New Giving Fund rules spark debate over charity system gaps in Australia

MID North Coast residents, like most in regional Australia, are known for helping others in need.

But changes to charity funding rules have led to concerns that the system isn’t working as well as it could.

The Federal Government has announced that “Giving Funds” will be required to distribute six percent of assets each year, up from four percent for public funds and five percent for private funds.

On the surface, the change appears positive, with more money expected to flow to charities.

However, sector leaders say the issue is more complex and that increasing the payout rate alone will not address deeper structural problems.

Maree Sidey, CEO of Philanthropy Australia, said the change overlooks a key barrier within the system.

“Australians want more community-based groups to be eligible to receive support from Giving Funds, so that support can flow to where it’s needed most,” Ms Sidey said.

To receive funding, charities must hold Deductible Gift Recipient (DGR) status, which allows donors to claim tax deductions.

Yet many organisations, particularly smaller or regional groups, do not meet the criteria or face significant barriers in applying.

This limits where Giving Funds can direct their money, even when demand for support is high.

“The demands on charities are immense and Giving Funds are vital sources of funding for their work across the community.

“Increasing mandatory distributions for Giving Funds without addressing wider system reform, is like turning up the water pressure without checking the plumbing.”

Data shows many funds already exceed the new six percent threshold, raising questions about whether the change will significantly increase overall giving.

“This change to Giving Funds’ minimum distribution is unlikely to significantly increase support for [small and regional] charities because, as the Government notes, around two-thirds of Public Giving Funds, and around half of Private Giving Funds, already distributed more than six percent of net assets in recent years.

“It could also disincentivise giving by introducing regulatory instability.

“The system is complex, confusing and hard to navigate for donors and charities.”

Philanthropy Australia is now calling for broader reform, particularly changes to the DGR system to improve access and reduce complexity.

By Sis HIGGINS