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4102.0 - Australian Social Trends, 1997  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 19/06/1997   
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Contents >> Income & Expenditure >> Income Distribution: Charity at home and overseas aid

Income Distribution: Charity at home and overseas aid

In 1994-95, Australian taxpayers declared donations of $463 million to a range of organisations with tax deductibility status. In 1996-97, the Australian government allocated $1.5 billion to overseas development assistance.

Governments have recognised that in a world where individual circumstances and opportunities vary greatly, redistribution of incomes and resources is an important social justice and human rights issue. The need for assistance is demonstrated by the vast differences in social and material well-being between individuals and population groups, and between countries.

In addition to humanitarian reasons for assisting people in need, there is a recognition of the collective benefits arising from policies and actions which facilitate a more just and equitable world. The well-being and security of Australian citizens is dependent upon the well-being and stability of other nations, particularly our neighbours in the Asia-Pacific region1. Economic benefits also accrue to Australians through the establishment of trade links, and in the delivery of official overseas aid. Many of the goods and services delivered as overseas aid are provided by the private sector, often by Australian companies and employees.

Within Australia, governments redistribute resources through a progressive taxation system, by the provision of infrastructure and services such as education and health care, and by income support and benefits targeted towards those most in need (see Australian Social Trends 1996, Household income redistribution). The Commonwealth Government provides aid overseas, most of which is administered by the Australian Agency for International Development (AusAID).

Charitable organisations complement the role of Australian governments in meeting human needs and in redressing inequities in Australia and overseas. The informal network of assistance provided by friends and families also plays a vital role in supporting and assisting people in need.

This review focuses on charitable organisations and their sources of income, and on official overseas aid provided by the Commonwealth Government.


Charitable organisations

Charitable organisations are generally considered to be non-government organisations primarily established for charitable and benevolent purposes, and not for the profit or benefit of the individual members of the organisation.

A recent Industry Commission Inquiry2 examined such organisations which provide the following services:
  • community services;
  • accommodation services;
  • nursing or convalescent homes, drug referral and rehabilitation, and blood transfusion services;
  • employment and training services for the unemployed and people with disabilities;
  • advocacy, referral, counselling, and legal services; and
  • emergency and development assistance overseas.
Tax deductibility of donations

Individual income taxpayers are entitled to a deduction from assessable income for gifts of $2 or more made to a range of approved organisations3. In 1994-95, donations to the following types of organisations were tax deductible:
  • an organisation or charity which gave help in Australia;
  • an approved overseas fund;
  • an approved environmental or cultural organisation;
  • a school building fund; and
  • a registered political party.

The range of organisations with tax deductibility status is much broader than the definition of charitable organisations used by the Industry Commission. Most significantly, it includes political parties and organisations providing educational, health, religious, cultural and environmental services. These types of organisations are excluded from the Industry Commission's definition of charitable organisations.


Charitable organisations in Australia
Charitable organisations existed in Australia long before the development of a comprehensive government system providing for human needs2. The not-for-profit sector still plays an important role in the provision of human services.

Charitable organisations range in size from small organisations based in a local community to large national organisations, many of which have international affiliations. Some rely entirely on volunteer labour, while others have paid employees as well.

Charitable organisations provide a diverse range of community and welfare services and goods, ranging from the provision of accommodation, food and clothing, to nursing home care and advocacy, counselling and legal services. Many organisations specialise in the provision of one type of assistance, for example, aged care, while others provide a range of services.

It is not known exactly how many charitable organisations exist in Australia, and estimates vary depending on the definition used. A recent Industry Commission inquiry into charitable organisations, excluding health, education and religious services, estimated that in 1993-94 there were between 10,000 and 11,000 charitable organisations in Australia receiving government funding. The number operating without government funding, and relying on volunteers and public donations was unknown2.

