in the US um there are caps, etc. So it's uncapped in Australia. So in one sense, the scope is narrower, but it's quite generous in terms of um being able to claim the deduction.

SPEAKER_00 19:52

Yeah, I mean, similar, I mean, in that uncapped nature to the UK then. And I I suppose that immediately, for I mean, for people who are sort of aware of the difference between credit-based and deduction-based systems, will will immediately sort of think, ah, well, yeah, it's probably subject to some of those concerns about upside-down effects, then where you know people who are paying more tax already get more value out of the deduction and that sort of thing.

SPEAKER_02 20:15

Yeah, and the people who don't pay any tax don't get any deduction. And and um, yeah, I mean, our tax-free threshold in Australia, and there's some discussion at the moment about increasing it, it's sort of 18,000 Australian dollars. So if um, you know, you're a retiree and you're sort of getting your retirement income, which is um tax-free in Australia, um, you know, you don't really benefit from any um incentive.

SPEAKER_00 20:36

Which which brings me to the to the point that, you know, that kind of thing seems like uh almost a sort of technical specification about how you design these incentives. And similarly, your point about the fact that, you know, some organi in Australia there is a distinction between those organizations that are re recognized as charities and then a smaller subset of them that are eligible to receive these tax reliefs. Again, this seems like kind of sort of a technical point. But actually, it goes to sort of a fundamental question about why it is that you're offering these incentives, because it's that that dictates how you structure them. I'd be really interested to hear why there is that distinction between things that are seen as, okay, you know, yes, that can be a charity, but then saying, well, yeah, but some some of them they can be a charity, but it's not allowed to have tax relief. Because that says something really interesting about how the government views the purpose of the tax relief.

SPEAKER_02 21:27

Yeah, well, and our tax deduction's been around for sort of over a hundred years in Australia, and it's evolved in this really ad hoc manner. It started out sort of that there was a deduction for basically sort of welfare charities called public benevolent institutions here. And then over the years, sort of a bit like paper mache or a ship sort of sailing through the water with barnacles kind of being attached, it just kind of little other categories were added. Oh, this category of charity will make them eligible, we'll make that one eligible. And then, you know, 100 years later, It's just like Swiss cheese. Like there's you know various organizations that are eligible, but then various ones that that miss out. And there isn't really any coherent, overarching policy rationale for it. So for example, you can be a charity trying to prevent illnesses in children in Australia, you're eligible. But if you're trying to prevent injuries in children, you're not eligible. It's not because someone sat down and said, no, no, we don't want them eligible. It's just evolved in this really ad hoc manner. And it's one of our main findings is that that framework, it's called the deductible gift recipient framework in Australia, it's not fit for purpose and it needs comprehensive reform to broaden the scope of eligibility, simplify it, um, because it is the framework really that sort of sits at the foundations of um the giving of money in Australia. And our our draft report's called the the future foundations for giving for a reason. It's about sort of making sure those foundations are solid as giving grows into the future.

SPEAKER_00 23:08

Yeah, that's really interesting. And I think that I mean it it's incredible in how many contexts around the world the when you dig into uh how uh systems for tax incentives on donations work, it is often some sort of odd mishmash of historical happenstance and kind of evolution over time rather than a clear set of principles about what you know what the policy is designed to achieve and and then kind of focusing it um according to that. And it sounds like that's very much the case there. I guess, I guess, given that, and you know, you're sort of saying the system was designed, you know, with one very, very limited purpose in mind a long time ago and it's evolved over time, and you're saying now it's not necessarily fit for the purposes that you would envisage a system of uh of kind of tax incentives on donations having. What are you recommending is best to do about that? Because obviously there's the challenge of it's very difficult when you have an incumbent system to suggest just ripping the whole thing up and starting from scratch. But then if you do need fundamental reform, how do you do that whilst maintaining the benefit that probably the nonprofit sector in Australia uh already feels that there is from the system and would be reluctant to lose?

