Inquiry pushes for increased disclosure on corporate giving
The inquiry into philanthropy says listed companies should be required to publicly report itemised information on donations to entities.
The Productivity Commission has recommended the government implement requirements to "enhance disclosures and reporting of corporate giving" in its final inquiry report on philanthropy.
The final report for the inquiry, Future foundations for giving, was handed down on Thursday by the Productivity Commission and made several recommendations for improving philanthropy in Australia.
The report said transparency of corporate giving and accountability to shareholders, consumers, employees and the broader public could be increased by requiring listed companies to publicly report itemised information on their donations of money, goods and time to entities that have deductible gift recipient (DGR) status.
"Additionally, the ATO should require listed companies to report charitable donations of money and assets as an item in their company tax return, allowing the ATO to regularly publish aggregated data on corporate giving."
The ATO could then regularly publish aggregate information on corporate giving in Australia including donation by company size, taxable status and industry, the Productivity Commission said.
It also believes the deductible gift recipient system needs major reform.
"The arrangements that determine which entities can access DGR status are poorly designed, overly complex and have no coherent policy rationale," the Commission said.
"This creates inefficient, inconsistent and unfair outcomes for charities, donors and the community."
The report said there is no explicit policy rationale justifying why some charitable activities are within scope, but others are not.
During the inquiry, participants noted that while charities that relieve poverty or distress in the community are eligible for DGR status, charities that focus on prevention face barriers to eligibility.
"The health promotion charity category is available to charities promoting prevention or control of diseases in people and the community, but this does not include prevention of injuries," the report said.
"Many smaller grassroots and volunteer-run charities can be ineligible for DGR status, such as community gardens or neighbourhood houses."
Some charities cannot easily access DGR status because they provide a broad range of support to a group of people or community and therefore do not neatly fit into one DGR endorsement category, the report noted.
"Reform is needed to simplify the DGR system and refocus it on activities that are likely to generate the greatest net benefits for the community as a whole. This would create fairer and more consistent outcomes for charities, donors and the broader community," it said.
The Productivity Commission wants a comprehensive overhaul of the DGR system and a principles-based framework to be applied.
"This will simplify the current system, reduce the risk of distortions to giving due to different treatment of activities that offer very similar outcomes and provide guidance to underpin its future development," it said.
To enhance regulatory consistency and public transparency, the Productivity Commission has also proposed to remove the concept of a basic religious charity and associated exemptions.
This would mean that all charities are subject to the same ACNC regulatory framework, including principles-based governance standards and financial reporting requirements proportionate to their size.
"Most basic religious charities are small and like other small charities would only be required to provide basic annual financial information to the ACNC, without having it independently audited or reviewed," the report said.
"It would also mean the ACNC would be able to act in response to an actual or likely breach of its governance standards by a basic religious charity."
