With Australia’s 50 most generous private givers having surpassed $1bn in donations for the first time last financial year, we speak to John McLeod, co-founder of JBWere Philanthropic Services, about emerging forms of charitable legacy and the scope of philanthropy.
When compiling the latest Philanthropy 50 list for the Australian Financial Review, JBWere’s John McLeod drew on his more than 20 years of experience researching the for-purpose sector to identify trends in the charitable priorities of this country’s megadonors.
Based on the public records of private foundations and direct liaison with philanthropists, the annual top 50 reflects a global trend for larger monetary pledges by a younger cohort of ultra-high net worth individuals. He says: “The amount donated has doubled since we started the list in 2017, putting the entry figure at around $5m now, and what’s particularly notable is the sense of urgency; today’s givers are eager to develop solutions to major societal problems within their lifetime.”
Philanthropic power couple Craig and Di Winkler pledged a listtopping $165m through their Yajilarra Trust in 2021-22, for example, while Canadian-born energy titan Geoff Cumming stunned Melbourne with his $250m gift (of which $100m was distributed last year) to fund a new medical research centre. McLeod adds that Australia’s wealthy are growing more comfortable with discussing their charitable activities—despite having a far shorter history in this arena than the philanthropic dynasties of the US and UK—since doing so can encourage others to join in supporting those causes.
While there is not a direct correlation between the AFR’s Rich List and Philanthropy 50, McLeod suggests this is less an indictment on billionaire benevolence than evidence of a knowledge gap when it comes to when and how much of one’s wealth might be redirected. He says the ‘good list’ has come to serve as a guide for UHNWIs wondering what constitutes a generous amount to give away, adding that one per cent of one’s investible net wealth each year is not a bad aspirational benchmark.
READINESS VS REACTIVITY
Organisations such as Philanthropy Australia (which counts McLeod among its board), have suggested that the broader population has lost its connection with charitable giving, leaving more of the heavy lifting to be done by the ultra-wealthy. McLeod believes this may be because charities tend to focus on reactive and emotive fundraising in emergencies rather than pre-empting the ‘what’s in it for me’ question. “The ask often skips over the idea that you should donate to a cause because it’ll make your own life better,” he says, “because my life is improved if the health system functions better, if art galleries are more wonderful, if better housing leads to less street crime, if global travel becomes safer as a result of reduced poverty.” The shifting priorities of private givers in recent years also hint at the fundamental difference between charity (as reactive) and philanthropy (proactive).
“Australian philanthropy is still dominated by universities, largely in relation to medical research, but we’re seeing growth in areas such as housing and climate change where money is going towards finding solutions for the root causes of a societal problem,” he explains. One top-10 giver, the Susan McKinnon Foundation, has pledged some $530m in totality to supporting effective government via think tank research and training for politicians, while the Scanlon Foundation is funding system improvements for the integration of immigrants in Australia. McLeod notes: “This is not the first thing that springs to mind when you think of philanthropy, but the scope is widening and there are serious dollars going towards bettering the way our country works. It invokes the adage that you’re better to install a fence at the top of the cliff than an ambulance at the bottom.” He says more people are realising that philanthropy does not necessarily mean giving money at the point of crisis; “If you really care about food wastage, you might fund a report that investigates how to make the system more efficient, for instance.”
FUNDING FRESH THINKING
For every $100 dollars in the coffers of a charity, only about $7 come from philanthropy. What that seven per cent offers, says McLeod, is opportunity to innovate and take the risks that a charity might not be free to do with funds provided by government or earned through the sale of services.
“Philanthropy’s job is to try new things, break the mould, and that can mean failing occasionally,” he adds. In the realm of private givers, the sky is the limit, or perhaps there is no limit at all. McLeod continues: “Alpha personalities who have achieved stellar success in the business world have a special capacity to make connections and bring together the right people to tackle huge problems, and because solving such problems is exciting, they tend to pursue ever-greater philanthropic ambitions.”
Take mining billionaires Andrew and Nicola Forrest, he suggests, whose Minderoo Foundation is addressing such epic challenges as ‘how do we fix the oceans?’, ‘how do we put an end to modern slavery?’ and ‘how can we cure cancer?’. He says it is this kind of big-picture thinking that makes it difficult to predict the members and focus areas of the Philanthropy 50 from one year to the next.
CHANGING THE GUARD
With technology joining mining and real estate as a major generator of Australian wealth in recent years, we are seeing younger and more socially conscious entrepreneurs entering philanthropic circles. McLeod says: “Look back 20 years and the biggest philanthropic organisations were groups like the Myer and Potter foundations, but now we have people aged in their 30s like Melanie Perkins and Cliff Obrecht of Canva thinking about their legacy right from the start of their business journey.”
The couple debuted 18th on the list with a pledge of around $15m to break cycles of poverty. Having been exposed to activism as well as wealth at an earlier age than their forebears, generations Y and Z are finding resonance in texts like the 2021 book Die With Zero (by former Wall Street trader Bill Perkins) and asking ‘what’s the point of being the richest person in the cemetery?’. For those with generational wealth, philanthropy often serves as the glue that holds the family together.
McLeod explains: “In addition to providing a reason for the different generations to meet regularly and discuss shared values, philanthropy also gives the patriarch or matriarch a chance to teach their descendants about money management before potentially transferring control of the family business.” He continues: “You might set up a foundation to distribute five per cent of the family wealth with your kids as directors, for example, and thereby ensure that they develop sound financial literacy skills before you hand over the keys to the entire family fortune.”
SENSIBLE STRUCTURING
While JBWere established its philanthropic advisory division back in 2001, McLeod says the wider industry remains somewhat backward in educating Australia’s highest earners about the role of philanthropy in a well-rounded wealth management plan. He believes Australia is home to enough individuals with the minimum recommended net wealth for there to be around 30,000 private ancillary funds—PAFs being the most common philanthropic vehicle— and yet only 2100 have been set up. This is partly because PAFs were only introduced to provide tax deductions for philanthropic investment just over 20 years ago, whereas a similar vehicle has been available in the US for over 50 years. Based on the fact that a private ancillary fund carries a certain administrative burden, including registering it as a company with directors, an annual audit, and filing returns with the Australian Charities and Not-for-profits Commission, it is logical to look at this structure if you plan to donate $1m or more, but there is no legal minimum.
“It makes sense to get started in philanthropy when you go through a major tax event like the sale of a business, partly for the tax offset but also to explore new purposes for your wealth while you can still be actively engaged, as opposed to the way that foundations used to only get started through bequests,” says McLeod. For those planning to give away a lesser amount or not wanting the extra paperwork, the sub-fund route is a good option. He explains: “A public ancillary fund is like the philanthropic version of a retail superannuation fund versus a self-managed one; you get the tax deduction without being required to manage anything, and if you grow your charitable interests to the point that you want to take control, you can port it over to a private fund.” JBWere has made a submission to the Productivity Commission’s Philanthropy Inquiry calling for additional options to these funds and the traditional vehicle of the charitable trust. The living bequest format used in the US sees double the percentage of Americans leaving money to charity in their wills than Australians. “The introduction of living bequests here would be a gamechanger, especially during a decade when gen Xers who are successful in their own right will be inheriting money they don’t particularly need,” says McLeod. “While superannuation makes up a bigger part of people’s assets nowadays, and Australia is a global leader in super, we’re currently disincentivised from leaving any of it to charity because the rules require you to put it through your estate first and therefore forfeit 15 per cent in death taxes.” The inquiry’s draft report is due in November. It goes without saying that continuous innovation in the forpurpose space is vital, especially as the generosity of the next generation may surprise and inspire us all.
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