SPEAKER_02 24:19

Yeah, and it's important to sort of qualify sort of what we're proposing is that it's just we just we've got a draft report with draft recommendations and we're doing further um consultation, we've got public hearings, we'll be receiving further submissions, it's all sort of happening in the next few months before we provide our final report to the government in in May. But basically, with this DGR um framework or system as it's called, we're basically proposing to broaden the scope of eligibility and tie it more closely to your um particular charitable purpose, or it's called a sub a registration subtype in Australia. But still, there would be some um categories of organizations under our um draft proposals that would become ineligible. Um and then we're also not expanding it to all charities. So, sort of one group of charities that uh are not gonna, we're not proposing to expand it are charities with the sole subtype of advancing religion. So you have churches, mosques, synagogues, etc. I mean, that if there's a a welfare arm attached to it or something, that's different, that would be eligible, but just for the purely sort of the practice advancement of religion wouldn't be, it's not eligible right now, and it wouldn't become eligible under our um proposals. But I think the the main thing we're trying to do is provide some sort of overarching coherence, some sort of policy framework for this to sit in to avoid the situation that we're in now where it's just evolved in this ad hoc manner. There's all these holes, you try and plug a hole and something pops out somewhere else. It's it's it's really um uh sort of what happens. And then we have a situation here where sometimes charities miss out, they're ineligible, and they can get what's called a specific listing where they actually pass like uh an amendment to the tax laws here and name the charity in it in the tax laws to make it eligible because they're not eligible through the the sort of the standard process. And I think we're trying to develop that overarching sort of policy framework and taking it a step back as well, we're we're sort of thinking like, why should government support philanthropy? What is the the rationale? Um, not sort of just taking it as a given. Because going back to what I said at the start, the commission takes a community-wide perspective, so it's not just thinking about the the sector, it's thinking about sort of the role of government here, that there are trade-offs, um, and yeah, and we're we're adopting that that sort of an approach.

SPEAKER_00 26:47

Yeah, and I mean I think that that fundamental question is really fascinating because it's there's a it always strikes me when when people are asked that question, or people particularly sort of you know politicians or policymakers who haven't thought about it before, the the default assumption that they leap to is oh well in some sense it's a you know those charities are delivering social goods, otherwise the government would have to provide, so it's a good use of money. So there's almost a kind of direct subsidy idea. Um, but there are reasons to think that's not necessarily the best way of thinking about why it's a good idea for governments to offer that, partly because it I think sets unrealistic expectations about what philanthropy can do. Uh, but also maybe it's a bit more limiting in that if it only if the only things that government wants to offer um tax subsidies for through um you know, or for donations to are things that are in line with government policy. Maybe that's an overly narrow conception. What where did you sort of come down on those kinds of concerns?

SPEAKER_02 27:44

Yeah, so we've got a whole chapter which sort of sets out our assessment approach, which looks at what the role of government is and should be in terms of supporting philanthropy and what the rationale for that is. And I think that we we wanted to do that to again give a kind of a policy framework to our entire um uh report. And I think it's actually quite surprising, given how dependent philanthropy is on um, you know, the tax environment and tax incentives, regulation, that around the world this hasn't really, I don't think it's really been done. I mean, there was the Filer Commission in the in the US in the 1970s, which was very comprehensive. But generally, philanthropy sort of, there's been kind of reviews that have looked at sort of the the not-for-profit sector sort of quite broadly, but not sort of specifically sort of at the the different levers that government have got in the context of philanthropy. And we I think chapter two of our draft report will have and our final report will be relevant, I think, um, anywhere really in terms of our discussion of what the role of government is in this context. I mean, really, we adopt the approach that that philanthropy can help fill gaps in in market and government provision of goods and services, drawing on what you said earlier, and that that governments can play a role supporting philanthropy to help improve efficiency and equity when markets and governments fail to deliver socially desirable outcomes, and that also philanthropy can build social capitals where relationships form within communities between donors and charities, between donors and beneficiaries, and those sorts of relationships facilitate trust and cooperation within groups, within the community, within society, um, which has positive benefits. But also, we do um discuss the fact that, well, we need to consider that when we support philanthropy, um be aware that government and philanthropy have limitations, they can not meet community expectations, and those things that we talked about earlier that um you know there are there are trade-offs here. So um you can governments can support philanthropy through new incentives, but that involves what we call Eastern Australia a tax expenditure. When you provide a new tax incentive or a new tax concession and concession, and there might be more philanthropy as a result of it, but there's less tax revenue. So there's less revenue that government can then spend on funding services and community priorities. So there are those sorts of trade-offs, and we've been very mindful of them throughout our our work. But also what we talked about earlier that um you know government has got various advantages and disadvantages, philanthropy does too, and say with philanthropy, you don't have the same oversight that you do with government, but that can be a good thing. It can mean that philanthropy can fund innovation, take risks, etc., that government might not. And there's that sort of pluralist argument in terms of philanthropy can sort of represent the diversity of viewpoints that might not necessarily be reflected by government policy and funding priorities. So we adopt a very broad and holistic approach to understanding and and and concluding, we do conclude that there is a role for government to support philanthropy, and then the the main levers are yeah, um, tax incentives, regulation. There's a role in terms of information as well.

