Law Council of Australia

Legal Practice Section

Giving Fund Reforms: Distribution Rate and Smoothing

Submission Date: 5 August 2025

This submission has been prepared by the Charities and Not-for-profits Committee of the Law Council of Australia’s Legal Practice Section (the Committee). The Committee welcomes the opportunity to make a submission to Treasury in relation to the recent consultation paper on Giving Fund Reforms: distribution rate and smoothing (Consultation Paper).

Many members of the Committee act for and advise both public and private ancillary funds and their founders in relation to the establishment and ongoing operation of Giving Funds (Funds). The observations below draw upon the experience of these professional advisers.

In general, the Committee does not support the reforms proposed in the Consultation Paper. In the Committee’s view, the proposed reforms are likely to decrease choice for donors and those choosing Funds as their philanthropic vehicle and, therefore, potentially reduce philanthropy.

In circumstances where deductible gift recipient (DGR) reform has been largely stagnant, the Committee submits that there are significant issues in the policy and law surrounding DGRs generally that require attention as a priority over the proposed changes for Funds.

The Future Foundations for Giving report issued by the Productivity Commission (the Commission) in 2024 concluded that the DGR system is not fit for purpose and requires reform in order to achieve the Government’s philanthropy targets. We contrast this with the observations made by the Commission about minimum distribution rates, which identified the lack of clear policy or a principles-based framework for minimum distribution rates and was ‘inconclusive’ in determining what the minimum distribution rate should be.1

Funds are an essential, well understood and widely adopted vehicle for philanthropy. As currently regulated, they provide flexibility to donors to give over a set number of years of their choosing or to create a lasting legacy through an endowment fund.

Historically many philanthropic foundations have existed—and have been understood by both donors and charity recipients—as endowments. Of course, others are established to have a limited life and be spent down more quickly. Much of the charity and trust law has developed on the basis that trustees of charitable trusts must balance the needs of the charities now and in the future. The investment powers in the state and territory Trustee Acts,2 and in the Ancillary Fund guidelines,3 are based on this balancing exercise. Most charitable trusts set up under Wills require the capital or corpus to be preserved and only income distributed annually. Most of the well-known philanthropic foundations which have been in existence for several generations operate on this basis. Philanthropists and potential philanthropists understand this, and many, possibly most, come to establish or contribute to foundations on the basis that it can exist in perpetuity. For some, it is a family philanthropic endeavour where the founder’s relatives can be engaged through their contributions of their own funds to a Fund established to have legacy or in the stewarding the Funds by becoming responsible persons.

Funds currently provide donors a choice of a lasting endowment model or a ‘flow through’ or limited life option. In our view and collective experience, more donors choose the endowment option as they want to know their generosity will continue to support the community for future generations as well as addressing today’s needs.

Given the government’s stated intention to double philanthropic giving by 2030, any changes to Funds which may discourage philanthropy, by removing the main choice of donors setting up giving funds, should be avoided.

1 Productivity Commission, Future foundations for giving (Inquiry Report No 104, 10 May 2024) 288 <https://www.pc.gov.au/inquiries/completed/philanthropy/report>.
2 Trustee Act 1925 (ACT), s 14; Trustee Act 1983 (NT), s 5; Trustee Act 1925 (NSW), s 14; Trusts Act 1973 (Qld), s 21; Trustee Act 1936 (SA), s 6; Trustee Act 1898 (Tas), s 6; Trustee Act 1958 (Vic), s 5; Trustees Act 1962 (WA), s 17.
3 Taxation Administration (Public Ancillary Fund) Guidelines 2023 (Cth), s 20; Taxation Administration (Private Ancillary Fund) Guidelines 2019 (Cth), s 20.

Related Documents

Last Updated on 19/08/2025

Share

Tags

Most recent items in Legal Practice Section


Trending Items in Legal Practice Section