MATTERS OF PUBLIC IMPORTANCE

Senator SCARR (Queensland) (17:39): We heard from government senators earlier in this debate about charities with DGR status—charitable trusts. That is missing the point. The point of this matter of public importance proposed by my dear friend and colleague Senator Dean Smith is that, under the government's budget, distributions to not-for-profits and charities which do not have DGR status will be subject to the 30 per cent tax, and that has been estimated to have an impact of approximately $2.9 billion over the five years post implementation.

That is the issue we're talking about. At the moment, billions of dollars flow to charities from discretionary trusts. Because those charities and not-for-profits are income-tax exempt, they are not subject to this 30 per cent tax.

That is the issue, and that is the issue which Senator Darmanin did not engage with during the course of this debate. She didn't engage with it. How many charities are we talking about?

It's estimated that only 42 per cent of all the registered charities in Australia are recognised as DGRs. If you do the maths, there are 65,000 registered charities. That necessarily means 37,700 charities across Australia will be impacted by this Labor tax, because they do not have DGR status, and therefore there is a disincentive upon people making donations to them under the government's tax changes to discretionary trusts—37,700 charities without DGR status.

That's even before we then move on to all the not-for-profit organisations: the local sports clubs, community associations and small volunteer groups that aren't formal charities and again do not have DGR status. In this case, we're talking about 300,000 organisations. Those organisations will be receiving distributions from discretionary trusts today that are not subject to 30 per cent tax.

What's going to happen when this minimum 30 per cent tax is imposed on all distributions from discretionary trusts? A source of revenue is going to dry up. That's the reality.

It actually is beyond the realms of comprehension that the government didn't think about this consequence when it actually introduced this measure in the budget. The government is talking about consulting with the charity and philanthropic sector now. Why didn't you think about this before the budget, when you came up with your estimate of $4.5 billion of revenue from the trusts tax?

Why didn't you consider the impact on the philanthropic sector? Why are you playing catch-up now, just as you had to play catch-up with respect to the so-called widows tax? As Senator Smith said, you capitulated on that today.

You need to bring in changes to address this issue tomorrow. This has created so much uncertainty to those in the charity sector. I want to quote to you from some members of that sector.

These aren't the words of opposition senators. This is what people in the charity sector are saying. David Crosbie, chief executive of the peak body for charities, not-for-profits and community organisations, Community Council for Australia, in a submission to the Treasury, said: … there will be a significant disincentive for discretionary trusts to maintain current levels of giving to these organisations as a result of the proposed Trust Tax.

It's very simple. That's not Senator Dean Smith's words. Those aren't my words.

That's the leader of the peak body representing charities and not-for-profits. I have not heard an answer to that fundamental issue, because there is no answer to it. It necessarily flows from this minimum 30 per cent tax.

So this is a case once again of Labor's tax proposals having—let's be gracious—unintended consequences throughout the community. (Time expired)