the paf report private ancillary funds after 12 years

Transcription

1 the paf report private ancillary funds after 12 years By John McLeod December 2013 jbwere.com

2 We are pleased to present our inaugural report on Private Ancillary Funds (PAFs) detailing their history and growth, and more importantly, the contribution they are making to Australia s charitable sector. Their introduction in 2001 has been arguably the single most important boost for Australian philanthropy in many decades. Their existence over these last 12 years has potentially aided and promoted the next big leap for philanthropy with the series of large and public gifts the sector has recently enjoyed. JBWere has a long and close association with PAFs, with many of the firm s clients and employees establishing them after learning about and discussing their potential with the Philanthropic Services team. We have actively participated in Government submissions around suitable and sensible rules and guidelines governing their operation. We have also more broadly promoted PAFs along with other structured and nonstructured giving alternatives to provide the best solutions for individual, family and corporate support of the non profit (for purpose) sector. This report examines the evolution of the PAF to its current role as the vehicle of choice for structured philanthropic giving. It highlights the growth in numbers established and their locations, donations into and distributions from PAFs including the issues that have led to changes in these measures over time. The report details moves in cause areas supported and payout ratios, and makes predictions about the corpus size and return from PAFs beyond the data released to date. It also looks at a number of innovative ways in which PAFs are being operated to enhance both social returns achieved and satisfaction gained by founders/trustees as well as some of the pitfalls in their operation. Finally it places PAFs in the overall context of giving in Australia. We hope you will enjoy reading this report, whether from a current PAF, interested sector supporter or potential recipient perspective, and would encourage further discussion on any aspects with the JBWere Philanthropic Services team. Highlights There are now 1,116 PAFs operating across Australia with established annually New South Wales leads in total number of PAFs established but when compared to income levels, Victoria stands out while Queensland and Western Australia are lagging Cumulative donations into PAFs should reach $4Billion (B) in the current financial year but annually have been volatile and correlate well with financial market moves Distributions from PAFs have been much steadier, showing good consistent growth and should reach a cumulative $1.5B in the current financial year Welfare still dominates as the most popular cause for distributions but has plateaued in recent years with international affairs and environment making gains. Culture continues to enjoy support from PAFs well above its share seen in broader giving measures PAFs continue to distribute around 8% of assets annually, well in excess of the minimum 5% required with the average PAF distributing around $200,000 each year Although flat at just over $2B in the years following the GFC, the total PAF corpus is expected to grow to around $3B in the current financial year PAFs have recorded an average annual return on corpus investments of around 8.5% before costs since establishment, an outperformance of around 1.6% on a hypothetical diversified portfolio Many PAFs are doing more than simply making annual distributions from the returns of a traditional financial portfolio. These involve their choice and use of asset types, involvement of children and providing support beyond dollars to their chosen causes While well regulated, there are a number of areas where PAFs have encountered operating problems including distributing to other ancillary funds and not completing audits of PAF guideline compliance When compared to other individual, bequest, trust and foundation plus corporate support for eligible DGRs, PAFs represent around 5% of total giving and have grown faster than other sources Private Ancillary Funds 2

