Region Report

Regional Reviewer: Susan Barker Institutional Affiliation: Sue Barker Charities Law With contributions from staff at the Indiana University Lilly Family School of Philanthropy

Overview of the Region

GDP Most Number of Population Official Registration Economy Capital Per Capita* Represented Registered 2016* Language Levels (US $) Religion** POs

English & Christian Central & 24.6 million Sydney 49,927 55,059 (1) Strayn (61%) State levels New English & Christian 4.7 million Wellington 39,426 27,428 (2) Central level Zealand Māori (48.1%) *Current US $. World Bank 2016 ** US Department of State. Bureau of Democracy. International Religious Freedom Report for 2016. (1) Australian Charities and Not-for-profits Commission (ACNC). (2) Charities Services. . November 2017

Oceania is a region of the South Pacific that comprises multiple islands. The United Nations divides the region into four sub-regions: Australia and New Zealand (including also the Christmas Islands, Keeling Islands, Heard Island and McDonald Islands, and Norfolk Island), , , and . The entire region has an estimated population of almost 39 million; Australia and New Zealand account for 75 percent of the population in the region. However, the second most populated in Oceania is Papua New in Melanesia, with 8 million inhabitants.

Australia and New Zealand are democracies that have shown significant economic progress in the last 30 years. The Index of Economic Freedom (2017) categorizes Australia as one of the wealthiest -Pacific nations, competitive in services, technology and manufactured goods. New Zealand is also a prosperous democracy that has a “strong commitment to economic freedom” and places a high value on international trade. For years, the two have reached agreements for economic integration to cut down trade barriers between nations. The recent Pacific Agreement on Closer Economic Relations Plus (PACER Plus) in 2017 extends to the Pacific Island economies with the intention to bring sustainable development to the whole Pacific region.

The latest censuses in Australia (2016) and New Zealand (2013) show that Christianity, in its various denominations is the most represented religion in both countries (41.9% in Australia and 47.6% in



New Zealand). Other religions include Buddhism, Hinduism and Islam. Educational attainment in both countries is relatively high in comparison with other OECD countries. In 2016, 43.4 percent of 25-34 year-olds had completed tertiary education in New Zealand, and in Australia, this portion was 49.3 percent.

Summary Report

The philanthropy environment in Australia and New Zealand is generally good. Both New Zealand and Australia enjoy stable democracies with high rankings on Transparency International’s perceptions of lack of corruption.

A key issue for Australia is the growing tension around advocacy activities of environmental organizations, a surprising development given Australia’s statutory recognition of the importance of advocacy by charities in 12(1)(1) of its Charities Act 2013. Advocacy by charities is also a key issue in New Zealand, with many charities denied registration or facing deregistration for this reason. Australia is also affected by a lack of harmonization of state fundraising legislation, creating a significant burden for charities operating in more than one state in Australia. New Zealand, by contrast, has a unicameral one-state system with fundraising largely self-regulated.

Figure 1. Global Philanthropy Environment Index Overall Scores, by Economy

4.33 4.25 4.17

REGION Australia New Zealand

Source: Indiana University Lilly Family School of Philanthropy, 2018 Global Philanthropy Environment Index

Key Findings

1. Proportionally large and diverse philanthropic sector

The philanthropic sector in Australia is rather large and mainly characterized by a high number of unregistered organizations. With an estimated population of 24.6 million (Australian Bureau of Statistics), Australia has 55,059 registered charities in the Australian Charities and Not-for-profits Commission (ACNC). In other words, Australia has one charity for every 446 people. In general, the nonprofit sector in Australia has almost 600,000 organizations (many of them small), including near



5,000 trusts and foundations (philanthropy.org.au). Nonprofits and charities can operate under a range of legal structures. It is estimated that the number of registered nonprofits is 190,000 and the number of unincorporated organizations is approximately 380,000 (AUSTRAC, 2017).

By contrast, New Zealand has a population of 4.7 million and 27,428 registered charities (Charities Services website). The nonprofit sector in New Zealand may seem comparatively small in absolute numbers, but in relation to the current population, New Zealand’s nonprofit sector is larger, with a population per NP ratio of one organization for every 171 people. This ratio is lower than in Australia, USA, , UK, and Japan. This may be an indicator of New Zealand’s culture of volunteering and no doubt contributes significantly to New Zealand’s high level of social capital (Legatum Prosperity Index 2017). The total estimated number of nonprofits in New Zealand is 115,000, most of them small, unincorporated associations and often volunteer-based (JBWere, 2017).