Sources of income vary between organisations, and include government funding, public donations, fundraising, investment and commercial activities, and contributions from international agencies such as the World Bank. Many are also indirectly supported by the government through tax concessions. The Industry Commission estimated that the major source of funding for charitable organisations in 1993-94 was from direct government payments ($2.7 billion). Clients of some services, particularly in aged care, pay fees, and these were estimated at $1 billion. Financial donations to charitable organisations from the Australian community (individuals and businesses) were estimated at $580 million. The sector's combined total annual expenditure was estimated by the Industry Commission to be $4.8 billion in 1993-94. This was equal to 1% of Gross National Product (GNP).

Most charitable organisations are at least partly staffed by volunteer employees. A 1995 ABS survey on voluntary work found that about 800,000 Australians aged 15 years or over had provided voluntary work for a welfare or community organisation in the previous 12 months (see Australian Social Trends 1997, Voluntary work). They provided about 100 million hours of volunteer labour per year (this would be equivalent to 48,000 people working 40 hours each week of the year)4.

TOP 10 CHARITABLE ORGANISATIONS(a) BY TOTAL INCOME, 1993-94

Source of income

OrganisationSector
Government funding
Fundraising
Fee for service
Other(b)
Total
Total
%
%
%
%
%
$ million

Australian Red Cross SocietyMulti-service
79.2
15.6
(c)
5.2
100.0
176.4
Salvation Army Southern Command(d)Multi-service
30.7
14.9
27.3
27.1
100.0
129.1
Salvation Army Eastern Command(d)Multi-service
23.0
23.6
(c)
53.4
100.0
126.4
World Vision of AustraliaOverseas aid
19.6
79.7
(c)
0.8
100.0
88.5
Wesley Mission SydneyMulti-service
35.2
7.0
2.0
55.8
100.0
60.3
Silver Chain Nursing Association Aged care
78.8
3.6
5.7
11.9
100.0
50.6
Care AustraliaOverseas aid
9.9
17.7
(c)
72.4
100.0
43.8
Anglican Retirement VillagesAged care
45.1
(c)
40.0
14.9
100.0
42.8
Endeavour FoundationIntellectual disability
26.1
25.7
13.9
34.2
100.0
42.3
Royal District Nursing ServiceAged care
87.4
0.8
9.0
2.7
100.0
40.5

(a) Excludes education, health and religious services, and political parties. The quality of these income figures may be affected by differing accounting practices between organisations. However, they represent the best available data.
(b) Includes investment and commercial activities, international agencies such as the United Nations High Commission on Refugees and the World Bank, and other sources.
(c) Not separately available.
(d) These two commands of the Salvation Army are separate legal entities.

Source: Industry Commission, Charitable Organisations in Australia.


Individual donations
Donations to many charitable organisations are tax deductible. In 1994-95, 247,000 individual taxpayers (37% of all individual taxpayers) declared donations to a range of organisations with tax deductibility status. However, this encompasses a much broader range of organisations than those meeting the definition of Charitable Organisation used by the Industry Commission. Different types of donations cannot be separately identified in taxation data. Some donations such as those to school building funds may accrue a direct benefit to families, and in this sense are not purely charitable. Total donations amounted to $463.2 million, an annual average of $58 for each individual taxpayer.

Among individuals who paid tax in 1994-95, the proportion in each taxable income bracket who declared donations increased with the level of taxable income. Of people with taxable incomes under $10,000, 18% declared donations, compared to over half of those with incomes higher than $50,000.

The average amount donated also increased with the level of taxable income. The average amount donated by people with a taxable income under $10,000 in 1994-95 was $17, compared to $148 for those with an income between $50,000 and $100,000.

INDIVIDUAL TAXPAYER DECLARATIONS OF DONATIONS(a), 1994-95

People in income bracket
Average amount donated(b)
% who donated
Taxable income
'000
$
%

Under $10 000
658.1
17
18.0
$10 000-$14 999
1,093.3
26
27.0
$15 000-$19 999
1,055.6
33
30.0
$20 000-$24 999
1,199.9
35
34.0
$25 000-$34 999
1,836.2
45
41.0
$35 000-$49 999
1,392.6
73
49.0
$50 000-$99 999
636.9
148
54.0
$100 000 and over
96.8
702
52.0
All taxpayers
7,969.4
58
37.0

(a) Donations of $2 or more to organisations with tax deductibility status.
(b) Average of all taxpayers in each taxable income bracket.

