One third of wealthy people do not give - unfounded

Recent media articles (Sun Herald Jan30 and Sydney Morning Herald Feb 21) based on an analysis of 1998 Tax Office Statistics suggested that about one third of wealthy Australians give nothing to charity. Givewell maintains that the data used to support this contention is deficient and that many more wealthy people are making a range of gifts to fundraising organisations which are not claimed in their individual tax returns. The following explanation is a brief attept to show why this is the case.

Tax Statistics provide data on donations claimed in individual tax returns. Donations claimed by other taxpaying entities are not separately published.

There are myriad reasons why charitable donations by the rich do not appear as a claim for a tax deduction in their individual tax return : -

Gifts made and claimed in a partnership, family trust or company tax return in which a wealthy individual has an interest. These are common legal structures for wealthy people and the bulk of their tax claims are made within those structures, including claims for donations.
Because rich people derive much of their income through other legal structures (like partnerships, trusts and companies) the figure of 905 people earning more than $1m in taxable income significantly understates the number of people who effectively earned more than this amount in the year.
Many people have previously established a charitable trust which acts as a capital fund used to finance future donations. Again, not part of their individual tax return.
Many forms of fundraising are not in fact tax deductible, some of which are well supported by wealthy people. Examples include charity auctions, donations of assets, merchandising, art unions and raffles.
Some of these high income earners died during the year and some of these would have left a significant bequest to charity, which again cannot be claimed as a tax deduction.
Many receipts for cash donations are lost, forgotten or not provided and it may well be that wealthy people are more inclined to overlook this in their tax planning.
Some people make donations and choose not claim a tax deduction as a matter of principle. They believe gifts should not enjoy tax breaks.

The above points are some that account for the difference between the $581m in claims for individual donations listed in the 1997-98 Taxation Statistics and the $3bn in total individual donations. Other research published ny Givewell - www.givewell.com.au/not_claimed.asp - estimates that over 5million Australian taxpayers give to charities but do not make a claim for donations in their tax return. Some of these, perhaps many, are the rich on which the analysis is based.

Givewell’s statistics - http://www.givewell.com.au/survey_feb00.asp – and - http://www.givewell.com.au/survey_jan00.asp l show that Australians are becoming more generous. We also agree that more can be achieved, but not with simple finger pointing at business and wealthy people.

The Australian Taxation Office has informed us that the scope of the data they provide will be clarified for the 1999 statistics to allieviate future misinterpretation.

Michael Walsh
Executive Director