SPEAKER_00 31:05

And and I guess the the other sort of follow-on point from that is if you get to the point of thinking, well, there is a clear rationale for why government should want to incentivize philanthropy, which again, I you know, I agree. I can certainly come up with one in my own mind. I'm not sure it's always the one that ends up in in other sorts of policy discussions, but I I think there certainly there is one. That still, I guess, leaves open a question in terms of what the the act the exact policy aim is, because I think even when it comes to encouraging philanthropy, you can distinguish between policies that are designed to to try and get more people giving, so to increase participation in philanthropy, get people giving more, so you know, those people are already giving to get them to to incentivize them to kind of increase the amounts, or to incentivize better types of giving or giving you know in different to different types of, or to kind of um make sure that the distribution of giving is is uh kind of changed in some way. In terms of your thinking about the your recommendations for government policy around philanthropy, are you focusing on any one of those in particular or is are you trying to sort of balance between all of them?

SPEAKER_02 32:12

Yeah, we've sort of got an awareness that, like, you know, your policy levers could say encourage um giving um in aggregate to grow giving the amount. But yeah, it could be is that through smaller donations, through the mass market, is it through um high net um worth individuals and and and setting up private foundations, which then has an an impact in terms of um, you know, if a charity receives you know a few million dollars from sort of just small donors, well, it's kind of untied funding that it can use for um you know its charitable purposes, whereas if it's from foundations, then it can be sort of project-specific, etc. And then you know, if you grow high net worth um philanthropy, then you know there's those implications for um democratic governance and those sorts of things. So again, there's always trade-offs um everywhere. So we don't sort of say, oh, it should be grown um through you know small untied donations, or we sort of look at it the bigger picture, but just draw out these sorts of trade-offs. Because yeah, you could you could grow giving um immensely just by focusing on the high high net um uh worth um donors, but then yeah, that could change the makeup, the look of the charity sector, um what's what's funded, what's not funded, what their priorities are, etc. So I really need to be aware of that.

SPEAKER_00 33:39

Yeah, absolutely. Um I just want to pick up on a few other things, um, because there's there's a lot of other stuff. I'd quite like to talk, I come back, you mentioned briefly um there around sort of uh something to do with structures, and I'd like to touch on some of the specific stuff around ancillary funds because I think it's relevant to wider concerns around foundations. But before we do that, I'm really keen to um pick up on the recommendations in the report about um establishing a new philanthropic fund um that's specifically owned and controlled by Aboriginal and Torres Strait Islander communities, which I think is you know really fascinating because it's obviously very specific to the context of Australia, but in terms of its focus on uh trying to balance philanthropy against the demands of justice and recognising kind of historical injustice and using philanthropy as a means of making reparation, it has echoes, I think, for conversations that are going on very much in the US, but in the UK and and elsewhere. Maybe you could just say a bit about um sort of the the context for that recommendation and what it is that the the report is actually recommending.