In New Zealand, 21 percent of charities provide educational services, followed by organizations dedicated to religious activities (18%), and health and social services (7.2% each). Similarly, in Australia religion (28.5%), and education & research (18.6%) represent the largest portion of charities (Australian Charities Report, 2015). The composition of giving in both economies is very similar. In general, the main source of income of the sector in both countries is self-earned income through fees and other means (45 in New Zealand and 54 percent in Australia). However, the JBWare Cause Report (2017) shows that while in Australia philanthropic income (individual donations, family trusts and bequests, corporate philanthropy) is merely 8 percent of the income, in New Zealand the percentage of philanthropic income is 24 percent. On its face, this may appear to indicate that the New Zealand sector is less reliant on government funding in absolute terms, but with a relatively nascent philanthropic sector, the New Zealand charitable sector is in fact heavily reliant on government funding. . In Australia, organized philanthropy understood in terms of family foundations is slowly growing, and planned giving, such as bequests, payroll giving, and gifts, are also slowly gaining pace. Corporate philanthropy (including sponsorships) is a large portion of philanthropic giving in Australia, while in New Zealand, the largest proportion comes from individual giving, followed by statutory trusts (family, individual and community trusts, bequests and the energy, gaming and lottery sectors).

2. Philanthropic organizations are free to operate

In general, both economies show highly favorable environment to form, operate and dissolve philanthropic organizations. There is freedom of expression and association protected by law or by the constitution in both countries. People have freedom to form and operate philanthropic organizations with any lawful purpose, and donors are free to donate to whomever they choose. Registration costs are affordable and no minimum capital or assets are required to register a nonprofit organization. Specifically in Australia, the transfer of certain powers to the Australian Charities and Not-for-profits Commission reduces significantly the time for registration and for obtaining tax-exempt status. In both countries, nonprofits are allowed to operate without registration.



Figure 2. Scores on Ease of Operating Philanthropic Organizations, by Economy

4.7 4.3

Australia New Zealand Form a PO 4.0 4.5 Operate a PO 4.0 4.6 Dissolve a PO 5.0 4.9 Ease of Operating a PO 4.3 4.7 Source: Indiana University Lilly Family School of Philanthropy, 2018 Global Philanthropy Environment Index

Among the most relevant regulatory barriers are the fundraising regulations in Australia. The recent report of Australian Charities and Not-for-profits Commission (2016) considers that the fundraising regulatory framework is a burden for charitable organizations. First, fundraising legislation differs significantly between jurisdictions, increasing the administrative costs of charities. Second, regulations have not kept pace with new forms of fundraising, particularly online fundraising.

In New Zealand, the most significant regulatory barrier is the narrow approach taken by Charities Services and the Charities Registration Board to the definition of charitable purpose, which results in significant numbers of charities being denied access to charitable registration. An additional barrier is the appeal mechanism in the Charities Act, which requires an appeal to the High Court: mounting such an appeal is beyond the practical reach of most charities, which means that the charities regulator is effectively not held accountable for most of its decisions.

Otherwise, organizations can generally decide on their purpose, internal structure and operation without government interference. Reporting, however still represents a challenge in terms of consistency of requirements between jurisdictions in Australia. In reference to termination, internal laws establish the reasons for voluntary and involuntary termination. Specifically in the case of New Zealand, most involuntary terminations occur after a period of non-filing, although the number of charities deregistered due to changes in jurisprudential interpretations of the definition of charitable purpose appears disproportionately high. Further, although organizations are still legally able to operate even when they lose their registered status, in practice, deregistration sounds a death knell for many charities.



3. Important tax incentives for donors and recipients of domestic donations, but under certain circumstances

Both donors and recipient organizations benefit from tax incentives. In New Zealand, charities must be registered in order to be eligible for the charitable exemptions from income tax. Most other tax incentives for charities, in particular the ability to give donors a donation receipt) do not legally require registration (although in practice the tax authority may effectively require registration). Non-charitable nonprofits may be eligible for other income tax exemptions under the tax legislation.

In Australia, charities must be registered and apply for tax-exempted status with the tax authority to get exemption; once registered, they can benefit from multiple tax incentives.

Figure 3. Scores on Tax Incentives, by Economy



Australia New Zealand Making Domestic Donations 4.0 4.8 Receiving Domestic Donations 4.0 4.6 Tax Incentives 4.0 4.7

Source: Indiana University Lilly Family School of Philanthropy, 2018 Global Philanthropy Environment Index

Individual and corporate donors receive tax benefits for donations to charities under certain circumstances. In Australia, giving to religious organizations is not tax-exempted, while in New Zealand citizens may receive tax credits for giving to religious organizations. In Australia, organizations need to have Deductible Gift Recipient status. Although there is no ceiling for individuals or corporate taxpayers giving to DGR charities, DGR status is restricted and, in 2015, only 38 percent of registered charities had DGR status. This proportion is much higher in larger organizations (80%). In New Zealand, donations to organizations that apply their funds wholly or mainly to philanthropic, benevolent, charitable or cultural purposes within New Zealand (donee organizations) are eligible for tax credits or deductions. Most registered charities that apply their funds in New Zealand are considered to be donee organizations.



