21/01/2009 - 22:00

Fears over new charity legislation

21/01/2009 - 22:00

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PHILANTHROPISTS fear proposed legislative changes to guidelines governing prescribed private funds could close down the majority of the charitable foundations within the next 15 years.

Fears over new charity legislation

PHILANTHROPISTS fear proposed legislative changes to guidelines governing prescribed private funds could close down the majority of the charitable foundations within the next 15 years.

Federal Treasurer Wayne Swan announced in the 2008 budget that the government would overhaul the rules to improve the integrity of PPFs and provide trustees of PPFs with greater certainty over their philanthropic obligations.

The government is looking to amend guidelines to, among other things, ensure regular valuation of assets at market rates and increase the size of compulsory distributions.

One fundamental amendment will be changing the current structure of PPFs distributing their entire profits each year to PPFs distributing 15 per cent of the closing value of the fund each year.

Ron Manners believes the changes, which are set to be implemented on July 1, could lead to the demise of his PPF, the West Perth-based Mannkal Economic Education Foundation.

He said the proposed distribution rate of 15 per cent would result in his foundation having an immaterial corpus, or total value, within a decade.

"[PPFs] are all running around supporting all these charities, art groups, health centres for research and education, and they're really becoming effective," Mr Manners said.

"But if these changes go ahead, in six to seven years there won't be enough [funds] left to ever cover the cost of the thing.

"It's already stretched so the corpus can't get bigger because you have to give all your profit away."

Mr Manners said most PPFs in Australia operate with only a 5 per cent profit margin, meaning the proposed 15 per cent distribution rate would see PPFs contract over time.

The Howard government introduced PPFs in 1999 to encourage individuals, families and businesses to establish charitable foundations.

In its submission on the proposed overhaul, Philanthropy Australia urged the government to ensure any new regulatory framework considered the added value of the PPF structure.

"A wide cross-section of the community, with the support of previous governments, has worked very hard to develop and strengthen a culture of giving in Australia," Philanthropy Australia chief executive Gina Anderson said.

"PPFs have been a tangible result of this emerging culture, but their value goes far beyond the dollars they provide to not-for profit organisations."

Figures from the Australian Centre for Philanthropy and Non-profit Studies reveal the average tax-deductible contribution in Australia has more than doubled in the past decade, due in part to the incentives to encourage philanthropy such as PPFs.

This equates to about $700 million of private wealth that has been irrevocably committed to the community sector as a direct result of PPFs.

Mr Manners said the proposed changes would discourage philanthropy, effectively threatening the 769 PPFs which have distributed $1.35 billion to the community.

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