SPEAKER_02 34:40

Yeah, and for our inquiry, we had a uh an Indigenous engagement strategy because we really wanted to ensure that we can centre Indigenous voices in the work of this inquiry. And so we engaged very extensively with a diverse range of um Indigenous people and organizations. And we recognize too that the practices of altruism and generosity in Australia didn't start with European um settlement and colonization. They've been practiced in Australia by our indigenous peoples for um tens of thousands of years in many different ways, and they continue to be practiced until this day. Um, and also indigenous people and organizations um interact with uh philanthropic organizations, with trusts and foundations, and they have their own experiences of that. And through our engagement, we heard about sort of that that there are you know examples of philanthropic organizations that that are really supporting the um the goals and ambitions of indigenous people and communities. Um, but then sometimes philanthropic support is provided in a way that's that's not appropriate, that's not um respectful, that doesn't need meet the needs and aspirations of those communities. So there's sort of like a mixed report card. And so where this um this proposal came from, so basically it's a proposal for the Australian government to support provide funding for um an Indigenous-led philanthropic foundation to be established, and it would provide some initial funding, and then there'd be other funding provided from um philanthropic organizations and it would be Indigenous-led and controlled. Um basically, the the the background to the proposal was that we listened to um Indigenous stakeholders throughout um our inquiry and engaged very extensively with them, and I think we came to an understanding that um the distribution of wealth in Australia is obviously a product of government policy decisions in the past, including sort of um that distribution in relation to indigenous people and communities. Um and at the same time that there is a growing sort of change within philanthropy in terms of recognizing the importance of the autonomy of indigenous people and communities, their um self-determination and and and providing philanthropic support in a respectful and appropriate manner. But there can still be barriers to accessing philanthropy that's provided in in the appropriate way. And so the the idea for this um foundation was really that it would have a role in terms of um yeah, connecting um indigenous uh people and communities with sources of philanthropic funding and effectively sort of building capacity to engage with different sources of philanthropic funding, but also to have a role changing practices within philanthropy more broadly. And it's also something where, I mean, it's not something where you would think that government necessarily has to have a role. I mean, there is billions of dollars sitting within philanthropy in Australia, and an Indigenous-led philanthropic foundation, or many of them, could be set up without any government involvement. But it hasn't happened. Um it hasn't happened, and I think that that's very similar to, I mean, there's probably, you know, maybe things are a bit different in in the US, but again, it's it the progress is is pretty slow. So I think that the this proposal is really about sort of responding to sort of what we've heard and um and the yeah, the stories, the experiences shared with us, but also really sort of um yeah, trying to initiate something, some change that doesn't seem to be happening.

SPEAKER_00 38:41

And and in terms of the wider context of this, I mean, uh, you know, some people listening might be aware, and you know, I need to sort of the bare bones of it, but there was obviously a referendum last year, I understand, on on establishing more of a sort of policy mechanism. So um Aboriginal and Torres Strait Islander voice, I think it was called, which would would allow those communities to feed more effectively into the policy process and kind of have a say in in setting policy at a local and kind of national government level. But unfortunately, that result, that that referendum turned up a negative result in the end. So the idea wasn't taken forward. Um, and so I I wondered in in terms of the recommendation you're making for the establishment of this this philanthropic fund, whether you think that kind of makes the case for it even more, you know, even stronger, or whether you think actually it sort of presents more challenges in terms of achieving that that recommendation.

SPEAKER_02 39:33

Yeah, so we did have a referendum in October last year where the the proposal was to establish um uh an Aboriginal and Torres Strait Islander voice, so like an advisory body um that would be sort of um yeah codified within our constitu we have a written constitution here, and it would be uh yeah, uh an advisory body um comprising representatives from the Indigenous Indigenous communities to um to parliament to the executive as well. And yeah, the the the the referendum wasn't successful, so that won't be happening. Um I think that this so this isn't directly related to that, but it is um more broadly related to sort of um the the very the very government priority, but also within um the community and within um sort of debate more broadly about recognizing the importance of the autonomy of indigenous communities, um their right to self-determination. Um and philanthropy is already there are examples of philanthropy already supporting that in Australia, but this is really about sort of accelerating that. So there are some common themes there, and I think that um yeah, it'll be interesting to see with this proposal, and obviously it's just in our draft report, so the draft proposal, when it's in the final report, sort of how it feeds into these broader debates that are happening about where Australia should go now, where government policy should go now following the defeat of that referendum.

SPEAKER_00 41:06

Yeah, it will be really interesting to see where that recommendation goes. I think it's certainly one that people I know who've become sort of aware of the the draft report um in other places have really picked up on because it is such a, you know, it is interesting, as I say, it kind of has resonance for lots of other contexts.

SPEAKER_02 41:21

And we're doing further engagement with um uh indigenous stakeholders um to really understand and and to yeah, listen to what their their perspectives and their views are on this proposal. And there's also a uh a bit of a balancing act in the sense that there is this recommended draft recommendation, but there's a limit as to how much detail we would um ever set out because we make it very clear in there that that the design of this has to be Indigenous-led. Um it's not for us to do the detail. It's it's gonna it has to be Indigenous-led and it's gonna be um controlled and and run by um indigenous people for the benefit of Indigenous communities.