4. Tax-exemptions for overseas donations are limited

There are few restrictions for cross-border philanthropic flows; however, the regime for tax treatment of cross-border donations presents significant barriers. Both, in Australia and New Zealand, obtaining overseas donee status is subject to multiple requirements associated with excessive time and effort to gain government approval. The approval process may take several years and involves significant legal and administrative difficulties.

Additionally, the income tax exemptions favor domestic charitable work. In New Zealand, business income is only exempt from income tax to the extent that an organization carries out its charitable purposes in the country, and donors may not receive tax credits for donations made to organizations with overseas purposes, unless the organization has specifically applied for and received authorization from the Inland Revenue Department and corresponding legislative amendment. In the case of Australia, nonprofit organizations are subject to ‘in Australia’ special conditions, which may constitute a barrier for international philanthropy. In practice, to support overseas charitable causes, charities donate to other organizations in Australia with approved overseas donee status. This requires that donating organizations pay a certain fee to the organization operating the approved overseas aid fund. On the other hand, charities can be considered to be pursuing their objectives principally ‘in Australia’ even if they merely pass funds in Australia to another charitable entity that conducts its activities overseas, diverting the original intention of benefitting mainly Australians with these tax concessions.

Figure 4. Scores on Cross-Border Flows, by Economy

4.5 4.1

New Zealand Australia Sending Cross-Border 4.0 4.0 Donations Receiving Cross-Border 4.2 5.0 Donations Cross-Border Flows 4.1 4.5

Source: Indiana University Lilly Family School of Philanthropy, 2018 Global Philanthropy Environment Index

Although the flow of money is relatively free from regulation, except for the established requirements of reporting foreign currency transactions, recent developments in cross-border flows into the region have opened the discussion about the increasing use of nonprofit organizations for criminal activities, and may have given grounds for increased scrutiny to philanthropic organizations. In Australia, NPOs are not directly covered by anti-money laundering (AML) and combating the financing of terrorism



(CFT) regime; however, they report activities to the ACNC, ‘a designated agency’ for the AML/CFT. While there have not been formal complaints against these reporting restrictions in relation to cross- border donations, a recent report of the national financial intelligence agency Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Charities and Not-for-profits Commission (ACNC), found links of certain NPOs with organized crime groups to support terrorism and money laundering. The study reports that the charitable sector is at a "medium" risk and found 28 cases of suspected terrorism financing. Likewise, in New Zealand, while phase 1 of the AML/CFT legislation was not specifically intended to cover charities, many charities did fall within the definition of “reporting entity” for the purposes of the AML/CFT legislation, and were therefore required to comply with the regime in full unless they were able to obtain a Ministerial exemption. The second phase of the regime was enacted in August 2017, following details revealed from the Panama Papers (leaked documents of financial and legal records detailing financial information of many offshore entities) about how external investors used New Zealand trusts for tax evasions offshore. The Anti- Money Laundering and Countering Financing of Terrorism (AML/CFT) Amendment Act 2017 was enacted in August 2017, although some key sections come into force over the succeeding two years.

5. Supportive government policies and practices

In Australia, the relations between government and the nonprofit sector have become stronger in the last decade. In Australia, almost 40 percent of the income of registered charities is received from government grants. Charities with income higher than US $1 million a year receive 40 percent of their income from government grants (Australian Charity Report, 2015) as a result of government outsourcing services to nonprofits, specifically in welfare and social services, health and education. The JBWere report (2017) observes a similar trend in the case of New Zealand, where there is continuing push for profit and nonprofits to deliver public programs and services. However, the tight government contracting environment has been the source of tension between government and the nonprofit sector in New Zealand.

Figure 5. Scores on Political Environment, by Economy

4.0 4.0

Australia New Zealand Governance 4.0 4.0 Public policies 4.0 4.0 Political environment 4.0 4.0

Source: Indiana University Lilly Family School of Philanthropy, 2018 Global Philanthropy Environment Index



While the good relations between government and the nonprofit sector in Australia has led to agreements such as the recently created Prime Minister’s Community Business Partnership to promote philanthropic giving and investment, other factors influence the dynamics of such agreements. In New Zealand as well, the significant growth of receiving organizations amid changing funding strategies from government has led to greater competition for government-based funding sources. Given the growing reliance on public funding, the vulnerability and dependence of the sector may intensify, particularly in Australia where government funding has increased from 30 to 38 percent in the last few years, while philanthropic donations remain flat at 8 percent (JBWere, 2016).

