Strategic philanthropy: a guide to giving

Australians are among the most charitable people in the world. But for high-net-worth individuals, philanthropy can represent both an opportunity to make a meaningful impact and a responsibility that often grows alongside wealth.

According to the Charities Aid Foundation’s annual World Giving Index, Australia consistently ranks among the top 20 most giving countries in the world.^disclaimer

David Lipari, Director – Wealth Advice at ANZ Private, says Australia's strong philanthropic tradition isn't surprising.

"It's not the first time Australians have scored in the top 20 on these lists, and I doubt it will be the last," he says.

"Australians, including our ANZ Private clients, often help their communities, and we're more than happy to support that."

Research shows that around two-thirds of Australians help strangers in need each year, while more than half donate money and around one-third volunteer their time. Australians donate billions to charity annually, and this drive to help others appears to strengthen with increased wealth.

"I've had a lot of conversations with people who like the idea of doing something but haven't quite been ready. Lately it feels like more people are becoming ready," Lipari says.

The growing need for strategic philanthropy

While Australia's charitable nature remains strong, many philanthropic organisations face ongoing funding challenges. Economic pressures can create a three-fold challenge for the sector: changing donor behaviour, increased demand for services and rising operational costs for not-for-profit organisations themselves.^disclaimer

This environment makes strategic, sustained giving even more valuable, particularly from high-net-worth individuals who can provide stability and significant impact through their contributions.

Generational wealth and giving

While the impetus to donate to important causes is widely held, according to Lipari this generosity often increases across generations, with the second or third generation making the biggest investments into their communities.

"I think the inclination to help others is stronger within that group because they feel an obligation to continue the legacy that's been created and also to give back to others," he says.

The causes that wealthy families choose to support vary, but typically, philanthropic families will have a personal connection to the cause they're supporting.

"People don't want to give money into a charity black box, they want their money to go to solve problems they're familiar with," Lipari explains.

"That is also part of what we do at ANZ Private: help people get their money into giving structures that allow them to be more thoughtful with their grants, so money gets to the groups that they're most interested in helping."

Structured giving for maximum impact

Effective philanthropy for high-net-worth individuals requires planning – it's usually not enough to pick a cause and donate a lump sum towards it. Instead, wealthy philanthropists think carefully about the causes that matter to them, how to best support those causes and what financial structures are required to do so.

The first step is considering your own financing and goals. Philanthropists need to consider how much they plan to give, the frequency of donations, how much control they'd like over their funding and their knowledge of the causes they're supporting.

While one-off donations typically won't require much involvement beyond the initial gift, those making regular contributions might like to join boards of organisations they support or specify how their funds are used.

Philanthropic structures for wealthy families

According to Philanthropy Australia’s Guide to Giving, some of the most commonly used philanthropic structures for high-net-worth donors are private ancillary funds, public foundation sub funds and charitable trusts.^disclaimer

Private ancillary funds create direct links between people who want to give and organisations that can receive tax-deductible donations. These funds can give philanthropists greater control and flexibility over how their donated money is used, however they come with significant compliance obligations.

Public foundation sub funds are funds that anyone can contribute to and that feed into specific organisations. Typically used by community foundations, public funds are easier to operate but give donors less control.

Charitable trusts and foundations often commence through wills and can be designed to give to any charitable purpose, although they don't provide tax benefits during the donor's lifetime.

Each structure varies in deployment and impact, making it vital that the right type is chosen and set up properly.

"Choosing the wrong vehicle or not setting it up properly can really undercut the effectiveness of your philanthropic efforts," Lipari says.

"An error here could mean you're unable to donate as much as you'd like or could trigger unwanted tax implications."

The importance of getting professional guidance

Given the complex regulation surrounding philanthropic vehicles, high-net-worth individuals should consider speaking with a professional about which avenue is likely to lead to the best outcomes. The right advice can help ensure philanthropic efforts achieve maximum impact while meeting compliance requirements and tax obligations.

For wealthy families, philanthropy represents both an opportunity to create meaningful change and a way to build lasting legacies that reflect their values across generations.