Accountants and advisers should be aware of structured giving options and benefits: Perpetual

One of Australia's leading managers of philanthropic trusts, Perpetual, has called for accountants and professional advisers to increase their understanding of the options and benefits of structured charitable giving programs.

At the Institute of Chartered Accountants of Australia (ICAA) Business Forum Series today, Perpetual's General Manager Philanthropy, Andrew Thomas, said that despite the benefits of structured giving programs, many wealthy Australians haven't yet considered them as an option.

He cited the Ramaciotti Foundations as an example of how structured giving can help clients better achieve their objectives. "The charitable trusts set up by Vera Ramaciotti in 1970, with an initial donation of $6.7 million, have now granted over $51 million to biomedical research," Mr Thomas said.

In his presentation, Mr Thomas explained the benefits of structured giving to tax and wealth advisers, who are in an ideal position to advise clients on their options in this area. In fact, a recent report by the Queensland University of Technology (QUT), titled Foundations for Giving, found that advisers play a crucial role in facilitating planned giving.

"Those with the capacity to give often do not know how to make the leap from ad hoc donations to sustainable giving. QUT's research found that by putting structured options on the table, advisers are instrumental in helping clients achieve their charitable objectives," Mr Thomas said.

Mr Thomas also explained that a planned approach to giving offers a range of benefits for both donors and recipients that are not available through one-off donations.

"Not-for-profits are able to engage with donors and form long-term relationships, which lead to sustainable giving and greater certainty about the contributions they will receive."

On the other hand, philanthropists, or those who have received a significant lump sum of money, for example through the sale of a business or inheritance, may receive tax benefits from structured giving, including the option to spread tax donations over a five year period.

"Charitable giving is not always considered when someone sells a business. Tax professionals therefore play an important role in raising awareness of philanthropy and the personal satisfaction it can bring."

Mr Thomas said that the end of the tax year also provides a timely opportunity to discuss the option of philanthropy with clients.

"Advisers may want to provide their clients with a range of options to reduce their tax bills. Given the $25,000 concessional contribution cap for superannuation and the higher contribution tax for high-income earners, charitable donations can be part of the conversation at this time of the year," he said.

Mr Thomas explained to attendees that charitable trusts could be structured in three ways: private charitable trusts, public ancillary funds and private ancillary funds (PAFs).

PAFs are the most highly regulated structures available. Almost 1000 PAFs are currently in existence, and to date have received donations in excess of $2 billion.

"PAFs can be structured to exist either in perpetuity or for a finite period; donations are deductible and can be spread over a number of years; and donors are able to have control over their investments and which charities receive benefits," said Mr Thomas.

Alternatively, giving through a public ancillary fund, such as the Perpetual Foundation, is an option for simple and flexible sustainable giving.

"An initial contribution of $20,000 is required to set up an endowment within the Perpetual Foundation and donors can recommend charities to benefit from donations. They offer the same tax advantages as PAFs, without the administrative and compliance requirements.

"Private charitable trusts are bespoke and can undertake charitable activities and distribute to a broad range of beneficiaries. While donations are not tax deductible, they do have low ongoing compliance costs," said Mr Thomas.

Perpetual argues that a structured approach to giving is more beneficial to the community. "A Giving Australia report from 2005 found that people who plan their giving donate four times as much as more spontaneous, reactive givers. In today's world, where competition for the philanthropic dollar has increased, structured giving programs are an effective way to provide a significant and lasting impact in the community" he said.

About Perpetual Philanthropic Services

Perpetual is one of the largest managers of private charitable foundations in Australia, with $1.1 billion in funds under management (as at 31 Dec 2011). Perpetual manages charitable trusts and endowments – including Private Ancillary Funds (PAFs) and the Perpetual Foundation – for over 540 clients, supporting medical, social, environmental, religious, cultural and educational causes.

Perpetual Philanthropic Services is part of Perpetual Private, which advises clients on $8.1 billion of funds (as at 31 Dec 2011). The Perpetual Private team of experts offer tailored advice and services and can help clients fulfill their charitable intentions.