3 A Brief History of PAFs PAFs started life as part of the Howard Government s response to a March 1999 report by the Business and Community Partnerships Working Group on Taxation Reform to improve philanthropy in Australia. This led to the introduction of the Prescribed Private Fund (PPF) vehicle being available as a philanthropic structure from March 2001 and the first funds being established in June The number of funds grew strongly reaching 769 by June 2008 with a peak of 170 established in that year alone. The attraction of PPFs included tax deductions for donations into them, exemptions from income tax and no public fundraising requirements (unlike public ancillary funds). They were required to grant income to eligible deductible gift recipient (DGR) organisations. PPFs also needed to complete an annual audit and provide an annual return to the Australian Taxation Office (ATO) while having at least one external trustee/ director of the fund. In November 2008, the Rudd Government released a discussion paper on Improving the Integrity of PPFs. After over 130 public submissions (including from JBWere Philanthropic Services) and after consultations, new legislation and guidelines were released converting PPFs to PAFs from 1 October Changes included replacing minimum annual distributions from an income measure to the simpler 5% of assets and requiring trustees be a corporation, while also adding an audit of the PAF guidelines compliance to the financial audit completed annually and required the development of a formal investment plan. The uncertainty of the final form of these changes plus the financial crisis of saw a slowing in the number of PAFs established in subsequent years. After falling to around 50 established per year in 2009 and 2010, the number of new PAFs established annually has increased to in the last 3 years to June 2013 (chart 1). At November 2013 there were 1,116 PAFs operating with a further 70 that had been established but now closed or re-established as Public Ancillary Funds. In terms of the location of PAFs, while Chart 1 shows cumulative totals, Chart 2 shows the annual number established by State, including for the current year up to November 2013 (although most are established in the final months of each financial year). The establishment State will usually be a good guide to the location of the founder, however as PAFs also operate under Relevant State Trustee Acts which can differ, some have chosen to be established in a different State. The volatility around the events of is evident as is the partial recovery since. In addition, the strong early years of acceptance of (then) PPFs in Victoria, despite a larger and wealthier NSW, shows the advantage of that State s philanthropic history. Any effect on existing PAFs or the potential for new PAF establishment from the recent introduction of the Australian Charities and Not-for-profits Commission (ACNC) is yet to be seen. While there are some issues around privacy (view the Common PAF pitfalls section), the ACNC recently extended the deadline for applications to withhold PAF details on its public register from 5 November 2013 to 31 March Chart 1 Number of PAFs by year of establishment and by State for currently operating PAFs Nov 2013 NSW Vic Qld WA SA Tas ACT NT Private Ancillary Funds 3

4 Chart 2 PAFs established annually by State for currently operating PAFs Nov 2013 NSW Vic WA Qld SA Tas ACT NT Examining the number of PAFs currently operating per State and comparing that to the number of tax payers, tax deductible donations and high income earners in those States reveals potential for further growth in some areas (Chart 3). New South Wales has 39% of Australia s tax deductible donations and a similar share of $250k plus high income earners; and they have a comparable 40% of the nation s PAFs. Victoria with 24% of high income earners does well to have 32% of the PAFs. States with more potential would include Queensland which has 15% of high income earners but only 11% of PAFs and Western Australia with 14% and 8% respectively. The other States and Territories are roughly in line on these measures. Other reports providing more detailed legal and operating information on PAFs are available from JBWere Philanthropic Services, Philanthropy Australia, the ACNC and the ATO and include:- Chart 3 Comparison of PAFs established to high income earners, deductible gifts and taxpayers by State 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% No. of Private Ancillary Funds No. with incomes above $250K Tax deductible donations No. of Taxpayers NSW Vic Qld SA WA Tas ACT NT Private Ancillary Funds 4

5 Donations made to PAFs have been volatile Chart 4 Annual donations into PAFs and equity market performance $800m 8,000 $700m 7,000 $600m 6,000 $500m 5,000 $400m 4,000 $300m 3,000 $200m 2,000 $100m 1,000 $0m Annual donation into PAFs All Ords Index (RHS) The level of donations into PAFs has been both spectacular and volatile (Chart 4). It can also be influenced by a small number of large donations as was highlighted by the ATO in 2008 where a single donation of over $200M boosted totals. It is not surprising that donations have been strongly correlated with both financial market performance and the number of new PAFs established annually. The quantum of donations made to establish new PAFs or add further to existing ones is not separated by the ATO. Although there are a few, particularly PAFs set up as corporate foundations by Australian companies, which distribute all annual donations, we would assume most PAFs have a larger capital sum donated initially with some ongoing additions over time and perhaps in the future, an additional sum through a bequest. This means as the number of PAFs established fell in 2009 as a result of the Global Financial Crisis (GFC) and uncertainty over new PAF legislation, the level of donations into PAFs also fell dramatically with only a small rise in 2010 and With some recovery in financial markets and a consistent level of new PAFs being established, we would expect to see donations into PAFs rise steadily in coming years to add to the $3.1B donated up to 2011 reaching an estimated cumulative total of $4B in the current financial year. Private Ancillary Funds 5

6 PAFs distributions show diversity and continue to grow strongly Chart 5 Cumulative PAF distributions $ millions $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $ Welfare Culture Education Environment International Affairs Health Research Other Two things stand out when looking at PAF distributions. The power of a corpus to deliver consistent and growing support for the charitable sector and the diversity of causes chosen by such a large group of over 1,000 individual PAFs. Total distributions reached $987M in 2011 (Chart 5) and we estimate will touch $1.5B in the current financial year. Given the relatively recent birth of the PAF vehicle, volatility in financial markets over this period and the uncertainty over PAF legislation changes, the continued and smooth rise in distributions is a welcome reward for a worthy sector and an idea championed by a small but influential and determined group of visionaries. In 2011, distributions from PAFs fell for the first time to $165M, still the second highest year on record, due largely to a decline in their asset value and fall in the actual payout ratio. When examined annually (Chart 6), we can see a number of trends emerging. Private Ancillary Funds 6