SPEAKER_00 42:02

No, exactly. You can't tell people exactly how they now need to be self-determined. It sort of defeats the point, doesn't it? I just wanted I'm aware that we're gonna be in danger of running uh out of time. So I just want to to touch on a couple of other things. We mentioned already one which is about um what are known in Australia as as private ancillary funds, but I guess you know the they're probably the the analogue of what would be called foundations in lots of other contexts. Um be really interesting, obviously, in the context of the fact there's a lot of debate about foundations in the US and the UK and in Europe around um you know their endowments, how much of their endowments they're willing to spend, the rate at which they're giving out grants, um, uh all these kinds of things. Um, what your uh findings were and what your recommendations are in in the context that you're working in.

SPEAKER_02 42:49

Yeah, so in Australia we have private ancillary funds, which are very similar to say private foundations in the US. They have a 5% minimum distribution or payout rate, for example, and they're sort of subject to relatively similar um form of regulation. We also have public ancillary funds, which are like a public foundation. You can have sub-funds in them, which are equivalent of a donor-advised fund or a DAF. So we look at all of them, and basically over time, um donations into these private ancillary funds, or PAFs as they're called, have gone up as a share of total donations. So in 2011-12, 15% of total tax-deductible donations went into them. It's up to 27% in 2020-21. So you've got them taking up more of a proportion of um donations. And the implications of that obviously are that when you put money into a private foundation versus say donate a directory to a charity, there's a temporal gap there in terms of when the money can be used by a charity to benefit the community. So the the minimum distribution or payout rate is that sort of that that lever that the government's got to at least ensure some. Sort of steady flow, minimum amount of flowing to charities and the broader community. So what we do is we actually sort of come up with a rationale for why you have a minimum distribution. And I know that say in the UK there isn't one, but really the argument there is that you can have a situation where say that the preferences of um the trustees of foundations or the donors don't align with the preferences of the wider community or the government in terms of the flow of funds going out into um to charities and benefiting the community. So you can have that mismatch. And so the minimum distribution is basically just um sort of, yeah, like some sort of a uh uh an assurance that there will at least be a minimum amount going out. And we use sort of an economic framework, principal agent theory to really sort of um draw that out. But yeah, we are we we and we also do a basically a cost-benefit analysis of um if you say have a million dollar donation going into one of these paths in year one, um, and then you have sort of the flow of grants at 5% coming out over the next say 10, 15, 20 years, and then you calculate a net present value to sort of basically look at how long it takes for sort of the government or taxpayer to get a return on that tax deduction. So we sort of do a cost-benefit analysis and we don't have a recommendation to change the minimum distribution, but we are asking for views in our draft report about whether it should be changed, and yeah, then we'll make a decision for the final report. But we certainly think that there is um a role for having a minimum distribution, um, and it's an important lever in terms of ensuring that there is that minimum amount of um philanthropic funding flowing out to charities and benefiting the community. And we also look at um, say, yeah, these public ancillary funds, or called TUAFs as they're sometimes called, and the sub funds. And we don't propose, say, a minimum distribution for subfunds, whereas, say, in the US there is there are calls for a minimum distribution for DAFs, but we do propose that there be um some additional transparency and reporting, so we can at least have some data on what the the trends are, what the dynamics are, and some and some transparency around that sort of as at least as a first step.

SPEAKER_00 46:23

And just so I'm clear on the the um these kind of subfunds or the things that you're saying are the equivalent of DAFs. Um, is it closer to the context in the US, for example, where you know the vast majority of the market for DAFs is taken up by uh kind of commercial DAF providers in the sense of commercial financial institutions that have a non-profit arm and are then providing DAFs um you know almost as a product? So the sort of fidelity, vanguards, um those those kinds of organizations. Or what we have in the UK, which is that essentially the DAF market at the moment is very heavily skewed towards subfunds within community foundations. So they're essentially subfunds within a fund that itself is charitable and has a kind of charitable mission to distribute funds to a local community. Because I think um it feels as though often the argument in the US is much more pointed, precisely because the incentives of the organizations that hold the vast majority of DAFs are, if not entirely misaligned. Obviously, there are kind of questions about whether they're they're entirely the right incentives to get the money distributed again, because obviously there's a strong incentive to keep uh assets under management. Um, what what's the situation there in Australia?

