(03) 5229 4364

The Fallacy of Perpetuity – a time to focus on mission

April 15, 2020

The Fallacy of Perpetuity, Bill Mithen CEO: Give Where You Live Foundation 

Now, right now, is the time when regulators and trustees of charitable trusts should question the notion of ‘in perpetuity’ that is the notion of forever.

As the economics of this current crisis start to take hold, charities are already closing. Many more will follow leaving our most vulnerable community members even more vulnerable. ‘In perpetuity’ doesn’t help them – forever is now.

For 27 years consecutive years the Australian economy has grown. It grew through the Queensland floods in 2011, the dot com crash and subsequent European recession in the early 2000s, and even through the global financial crisis in 2008.

Of course, that has all changed. That economic growth world record has ended and a recession is not an ‘if’ question but a ‘how deep’ one. But that 27- year period of growth and prosperity has resulted in an unprecedented period of wealth accumulation. A Credit Suisse report in 2017 identified there were 3,000 people in Australia who were regarded as High Net Worth Individuals having a net worth exceeding $65.5million.

This economic growth and wealth accumulation have driven an explosion in the development of public and private charitable trusts. Nearly all these eponymous trusts have been designed to be there ‘in perpetuity’, or, forever. They’ve been established as a legacy, to continue to support their range of causes for evermore.

To ensure that these trusts do not just simply accumulate assets, the rules governing them require an annual quantum of grants equivalent to at least 5% of their assets in the case of private trusts, and 4% in the case of public ones.

Of course, in recent times, these trusts have accumulated assets at a rate that far exceeds the rate of distribution. And, in some cases, those that established trusts continued to add further money as individuals and companies continued to grow wealth.  There are now over 3,000 of these funds in Australia and prior to COVID19 they held in excess of $12 billion in assets.

But in this time of crisis, in this time, unprecedented in our generation, in this time when humanity is experiencing one of its most significant public health crises where rapid and devasting economic turmoil abounds and lives will be changed forever, what are the merits of this notion of ‘in perpetuity’?

Philanthropy Australia reports that one in four charities rely on philanthropy for 50% or more of their revenue.

Charities employ more than 1.3 million people and engage over 3.5 million volunteers as well as contributing over 8 per cent of Australia’s GDP.   These charities are at the coal face.  They’re helping women and children fleeing domestic violence, they’re helping the homeless, feeding the hungry, helping those under the devastating grip of addiction and supporting those with disabilities and mental health challenges.

They are connecting communities and people and reducing social isolation, they’re helping young people with their education, they’re providing services and friendship to the aged.  They are working in schools, community centres, hospitals, neighborhood houses, men’s sheds and support groups across the country. They provide the fabric of support for the most vulnerable and are the soul of our community.

We must help keep the lights on for these vital community assets All charitable trusts, big and small should think about how they can help provide immediate funding to assist with basic operational costs for charities so they can be maintained at this time.

It is a time like now when we need to provide support more than ever. It is a time when we need to be courageous and, if necessary, change the rules and guidelines that are getting in the way. Legacies will be built during this time not by what money is stored but by what assistance is given.

It is a time to focus on mission, not a falling asset base.
It is a time when we should give and help and act.