7 Chart 6 Annual PAF distributions by sector $ millions $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $ Welfare Other Culture International Affairs Health Environment Education Research In some of the recipient sectors, particularly the more capital intensive ones where a large single grant may be sought and planned over a period of time (e.g. medical research) we can see significant volatility versus other areas where a larger number of smaller grants tend to smooth annual totals (e.g. welfare). The plateauing of support for the dominant welfare sector is noteworthy but rather than suggest a future decline, we feel it has more to do with PAFs gaining the confidence to explore other less travelled areas such as international affairs and environment which have gained in support both here and in similar US data. Education has seen its share of distributions fall from around 15% over the first 5 years of PAF distributions to now under 10%, and it will be interesting to see future data given some of the recent large and public gifts made to Universities, albeit not all through PAF structures. Culture continues to be supported at a rate almost double that seen by broad public giving. This has partially been due to the excellent work by Artsupport Australia (now Creative Partnerships Australia) in promoting the PAF vehicle to sector supporters, the wider public and financial advisers. The other notable area is other which includes legitimate smaller, eligible DGR sectors and some areas not allowed to be supported by PAFs. The most common of these is the support of other ancillary funds, which totalled $11.6M or 7% of distributions in This will often be where a charitable organisation has set up its fundraising vehicle as a Public Ancillary Fund. These public funds are DGR type 2, the same as PAFs, and PAFs can only support DGR type 1 organisations. This issue will be covered in more detail in the Common PAF pitfalls section of the report. Private Ancillary Funds 7

8 PAF payout ratios exceed minimum requirements Much has changed in the minimum amount PAFs have been asked to distribute annually. In the initial PPF legislation, there was a requirement to make a minimum distribution of net income from the fund each year. Uncertainty was common amongst PAFs as to the treatment of items such as realised and unrealised capital gains, franking credit returns and share buy backs. PAFs were set up promising a simple and effective way of supporting charities over the long term and the confusion around payouts potentially hindered their growth, and in some cases may have allowed long term growth to be pursued with little short term distribution. After some debate about the level of appropriate payout, the US model of 5% of asset value was agreed (although operating costs are included in the US calculation). Chart 7 Average PAF payout ratio as a percentage of assets 20% 18% 16% 14% 12% 10% 8% 6% 4% current minimum 5% requirement 2% 0% It is interesting to look at the history of the PAF sector payouts since inception (Chart 7) as a percentage of the previous balance date corpus (the value on which the 5% minimum distribution is calculated). There are a number of factors that influence the results but the main observation is that since the new legislation in 2009, payouts have averaged around 8%, well above the minimum required. Part of the extra payout will be due to a small number of flow-through funds where all donations are paid out as distributions and some PAFs that were set up with a shorter term sunset clause and have closed during the period, paying out all capital. The very high payouts seen in 2003 to 2007 were a result of an equity market with cumulative returns of around 25% including dividends where realised capital gains were often distributed as part of income, plus some very large share buy backs with attached franking credits which were eagerly taken up by non taxed entities. Clearly this was unsustainable and would have led to much lower payouts during the GFC, compared to the record distributions seen after the adoption of the smoother and more predictable 5% rule. Private Ancillary Funds 8

9 Chart 8 PAF average and minimum required distributions $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Actual average PAF distribution Minimum required average PAF distribution With changes in the number and size of PAFs over time, it is useful to examine what the average payout requirement and actual payout levels have been. Chart 8 shows that the average PAF has distributed between $200, ,000 annually since establishment, about $100,000 over the minimum required. This also doesn t include costs which are paid for by the PAF in addition to its distributions. While all PAFs are different, this may be a useful guide to grant seekers when approaching PAFs for support. Private Ancillary Funds 9