SPEAKER_02 47:33

Yeah, there's probably it's it's certainly nowhere near what the US is in terms of sort of how DAFs have taken off over the last decade there. Um it's it's a mix. A lot of um sort of um these public ancillary funds, these PUAFs are operated by community foundations and other similar organizations, and you can open up a sub fund there. But there are also um wealth advisors that also operate a PUAF, and you can set up a sub fund there too, but certainly not to the extent of of the US, um, where you've got sort of you know Vanguard, Fidelity, etc., um, and um, and how they've taken off. But anecdotally, and sort of based on the limited data, but I did a survey a few years back, they are growing. Um, and they are also a uh they're a substitute to a PAF or a private foundation, as we know in the US. The difference is in the US they've got different tax treatment for a private donation to a private foundation versus into a DAF. It's the same here. Um, but they are a substitute. So we're also mindful of, again, about these trade-offs and these flow and effects. You could change the regulation of um uh PACs, private foundations, you could say increase the minimum distribution, but then you might have more people setting up subfunds, and they don't have a minimum distribution for each individual subfund. The the public ancillary fund as a whole has got a four percent minimum distribution, but you could have subfunds that are you know just flow through, and then you've got that would mean that um you know it would meet its four percent and still have sub funds that are not donating well, not granting out that much.

SPEAKER_00 49:07

Yeah, absolutely. Is that is that a bird in the background?

SPEAKER_02 49:10

Yeah, yeah, no, no, it's no, what is it? Is it I don't know, but it's uh because it's it's quite it's quite high. I turn the air conditioning off and then I open the window. The sun's setting, it's it's beautiful outside, and there's uh I've got some trees outside uh here and there.

SPEAKER_00 49:25

My abiding memory of Australia is just the incredible variety of bird songs. So um but that's that's an entirely that's entirely by the by. Um I just I wanted to before I let you go, I just wanted to ask something you've mentioned a couple of times already, and I think it's sort of an important point within the report is the the role that that data can play um within within philanthropy and and what government should be doing to try and sort of drive an improvement in the amount and the quality of data um that's available around philanthropy. Um you know, I guess the obvious question is why is that important, but also what do you think government can be doing and sort of you know what does the the nonprofit and the philanthropy sector need to be doing, and what sort of data is it that we're talking about here?

SPEAKER_02 50:04

Yeah. Well, I think you know, the starting point is that we've actually got a lot of data on on charities and and philanthropy in Australia. So going back 10 years when the um our charities regulator, the ACNC, was set up, which I um worked on setting up when I was an advisor um to the Australian government back then, that you you actually didn't know how many charities there were in Australia. You didn't there was like there was you didn't know their revenue. I mean, there was no reporting or anything like that. Um, so the amount of data was very limited. We've got so much more data now because of the ACNC charities reporting, um, and that's all made available um publicly. So we've got a lot of data, but there are still data gaps. So, for example, around bequests, we have data gaps here around corporate giving, and we've got recommendations around both of those things. So, one of the things we're proposing, for example, is that with corporate giving, that um larger companies, so listed companies, for example, should have to publicly report um on their donations um so that all stakeholders, you know, shareholders, um uh charities, others that are interested, um, can have you know uh a picture of what their contributions are um through philanthropy. Um so yeah, I think that the the the the importance of data is that if you um if you can't if you don't measure something, then you don't know how you're tracking in terms of increasing and and and if you've got a goal to to double giving and you want to or you want to just grow giving. Um if you don't have um data, well, how do you know if you're meeting that goal? And also say with bequests, we're gonna see a very large intergenerational wealth transfer in coming years, and there's sort of an expectation that sort of bequests will increase as a result of that. But if you don't have good data on that, well then how do you know um about that? But again, nothing is without there are trade-offs, nothing is free. Um, reporting can impose burden, um, can impose costs. So you have to really look at everything in terms of the broader context and you know, do we really need this? Um, what kind of costs could it impose? What sort of benefits could it provide? That sort of thing.

SPEAKER_00 52:18

Yeah, absolutely. Um I mean, I think you know, it's something we hear all the time here in the UK, and I think your point about um being able to measure uh the policy change that you're trying to achieve is is vital because it's it's all very well to say that you want to sort of double philanthropy, but if you don't know what your starting point is and you're not able to track where you're getting to, then it kind of becomes a bit meaningless.