6. Multicultural Environment

Australia and New Zealand have a long tradition of giving that is reflected in high generosity global measures. Both countries are among the five highest rated countries in the Gallup Civic Engagement Index and CAF World Giving Index, two indices that measure global giving in terms of likeliness of giving money, time and helping a stranger. Both countries also provide a relatively healthy political and policy environment for the operation of civic society organizations, according to the latest results of the CIVICUS Enabling Environment Index. Together with this policy environment, social, cultural and historical influences play important roles in explaining giving and current philanthropic trends in both Australia and New Zealand.

Both countries were largely influenced by the British culture, marked by histories of colonial settlement. The British culture of , unplanned, and dispersed giving, together with the ever- present government control and provision in the early may have tended to encourage greater reliance on the state, and self-reliance, rather than on philanthropy. This early socio-cultural environment changed later to give place to a more independent philanthropic sector, particularly since 2000. Giving is starting to be more planned with the creation of family and local community foundations, payroll giving and bequests, accompanied by professionalization of those who can advise on such matters. Significant individuals are becoming less hesitant about making their major giving public, and this behavior is gradually becoming normalized. The greater accumulation of wealth by families and corporations is also gradually allowing a sustainable philanthropic tradition to emerge.

Both countries are multicultural mixtures of Anglo-Western and indigenous cultures, with traditions set by their first settlers. This has created a multicultural landscape for philanthropy influenced by very particular values of reciprocity, family, community, and self-reliance. Such a diverse cultural environment embraces the use of philanthropic practices not always recognized and counted as philanthropic giving in several western studies.



Figure 6. Scores on Socio-Cultural Environment, by Economy

4.2 4.0

Australia New Zealand

Source: Indiana University Lilly Family School of Philanthropy, 2018 Global Philanthropy Environment Index

For instance, in Māori culture, koha (the giving of a gift that necessitates a reciprocal response, now or in the future) has particular significance in New Zealand. Generally, koha is perceived as a duty, with an obligation of reciprocity. Therefore, koha is excluded from the definition of philanthropic giving in most reports, like Giving in New Zealand, although the amounts given may be significant. Williams and Robinson (2004) talk about the invisibility of Māori communities in western philanthropy for two reasons. First, because Māori communities have little experience with the fundamentals of western philanthropy like “tax incentives”. Second, because the sector has little understanding of Māori motivations for giving and forms of giving. This invisibility also transfers to the Māori people as recipients of philanthropic giving. The J R McKenzie Trust study found that in 2012 funding to Māori is lower on a per-capita basis than funding to other population sub-groups; in fact, Māori receive just over 12 percent of total philanthropic funding, even though they make up almost 15 percent of the national population.

7. The future: online giving and social enterprise

Social Enterprise and social impact investment: There is considerable interest in social enterprise and social impact investment among government, investors and social providers, as well as alternative financing, such as social impact bonds as a vehicle to involve private and nonprofit organizations in partnerships with the public sector to deliver social services. Of both countries, Australia has progressed further into this trend.

Increasing use of online platforms for fundraising: Online fundraising tools are gaining momentum as effective means for nonprofits and individual funders to get support to causes and initiatives by directly communicating with donors using multiple specialized online tools and others technologies such as websites, email campaigns and social media.




AUSTRAC. (2017). Australia's NPO sector risk assessment. Retrieved from http://www.austrac.gov.au/sites/default/files/npo-risk-assessment-FINAL-web.pdf Australian Charities and Not-for-Profits Commission. (2016). Australian Charities Report 2015. Retrieved from http://www.acnc.gov.au/ACNC/Publications/Reports/CharityReport2015.aspx Gallup (2016). 2016 Global Civic Engagement. Retrieved from http://www.shqiperiajone.org/sites/default/files/pdf/2016%20Global%20Civic%20Engagement% 20Report.pdf Heritage Foundation. (2017). Index of Economic Freedom. Retrieved from https://www.heritage.org/index/ JBWere. (2016). The Cause Report. Retrieved from https://www.jbwere.com.au/content/dam/jbwere/documents/the-cause-report.pdf JBWere. (2017). The New Zealand Cause Report. Retrieved from https://www.jbwere.co.nz/assets/Uploads/JBWereNZ-CauseReport-March2017- DigitalVersion.pdf Jr. McKenzie Trust. (2014). Philanthropic Funding to Maori. Estimates, Insights and Next Steps. Retrieved from https://jrmckenzie.org.nz/wp-content/uploads/2017/12/1.-Final-Report-Phil- Funding-to-M%C4%81ori.pdf Williams, T. and Robinson, D. (2004). Social Capital and Philanthropy in Maori Society. The International Journal of Not-for-Profit Law, 6(2). Retrieved from http://www.icnl.org/research/journal/vol6iss2/special_4.htm