10 PAF corpus growth flat for now but recovery expected from 2013 Chart 9 PAF total and average corpus $2,500m $5.0m $2,000m $4.0m $1,500m $3.0m $1,000m $2.0m $500m $1.0m $0m $0.0m Total PAF assets (LHS) Average PAF assets (RHS) While the primary reason for the existence of PAFs is to provide support for the charitable sector (eligible DGRs), it can t do that without funds. The bigger that pool of funds, the more support they can offer. We have examined the combined corpus of PAFs each year (Chart 9) and looked at the average individual PAF size over that time. While there are a small number of flow-through PAFs which distribute all donations in the same or following year using the structure more as a discipline, most are building a corpus over time through a combination of new donations and financial performance above their distribution level. Weaker financial markets from 2008 combined with still good distribution levels have seen a flat total corpus in recent years. However with stronger markets more recently and a rebound in the number of new PAFs established, we estimate that the total PAF corpus will exceed $3B in the current financial year. This is even more impressive when we consider that they will also have distributed an estimated $1.5B since establishment. The average PAF has consistently had assets valued in the $2-3M range, although there are some in excess of $100M. Benchmarking the financial performance of PAFs is difficult on an annual basis as tax returns are often incomplete for the full group when reported by the ATO, and as many funds are run on a cash basis, the return of franking credits occurs in the following financial year (particularly important for share buy backs). Estimates can be made using known donations into and distributions from the funds, and opening and closing values of the fund (Table 1). The resulting implied performance will be after costs associated with running the PAF. To compare this performance with financial market moves, we have assumed a 1.5% annual cost of operation to calculate precost returns and compared this to a hypothetical diversified portfolio of 20% cash, 70% Australian shares and 10% International shares. Although annual comparisons can be difficult to reconcile for the reasons mentioned earlier, it is very useful to see the average performance of PAFs over their full life. While the hypothetical diversified portfolio grew an average 6.9% annually, PAFs recorded an average annual gain of 8.5% before costs, an outperformance of 1.6%. This outperformance will largely be the result of the refund of franking credits which these non-taxpaying funds (and other tax concession charities) can take advantage of. If we project this outperformance forward and use actual financial market returns post 2011, PAFs should enjoy solid gains in 2013 and An observation on inflation is cautionary. Although low in recent years, Consumer Price Index (CPI) took 2.9% from nominal returns over the period , reducing after cost, real returns below the 5% distribution level. It is also sobering to observe other JBWere Philanthropic Services research that shows inflation in many charitable sectors such as health and education is running well above headline CPI levels as service costs rise faster than goods. Private Ancillary Funds 10

11 While collected by the ATO, actual asset allocation for PAFs is not released although we have requested it be included in future years information releases. There is also potential for PAFs to engage in Impact Investing through their corpus. This is where an investment provides both financial and social returns adding force to the PAFs social mission by more than just the distributions it makes. The most common type of impact investments globally have been in the microfinance areas but rapid growth is being seen in other fields. It is thought that around 1% of PAFs currently hold investments of this type. More information is available in the joint DEEWR/JBWere authored Impact Australia report. Table 1 Estimated PAF financial performance versus markets from e Year ending June Av e 2013e to Oct 13e Estimated PAF 11.1% 8.1% 13.7% 17.8% 15.0% 22.5% -3.6% -7.2% 5.1% -12.4% 7.0% -3.6% 20.1% 11.4% return after costs 1 Financial Markets Performance CPI 2.8% 2.6% 2.5% 2.5% 4.0% 2.1% 4.4% 1.4% 3.1% 3.5% 2.9% 1.2% 2.4% - Cash 2 4.6% 5.0% 5.3% 5.6% 5.8% 6.4% 7.3% 5.5% 3.9% 5.0% 5.4% 4.7% 3.3% 0.9% Fixed Interest 3 6.2% 9.8% 2.3% 7.8% 3.4% 4.0% 4.4% 10.8% 7.9% 5.5% 6.2% 12.4% 2.8% 1.0% Australian shares 4-4.7% -1.7% 21.6% 26.4% 23.9% 28.7% -13.4% -20.1% 13.1% 11.7% 8.5% -6.7% 22.8% 14.6% International shares % -18.1% 19.9% 0.5% 20.4% 8.3% -20.8% -15.7% 5.8% 3.2% -2.0% 0.1% 33.9% 8.6% Est. PAF return before est. 1.5% cost Hypothetical diversified portfolio return 6 Relative PAF performance 12.6% 9.6% 15.2% 19.3% 16.5% 24.0% -2.1% -5.7% 6.6% -10.9% 8.5% -2.1% 21.6% 12.9% -4.7% -2.0% 18.2% 19.6% 19.9% 22.2% -10.0% -14.6% 10.6% 9.5% 6.9% -3.7% 20.0% 11.3% 17.3% 11.6% -3.0% -0.4% -3.5% 1.8% 7.9% 8.9% -3.9% -20.4% 1.6% 1.6% 1.6% 1.6% 1 Based on ATO reported corpus values, donations into and distributions from PAFs and assumed year end timing 2 UBS Bank Bill Index 3 UBS Composite Bond Index 4 S&P/ASX 200 Accumulation Index 5 MSCI World ex-aust Accumulation Index Gross Div A$ 6 Assuming a mix of 20% cash, 70% Australian shares and 10% International shares Source JBWere Philanthropic Services Private Ancillary Funds 11

