QUESTIONS WITHOUT NOTICE: TAKE NOTE OF ANSWERS

Senator SCARR (Queensland) (15:15): I rise to speak about the answers to two coalition questions and, in particular, the question I asked the Minister representing the Prime Minister in relation to the impact on philanthropy of the Labor government's changes to the taxation of discretionary trusts. I recognise this is not Senator Wong's portfolio area, and Senator Wong is acting on advice given to her.

However, it deeply disturbs me that the Labor government doesn't seem to understand the scope of this issue, and I want to set it out very, very clearly. The issue is that, at this point in time, before Labor's changes to the taxation of discretionary trusts, income generated through discretionary trusts is being donated to charities and not-for-profits. Because Labor is proposing to change the taxation of discretionary trusts and impose taxation of at least 30 per cent, money which would otherwise be given to charities and not subject to that 30 per cent tax is in jeopardy.

It's in jeopardy because 70 per cent of the donations given by Australians to charities, not-for-profits and income tax exempt entities are not tax deductible donations. They're not tax deductible donations—70 per cent of them are not tax deductible donations. So you don't get a deduction on your tax when you actually make the donation.

If the donation is coming from a discretionary trust and you're not paying tax on that distribution, it doesn't matter—because you're not paying tax on that distribution. But as soon as you introduce the 30 per cent tax on all distributions from discretionary trusts, there is a huge disincentive for people to make donations to not-for-profits and charities which do not have deductible gift status.

That's the issue. It's been estimated that the potential impact over the next five years will be $2.9 billion—$2.9 billion, which is currently going to organisations without DGR status. They include charities with a human rights focus and charities with the focus on prevention of disadvantage, social welfare charities engaging in advocacy, religious institutions, educational organisations, community service organisations, cultural organisations, educational organisations and health organisations.

The list goes on. These are organisations where, if you make a donation, you don't get a tax deduction for making that donation. Under the existing law impacting discretionary trusts, that doesn't matter because you're not paying tax on that income.

You're distributing it to the not-for-profits. But once you introduce that 30 per cent tax on all distributions from discretionary trusts, it makes a huge difference. The estimate is from Dr Mark Fowler, who is probably one of Australia's leaders in terms of the law of charities.

Based on his analysis, going through the percentage of donations to those with DGR status and those that don't, he's estimated a $2.9 billion impact over five years. So I really do request that the Labor government looks deeply into this issue. Senator Wong said that consultations are continuing, but we do not want to see these community organisations doing such good work impacted by this tax change.