Source: Australian Taxation Office (unpublished data).


Overseas aid
While incomes vary between individuals and population groups within Australia, international comparisons show an even greater contrast in material and social well-being.

The Asia-Pacific region, where the bulk of Australia's overseas aid is directed, includes some of the poorest countries in the world, with per capita incomes, life expectancy and literacy rates much lower than those in Australia.

Papua New Guinea, which receives the largest share of Australia's aid, had a national income in 1994, measured as GNP per capita, of US $1,200, compared to US $18,000 for Australia. Average life expectancy at birth in Papua New Guinea was 57, 20 years lower than Australia's. Other countries in the Asia-Pacific region, amongst the poorest in the world with GNP per capita of less than US $1,000, include Bangladesh, Burma, China, India, Laos, Nepal, Pakistan, Sri Lanka and Viet Nam5.

To many developing countries, overseas aid represents a significant proportion of their total national income. Overseas aid (from all sources, not only from Australia), measured as a proportion of GNP, amounted to 7% for Papua New Guinea and Bangladesh, and 5% for Viet Nam.

Australians provide assistance overseas through two main channels. The Australian Government provides assistance to developing countries through the Overseas Development Assistance Program (the official overseas aid program), most of which is administered by AusAID. Many Australians donate their time, skills and money to non-government aid organisations (NGOs), which also play an important role in overseas aid. AusAID and the NGOs cooperate in the delivery of overseas aid through a formal cooperation program.

A major review of Australia's official overseas aid program was completed recently. The committee of review recommended that the aid program focus more clearly on the objective of reducing poverty through sustainable development, and sharpen its geographic focus by donating to a smaller number of countries, while maintaining the focus on the Asia-Pacific region. At present, the aid program requires that many of the goods and services delivered as aid, be provided by Australian businesses or agencies. The committee recommended that AusAID move away from this requirement6.

OVERSEAS DEVELOPMENT ASSISTANCE AS A PROPORTION OF GNP FOR YEAR ENDING 30 JUNE


Source: AusAID, Australia's Overseas Aid Program Statistical Summary 1990-91 to 1994-95; and The Committee to Review the Australian Overseas Aid Program, One Clear Objective: Poverty Reduction Through Sustainable Development.


Official overseas development assistance
In 1996-97 the Australian Government allocated $1.5 billion to official overseas development assistance. This was 0.3% of GNP, and lower than the amount recommended by the United Nations (0.7% of GNP). As a proportion of GNP, Australia's aid budget has fluctuated, but overall has declined in the past two decades, from 0.55% of GNP in 1969-70 to 0.29% in 1996-97. This decline has also occurred in other countries7.

Of Australian overseas aid allocable by region in 1994-95, 89% went to neighbouring countries in the South Pacific or Asia region (other than Central Asia). Each of the top ten recipient countries were in the Asia-Pacific region. Papua New Guinea received the largest single share of Australia's overseas aid, 28% of aid allocable to individual countries. This reflects Australia's close historical ties with Papua New Guinea, which was a colony of Australia prior to its independence in 1975, its geographical proximity, and its level of need for assistance.

Sub-Saharan Africa also receives a considerable proportion of Australia's aid budget, amounting to 9% of aid allocable by region in 1994-95, reflecting this region's level of need for assistance, largely due to civil conflict.

The largest single sector of expenditure was education, receiving 17% of total overseas aid. Transport and communications were also significant areas of expenditure, together receiving 10% of the total budget. 10% of total aid was spent on food aid and emergency assistance.

TOP 10 RECIPIENT COUNTRIES OF AUSTRALIA'S OVERSEAS DEVELOPMENT ASSISTANCE, 1994-95

Amount
Proportion
GNP per capita(a)
Countries
$million
%
$US

Papua New Guinea
319.2
28.2
1,240
Indonesia
135.1
11.9
880
China
84.0
7.4
530
Philippines
71.4
6.3
950
Viet Nam
63.2
5.6
200
Thailand
42.2
3.7
2,410
Cambodia
29.8
2.6
n.a.
Bangladesh
25.3
2.2
220
Fiji
21.5
1.9
2,250
India
20.5
1.8
320
Other countries
320.2
28.3
. .
Total(b)
1,132.4
100.0
. .