SPEAKER_02 52:39

And making policy is so dependent on data. So I see in this inquiry like how we use data that wasn't available 10 years ago or 15 years ago, how we use data to um get insights that we then take to inform our our um analysis of whether there should be policy changes. So, say, you know, a little while ago I was talking about how say donations into into um these these private and and and public ancillary funds have been increasing as a as a proportion of of total donations. Well, that's data we can then use to sort of understand, okay, what are the what does that mean? What are the implications of that for the regulatory framework, for example? So I think that um you know data's not everything, but it's really important in terms of informing policy development.

SPEAKER_00 53:28

Yeah, absolutely. Um and just before I I let you finally uh go, um I'm just gonna ask what's next in terms of the process for the report. I mean, what is it that you you know to expect uh is coming and what do you kind of hope and expect beyond that um, you know, once the final report's out?

SPEAKER_02 53:44

So where we're at now is um we released that the draft report um at the very end of November last year, 2023. And we've got um another round of submissions now that close on um the 9th of February. And we then do public hearings in a number of places around Australia. So it's um anyone that wants to could participate and give evidence um at public hearings on the record, and then we're also doing um other consultations with um different stakeholders to you know uh find out some more information just in response to some of our draft recommendations and that sort of thing. So there's a lot more engagement and consultation to happen. Our final report is due to the Australian government um in May this year, so it seems like it's far away, but it's gonna go really quickly. Um, once it's provided to the Australian government, it's obviously um their decision then in terms of what they do with the um recommendations. But yeah, there's a lot of work that's going to happen between now and then, and what because of some of the proposals we've got around reform of that DGR framework, that DGR system, particularly in the education space. So we're having a little bit of a similar kind of experience that the UK had some years ago around looking at sort of education and public and private benefit, and um you know how sort of that balancing between public and private benefit interacts in the context of education and sort of the use of tax-deductible donations in Australia. So um we're gonna get lots of submissions on that and um people at the public hearings, but it's an important um debate and a discussion to have. And then we take all that we hear, that we read, that's put to us, and we analyze it, synthesize it, think about it. And the commission does change draft recommendations between a draft report and a final report. Um, but yeah, we sort of will be formulating our views and thinking to get our final report to the government um by by May this year.

SPEAKER_00 55:51

Yeah, I'm really interested to hear. And I'd I'd love to talk more about the uh public benefit of private education, but we'd be here for another couple of hours. So I think we're probably better not for now. Um it just remains to say thanks ever so much, Christian, for finding the time to come on the podcast. It's really interesting to hear about the work you've been doing, and yeah, certainly wish you all the best with it. It'd be really interesting to see the final report when that comes out and to kind of track the progress of it.

SPEAKER_02 56:12

Thanks for having me on your show, Rodri. Great.

SPEAKER_00 56:23

Okay, great. Well, my thanks again to Christian for finding the time to come on the podcast and to talk about the work he's been doing. Um, I'll put links in the show notes to places where you can find more about the work of the Productivity Commission. Uh, read the report if you'd be interested to do that, uh, read some things that Christian's also written about uh philanthropy over the years, um, some things that I've written about philanthropy that might be relevant to this conversation as well. Um, I should just give a small apology. Obviously, uh I sounded absolutely terrible during that whole conversation. Um, I should say this was recorded back in January and I had a pretty uh stinking cold at the time. Uh it was around the time of my birthday, so I kind of traditionally am relatively ill at that point. Um, if you're interested more broadly in uh any issues to do with philanthropy and civil society, uh do check out the website at why philanthropymatters.com. There's all kinds of articles there. There's news updates on things uh you know I've been doing through Why Philanthropy Matters. There are also all the back issues of this podcast that you can check out, which is a really interesting growing archive of conversations at this point. Um, if you want to follow me on social media as well and get kind of more uh regular updates, best place to do that at the moment's probably LinkedIn, but you can find me on various other places as well. If you like the podcast, uh you know, uh subscribe to it or whatever it is you do these days, follow, I think. That's right. Um, I keep saying leave us a nice review on iTunes, but I realize that you know that would be uh about 15 years ago. So I think Apple Podcasts is probably the thing, or wherever else you get your podcasts. Um, but on a more personal level, if you know somebody that you think would be interested in the podcast, whether that's a colleague or a friend or somebody uh the you know, an enemy perhaps, uh do tell them about the podcast. Um, you know, share, share the good word, and and uh hopefully we'll get more people listening to it in future. Um other than that, uh I will see you next time. Bye.