12 Innovative ways of operating a PAF While many PAFs are run very simply and successfully, a significant number are using the structured giving vehicle in more diverse ways. This involves activities that further enhance both the social good being achieved and the personal experiences of founders/trustees through their involvement in the PAF process, such as: becoming more closely involved with areas of social interest this moves the PAF beyond just writing the cheque. It can extend from casual discussions with grantees to sharing knowledge/contacts and joining Boards. It can even extend to arranging research in a particular field to better direct funding/activities or to promote an overlooked problem arranging or encouraging leverage of their distributions particularly with Government and/or other donors where matched funding challenges may encourage further support from various sources. While an increased profile has come from efforts in gaining Government funding, it has even extended to the Impact 100 programs in Western Australia and Victoria, and to crowdfunding events (although care needs to be taken to be sure the recipient organisations are DGR 1s) working with other donors, particularly other PAFs having a growing pool of PAFs has inevitably meant a number have combined to collaboratively fund and offer other support/guidance to particular causes. Not only has this greatly aided the causes but it has seen new and strong friendships develop between families and others not previously linked funding evaluation for DGRs a number of PAFs have funded the DGRs they support to undertake Social Return On Investment (SROI) or similar evaluations on their programs. This has allowed both improved and better directed activities and can be used as evidence of success in attracting other funders using their corpus for both social and financial return a small but growing number of PAFs are using part of their corpus to invest in assets that are designed to provide a social as well as financial return. This is known as Impact Investing and our Philanthropic Services team can provide further information using other ways of granting some PAFs are providing DGRs with other forms of support through allowing use of corpus assets. One of the most common ways has been by providing the use of property at a low or no rent cost. The market rent forgone may be able to be included in the calculation of minimum annual distributions required by the PAF improving the knowledge base of PAFs it is recognised that better knowledge will lead to better grant making. Many PAFs fund activities which enhance the quality of their grant making such as membership of Philanthropy Australia (PA) (15%, and rising, of PAFs are now members) or attending seminars/conferences related to their areas of funding interest an opportunity to reward their responsible person while the vast majority of people acting as the responsible person on a PAF Board do it because of their relationship with the PAF founder/family, a number of PAFs not only have them contribute to the decisions on grant recipients but actually allocate a distribution to a DGR of their choice as a reward for their services employing a professional manager depending on a PAFs size and complexity, a number employ professional managers to run their PAF, similar to other large Foundations. They may be chosen for their management and/or expertise particularly in specific cause areas involving children or extended family in their PAF this can be simply achieved by allocating a portion of distributions to children for learning opportunities to adding them as trustees as they get older. A high proportion of PAFs who are members of PA, have their children as members of PA s New Gen program. This program adds to the skill base and connectivity of the next generation. Management of the PAF can also be shared or alternated between family members to spread skills and workload. This nurtures the formation of social values and provides financial experience in a controlled and audited environment. For extended and multi generational families, often it is their philanthropy that provides the formal glue that holds them together over time. benefiting from direct experience in the NFP sector often children, extended family or friends may be working or volunteering in the NFP sector and have specific knowledge that is brought into the PAF and influences grant making activities using donations to a PAF to help in annual tax and estate planning many donations to PAFs occur in years of high income that may be irregular or a once off and may not match the desire to continuously support causes or even allow time to identify causes or specific DGRs. The PAF vehicle allows a separation of the timing of the donation and the distribution. In addition, many PAFs are now a beneficiary of the estate of founders and other family members, and ensuring tax effective donations can continue to be made to DGRs many retirees are finding that in a low or no tax superannuation environment, all giving is made out of pre-tax dollars. While they want to continue to support causes, they are missing the opportunity of leveraging those donations as deductions unless they have matched their higher income years with their use of structured philanthropy, such as establishing a PAF. Private Ancillary Funds 12