(a) 1994.
(b) Excludes contributions to global programs which cannot be allocated to a particular country or region.

Source: AusAID, Australia's Overseas Aid Program Statistical Summary 1990-91 to 1994-95; and World Bank, From Plan to Market: World Development Report 1996.

OFFICIAL OVERSEAS DEVELOPMENT ASSISTANCE, 1994-95

Assistance
Expenditure by sector
%

Social infrastructure and services
32.1
    Education and training
16.7
    Health
4.9
    Water supply and sanitation
2.4
    Population
1.6
    Public administration
2.4
Economic infrastructure and services
12.6
    Transport and communications
10.0
    Energy
2.4
Production
8.6
    Agriculture, forestry and fishing
6.5
Multi-sector
1.9
Program assistance(a)
27.5
Debt reorganisation
1.0
Food aid
6.4
Emergency assistance
3.6
Other
6.5
Total
100.0
$ million
Total
1,483.7

(a) Includes administration, general budget support and donor-specified goods and services.

Source: AusAID, Australia's Overseas Aid Program Statistical Summary 1990-91 to 1994-95.


Non-government organisations and overseas aid
There are about 120 non-government overseas aid organisations (NGOs) in Australia. The combined income of all the NGOs was estimated at $285 million in 1993-94, of which $71 million (25%) was provided by the government through AusAID. Public donations provided about
$173 million, and over $41 million was received from other sources such as the World Health Organisation, and the United Nations High Commission for Refugees2.

The largest two organisations, World Vision Australia and CARE Australia had incomes of $89 million and $44 million respectively, accounting for almost half the combined income of all NGOs. Africa received the largest share of overseas aid provided by NGOs, with a large proportion spent on emergency assistance8.


International comparison
Among member countries of the OECD's Development Assistance Committee, Australia ranked ninth in the proportion of GNP allocated to overseas aid. Only four member countries donated the 0.7% of GNP recommended by the United Nations.
OVERSEAS DEVELOPMENT ASSISTANCE (ODA) FROM OECD COUNTRIES, 1995

ODA as proportion of GNP
GNP per capita
OECD countries
%
$US

Denmark
0.96
32,100
Norway
0.87
32,900
Netherlands
0.81
27,100
Sweden
0.77
25,200
France
0.55
26,500
Canada
0.38
18,400
Belgium
0.38
26,900
Luxembourg
0.36
46,200
Australia
0.36
18,600
Switzerland
0.34
44,800
Austria
0.33
29,000
Finland
0.32
23,700
Germany
0.31
29,300
Ireland
0.29
15,000
UK
0.28
19,100
Japan
0.28
41,000
Portugal
0.27
10,000
Spain
0.24
14,300
New Zealand
0.23
15,100
Italy
0.15
18,900
USA
0.10
27,400

Source: OECD, Development Co-operation: Development Assistance Committee Report 1996. OECD, France.

Endnotes
1 Hunt, J. 'Aid: The way ahead', Development Bulletin, Vol. 39, October 1996, pp. 41-42.

2 Industry Commission 1995, Charitable Organisations in Australia, AGPS, Canberra.

3 Australian Taxation Office 1995, Tax Pack, ATO, Canberra.

4 Australian Bureau of Statistics 1995, Voluntary Work, Australia, cat. no. 4441.0, ABS, Canberra.

5 World Bank 1996, From Plan to Market: World Development Report 1996, Oxford University Press, New York.

6 The Committee to Review the Australian Overseas Aid Program 1997, One Clear Objective: Poverty Reduction Through Sustainable Development, AGPS, Canberra.

7 OECD Development Assistance Committee 1997, Development Co-operation: Development Assistance Committee Report 1996, OECD, France.

8 Australian Council for Overseas Aid, Annual Report 1996, ACFOA, Canberra.


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