Disruptive ideas for boosting productivity and wellbeing in Australia

Most of the proposals I would promote are already well researched, are evidence based, and have at least been considered. But some are more ideas than proposals. They have a small string attached and are waiting for the right wind.

In government terms, there are three categories of ideas:

1. Expenditure measures. These are measures that will cost the government either in foregone revenue or increased costs.
2. Revenue neutral measures. These measures would require a reallocation of existing expenditure.
3. Revenue generating measures. These measures would generate increased income for government.

Let’s look at the proposals in each category.

Expenditure measures

Reform deductible gift recipient (DGR) status rules. Incentives matter in giving. The current government incentives to encourage donations favour larger established charities. Reforming DGR eligibility to enable most charities to offer donors tax deductibility makes a lot of sense and would probably increase giving, especially to smaller community-based charities. (This has been recommended by the Productivity Commission.) If more money went to community-based charities, then community resilience and capacity to address local issues would increase, driving productivity and wellbeing.

Reform contracting of charities and not-for-profits. Long-term contracts provide stability, allowing charities to plan and invest in sustainable programs and services. This stability is crucial for building trust with beneficiaries and stakeholders and ensuring quality service delivery. Uncertainty minimises investment and reduces effectiveness.

All funding contracts for charities and community groups above $150,000 per year should be for a minimum of three years, preferably five. While there is a place for the small one-off grant, where significant contractual obligations are involved there should be an acknowledgement that charities can’t turn programs and services on and off like taps.

Larger contracts should have to make provision for the required infrastructure, IT, data privacy, cybersecurity, full operational costs and external evaluation. Expecting individual agencies to operate without adequate resources and to individually conduct meaningful in-depth evaluation of individual programs and services is both unrealistic and counterproductive.

Establish a national government-backed insurance agency to underwrite the costs of insurances for charities and community organisations. Insurance premiums are rising much faster than income levels in charities and community organisations, often eating into program delivery resources. Underwriting risk will become increasingly important as climate change and other factors drive up exposure to risks across the sector. It also makes more sense (and would be more productive) to share risk rather than outsource it to individual charities.

Revenue neutral measures

Develop a Charities Transformation Fund through a targeted 0.5 per cent levy on all government funding of charities and community groups. This fund (roughly $1 billion) would support investment in the following areas: climate change adaptation, cyber-security, AI adoption, impact investment and building income streams, concessional debt financing (e.g. lines of credit), uptake of new technology, staff training and development, research and evaluation, infrastructure and capacity improvements, renewable energy transition and increasing resilience in response to climate change.

The Charities Transformation Fund would also support the establishment of a Charities and Not-for-profit Centre of Excellence to support cross-program evaluation and learning (sharing of successful approaches) to drive improvements in effectiveness (as envisioned by the Productivity Commission). More effective charities and not-for-profits mean higher productivity.

Revenue measures

Revoke the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs. The mutuality principle that rightly applied in the late 1800s in Australia is no longer appropriate or consistent with existing taxation arrangements, particularly for organisations involved in gaming. Licensed clubs that act as gaming venues should not be able to treat over 75 per cent of their income as tax free, especially when part of their core business involves taking money from the vulnerable through gaming machines, and they fail to satisfy the basic requirement of being a not-for-profit organisation that exists to provide a public benefit.

Introduce a targeted “estate duty” for people with estates valued at over $10 million, with appropriate incentives for donations to charities, safeguards relating to family businesses and farms, and mitigation of any potential adverse impacts. National estate duties exist in many countries, including the United Kingdom, Germany, Italy, Belgium, the Republic of Ireland, France, Czechia, Canada and the USA. Not only do these duties provide substantial government revenue, they also increase philanthropy by offering relief from estate duties for any money left to charity. The Henry Review drew on this international experience in supporting estate duties as a taxation measure. Among other benefits, estate duties can apply a small brake on growing levels of inequality in our communities.

And finally, I would propose one simple reform (with a small dose of incredulous irony).

Abolish all state and territory regulation of charities. It serves no constructive purpose. A well-functioning national regulatory system under the Australian Charities and Not-for-profits Commission in combination with the powers of the Australian Competition and Consumer Commission to enforce any misleading or deceptive conduct would mean we would be better regulated without all the costs and complexities of multiple regulators.

How serious is the government about productivity?

The sum of all of the above measures is at least revenue neutral if we allow for the tightening of mutuality provisions enabling higher taxation of gambling-dependent licensed clubs, as well as the 0.5 per cent levy on government funding of charities. The revenue from estate duties would be a bonus.

It’s worth noting that there are other harmful concessions the government could remove that would mean a levy on government funding to the sector was not required for all the above measures to be implemented. Some experts have suggested cutting oil and gas subsidies, which amount to billions of dollars a year, and there are other options. Gambling concessions in NSW alone amount to over $1 billion a year.

I doubt the government has the courage to take on vested interests like Clubs NSW or the Minerals Council of Australia, despite knowing that the concessions and subsidies provided to these groups are not in the public interest. Governments have historically chosen to underwrite the extraction of fossil fuels and the exploitation of vulnerable gamblers rather than to investin more in critical areas like community building, health and wellbeing, education, housing, and environmental sustainability.

But then again, maybe the government is serious about boosting productivity? Maybe it sees the potential gains from a more productive charities and not-for-profit sector? The wind might be picking up. Time to build some windmills.