Death benefits, Retirement, Superannuation, Tax

Super reform can unlock billions for charity

Superannuation death benefits Philanthropy Australia Tax reform Charities Charity

Eliminating taxes on superannuation death benefit bequests to charities could generate billions of dollars in additional income for Australia's charitable organisations.

Simplifying the process for superannuation fund members to direct unused savings to charities upon their passing could generate an additional $260 billion in charitable donations by 2060, according to a new report released by Philanthropy Australia.

The “Making Giving Easy” report, produced in collaboration with Impact Economics and Policy, examined data for estimated superannuation death benefits from the Retirement Income Review for 2018/19 and 2059/60 alongside contributions to charities made via bequests through legally established wills, excluding super.

The report proposed that removing the 17 per cent tax on donating unused superannuation after death and changing the rules to allow direct nominations to be made to charities could lead to an increase in donations ranging from $4.8 billion to $21.9 billion a year.

“This reform can transform giving in Australia. It would also streamline tax policy and remove the anomaly that if you donate to a charity the day before you die, you get a tax break, but if it goes to charity the day after your death, the charity loses up to 17 per cent,” Philanthropy Australia chief executive Jack Heath said.

“In the end, this reform will have transformational impact, with tens of billions in additional funds flowing to charity. It would play a huge role in a great national endeavour – working to make Australia one of the more generous and giving nations on earth.”

The release of the report coincides with the federal government’s stated intention to collaborate with the philanthropic, charity and business sectors to double charitable contributions by 2030.

Heath hoped the reforms could be implemented by 2026 following a Productivity Commission inquiry into philanthropic giving, which is expected to conclude in 2024.

“We think it’s important the government takes the time needed to get this reform right.  There is a Productivity Commission inquiry currently in progress which will provide options to government to double giving, with its final report due next May. This will need to be considered by government,” he said.

“As the report itself states, it is also critical to have a consultation process with the superannuation industry so there’s time for them to discuss and consider the reform and so government can leverage the industry’s expertise on policy design and implementation issues.”

The analysis follows a report released by Philanthropy Australia last year that revealed around 75 per cent of more than 2500 survey respondents supported reforms enabling trustees to allocate unspent superannuation funds to charity without incurring tax penalties.

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