13 Common PAF pitfalls With the requirement for an annual audit (now also including an audit of compliance with the PAF guidelines) plus an information return to the ATO, PAFs are more tightly regulated than other trusts and foundations in Australia, and there is much confidence in their operations. However with such a relatively new structure and with new regulations in place since 2009, it is not surprising that some areas have caused problems in the running of PAFs. Some of the more common issues are: distributing to incorrect organisations PAFs are only able to distribute to type 1 DGRs. While this comprises around 90% of the almost 30,000 DGRs, some funds also distribute to type 2 DGRs which are either public or private ancillary funds. In the vast majority of cases this is because charities have chosen to use a public ancillary fund as their fundraising vehicle. In 2011, PAFs gave $11.6M to ancillary funds (7% of distributions) and since inception have given 5% to them. PAFs should use the ABN Search website (www. abr.business.gov.au) to check the status of recipients not completing an audit of the PAF guidelines compliance one of the more recent changes to PAF regulation is that their annual audit must now show they have complied with the PAF guidelines. This is not a familiar area for all auditors. This compliance must then be indicated on the annual ATO information return not submitting an information return on time these simple returns must be completed and supplied by 28 February for the previous financial year and while the audit is not required to be sent, it must be completed prior to the information return not claiming franking credits this is now less likely as the ATO reminds and sends the application form to PAFs, but post July each PAF should apply for eligible refunds of franking credits not having an Investment Policy part of the new PAF guidelines (and their audit) require that a PAF has an annually reviewed Investment Policy which takes into account the objectives of the fund and its method of achieving that not having appropriate investment diversity as part of the Investment Policy, diversification of investments will be important. PAFs may have been gifted a single physical asset or one company share holding. This needs to be diversified and some assets such as collectables are not able to be held high level of expenses PAFs can and would be expected to have costs of operation including financial management, audit costs and assistance with grant making (such as membership of PA). Although there are no legislative limits on these costs, the ATO can query the legitimacy of costs and in cases of high costs relative to distribution levels, will investigate borrowing within the PAF as part of the new legislation, PAFs can no longer borrow except in limited circumstances. Borrowings held by PPFs at Sep 2009 can be maintained and borrowings made to cover distributions can be made for no longer than 90 days and for under 10% of the funds assets privacy considerations for a PAF the ACNC plan to publish individual PAF details on their public register (as they will for all other charities) unless they are requested to withhold those details. Recently the ACNC extended the deadline for applications to withhold these details from the register until 31 March Only 27 PAFs had made this application up to 31 Oct 2013 succession planning for a PAF very few PAF founders have died (thankfully), however with many in operation for a decade now and having children become more involved, questions of succession and planning for control and knowledge transfer are becoming more common, and considering if a PAF is still the right philanthropic vehicle situations evolve and many have found that a PAF wasn t the correct structure for their needs. About 70 have closed (6%) since establishment and more should possibly again examine their requirements and investigate other alternatives. Others should investigate if a PAF might be the ideal choice for their circumstance. The JBWere Philanthropic Services team has broad experience in the establishment and maintenance of a PAF, and would be happy to advise. Private Ancillary Funds 13

14 The place PAFs have in Australian giving As good as PAFs have been for recipient charities, it must be remembered that they only account for 5% of total giving in Australia when you include estimates for other trusts and foundations, bequests and corporate giving plus the dominant individual giving source. While individual giving is generally more costly and difficult to source per dollar donated, it is still this large number of smaller donors that provides around 70% of total giving both in Australia and the USA. Importantly, PAFs have further room to grow, as does broader philanthropy in Australia. Giving from PAFs is growing substantially faster than broad giving in Australia, partly due to the continued establishment of new funds and partly due to the advantage of a corpus dedicated to giving through changing economic conditions. Since 2007, giving from PAFs has risen at an average annual rate of 17% compared to 8% for individual giving, both impressive numbers, partly boosted by strong gains in the 2007, 2008 pre-gfc years. Since 2009, after the PAF legislation changes and during the GFC, PAF giving rose by 7% annually while broader giving fell by 1.4%, again highlighting the growth potential for this relatively new form of structured giving. Although comparisons with the USA are broadly similar in the proportion from each giving source, the quantum of dollars compared to incomes and the proportion of people donating still leaves significant room for gains locally. The higher proportions seen in Australian estimates for corporate and bequest giving are more a reflection of a lower total base of giving compared to the USA. The inclusion of religion as a tax deductible cause in the USA, unlike Australia, also affects comparisons. The share of giving from trusts and foundations in the USA is around 25% higher than in Australia (adding trusts, foundations and PAFs) even with a lower base locally. This is largely due to the long and established history of structured giving in the USA, a gap now beginning to be closed locally, thanks to the introduction and growth of PAFs. Chart 10 Giving in Australia and the USA by source 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Australia USA Individual giving PAF distributions Trust and foundation (excl. PAF) giving Bequests Corporate Giving Source - ATO, Giving USA 2012, JBWere Philanthropic Services Private Ancillary Funds 14

15 the jbwere philanthropic services team David Knowles David leads JBWere s Philanthropic Services team. One of his primary responsibilities is to provide strategic advice to charitable and non-profit organisations in relation to their governance, capacity building and donor relations activity. David sits on the Investment Committee of the JBWere Charitable Endowment Fund. He is a member of the Centre for Social Impact s advisory council, the MLC Community Foundation s advisory committee and a Director of BoardConnect. David also sits on the editorial advisory board of Generosity magazine. In 2012, David established his own account within the JBWere Charitable Endowment Fund. T: E: david.knowles@jbwere.com Chris Wilson A Director of the Philanthropic Services team, based in Melbourne, Chris joined JBWere in April His responsibilities include bringing philanthropic opportunities and solutions to clients, facilitating dialogue between the non-profit sector and those with a philanthropic interest and increasing visibility of philanthropy in the community. One of his primary responsibilities is to provide strategic advice to charitable and non-profit organisations in relation to their governance, capacity building, sustainability and donor relations activity. Chris is on the Founding Committee of Impact100Melbourne and he is also a member of JBWere s Diversity Council. T: E: chris.wilson@jbwere.com Shamal Dass Shamal joined the Philanthropic Services team in November His responsibilities include the provision of specialist advice to both non-profit organisations and private clients in areas ranging from the structuring of philanthropic giving to governance structures and organisational strategy. Shamal works in partnership with JBWere advisers to develop tailored investment management solutions that allow clients and non-profit organisations to fulfil their mission. Prior to joining JBWere, Shamal worked within the financial services and trustee industries where he has significant experience in advising high net worth individuals on their philanthropic structures, managing trusts and foundations (including PAFs), and constructing charitable foundation investment portfolios. T: E: shamal.dass@jbwere.com John McLeod John joined Goldman Sachs JBWere s Philanthropic Services team on its establishment in 2001 after 16 years in resource equity markets. His primary responsibilities were researching and analysing trends in the philanthropic sector; interpreting the findings to provide valuable insights for clients; and forging relationships between clients with a philanthropic interest and the not-for-profit sector. After retiring as a Principal and Executive Director of Goldman Sachs JBWere, John has been able to devote more time to both his family s interests in private philanthropy through a Private Ancillary Fund (PAF) established in 2004 and broader education through independent consultancy in the sector while still undertaking research and client advisory work for the Philanthropic Services team at JBWere. John is also the co-author of IMPACT Australia: Investment for social and economic benefit. Josephine Paino The JBWere Philanthropic Services team is supported by Josephine Paino, Associate, Philanthropic Services who can be contacted on or josephine.paino@jbwere.com 2012 and 2013 Winner of the Australian Private Banking Council Outstanding Institution - Philanthropic Services Award. Based on a submission lodged by JBWere and NAB Private Wealth. The JBWere Philanthropic Services team is committed to contributing to the ongoing development of the philanthropic and the non-profit sectors in Australia and New Zealand. Our team has been an integral component of JBWere s wealth management offering since We also provide insight and advice to non-profit clients on governance, on how to maximise investment outcomes and on how to appeal to donors. In further support of our clients, we conduct and compile research and best practice in the non-profit space and share these findings with our clients. Additionally, our team provides capacity building seminars and events that provide educational opportunities for non-profit staff and board members. For a copy of our Client Engagement Plan and to access other insights please visit:

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