‘Charity is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim.’
~ Clement Atlee (1920)
LAST WEEK, the Turnbull Government pushed through massive tax cuts for wealthier Australians. This week, they look to push through the tax cuts for big business, banks and multinationals. Also this week, Labor made the obvious connection that Australia’s richest ever Prime Minister, Malcolm Turnbull, personally stands to benefit from both these moves.
Right on cue, as ever, the Canberra Press Gallery jumped in to denounce Labor for impugning their great and glorious hero.
Here’s a typical example from the Financial Review’s ubiquitous belly-mumbler, Phil Coorey:
‘If Bill Shorten is to pull off the twin tasks of trying to deny tax cuts to middle-income earners and small and medium-size businesses, then he has to get his argument back to basics and drop the class warfare ballyhoo.’
(Seriously, Phil, "ballyhoo"?)
In fact, small businesses already received corporate tax cuts in 2016 and the Labor Government has promised tax cuts in excess of what the Government has offered to middle-earning Australians — but why let the facts get in the way of a good Labor kicking?
The Government refers to ALP objections to wealthy & big biz tax cuts as "class warfare"— Cranky Pants Noely 🤨 (@YaThinkN) June 26, 2018
When a journalist uses that term AND is not quoting the Government, you are furthering that 'line', just like 'Carbon tax' etc. Please STOP!#WordsMatter pic.twitter.com/ZvI4f4rzGP
MALCOLM TURNBULL — THE FIGJAM PHILANTHROPIST
Then it emerged somehow (surely not from Turnbull himself?) that our beneficent PM allegedly donates his $527,852 parliamentary salary to “charity”. Well, to his own “Turnbull Foundation”, which according to the Australian Business Register is a “private ancillary fund”, with all the tax benefits pertaining to a charity. From this private charity, according to gushing News Corp “reports”, wonderfully philanthropic Malcolm and his wife Lucy dole out their riches to a wide range of “worthy causes”.
Because, as the PM himself declaimed, modestly, when he and Lucy established the Foundation in 2001:
“I’ve always been a philanthropic person. We’ve always been very generous.”
In furious agreement is another over-exposed “Insider” of the Coorey ilk, The Australian’s Peter van Onselen:
I for one am glad wealthy Australians like the PM are prepared to make such large charitable donations... https://t.co/vL0DKVGzqo— Peter van Onselen (@vanOnselenP) June 26, 2018
For a start, it is valid to ask the question: why can’t Malcolm just pay his tax? Why does he get to decide which causes are worthy and which are not?
THE FOUNDATION TAX SCAM
But it gets even murkier than that.
The private ancillary fund scheme was set up in 2001 under the Howard Government, ostensibly to aid private philanthropy. However, these sorts of entities are poorly regulated and typically manipulated by the very wealthy for their own purposes. This is because the law only requires 5% of the value of funds like Turnbull’s to be donated per year to other non-profit organisations who themselves hold deductible gift recipient (DGR) and tax concession charity (TCC) status.
And in reality, the historical average donation from these funds since 2001 has been a mere 8% of value. So where does the 92% go?
Well, according to ATO Taxpayer Alert 2016/5: Purported tax-exempt non-profit 'foundations' used to evade or avoid taxation obligations, funds like Turnbull’s are at a high risk of tax evasion.
In 2016/5, the ATO describes a “typical arrangement”:
'An advisor or promoter assists individuals (participants) with setting up a 'private' 'foundation' which is then claimed to be exempt from all taxes. The advisor or promoter tells participants that, by operating their business or income producing activities through such a foundation, participants are able to 'opt out of,' or disregard the tax system. A small portion of the income that is streamed through the foundation may be paid to humanitarian or social causes, such as through charities, and these payments are sometimes presented as a justification for the foundation's purported tax-free status.'
Beneficiaries of the Turnbull Foundation -— MarkJacka (@themarkjacka) June 27, 2018
- Biennale of Sydney $25,000
- Australia Chamber Orchestra $20,000
- Rhodes Scholarships $200,000
- Sydney's Scots College $10,000
- ANU $70,000
Even with his "Charity" @TurnbullMalcolm only looks after the top end of town.#auspol
And because the regulatory regime around charities is so lax, as exposed by the Shane Warne Foundation scandal, it is almost impossible to prosecute rorters for fraud. So long as at least 5% of the money invested goes to other charities, they will generally be regarded as complying with the legislation.
The ATO continues:
'While participants may contribute some of the money received by their foundation to humanitarian or social causes, they primarily use such monies for personal consumption and investment, and the participants remain in control of the way in which the monies are used by their foundation.'
One method for the fabulously wealthy to siphon money out of a charitable foundation is through director’s fees, which are tax-free if paid directly into a superannuation account. In Malcolm Turnbull’s register of interests, both he and Lucy are listed as directors of the Turnbull Foundation. Another is for a foundation to pay for services, such as rent and office expenses, to an associated person or entity. Turnbull’s registered interests show a web of companies and assets, including commercial property in Pott’s Point.
And a nice complex company / trust / foundation structure to launder money and avoid tax. No conflict of interest the Prime Minister of Australia having shares / directorship of these companies @smh @theage do directors of Turnbull Foundation pay tax on their fees? No! No! No! pic.twitter.com/rcGqpKfjLL— Mick Minion😠 The 🎩 approved Joyce fraud. (@169lunar) June 26, 2018
THE TURNBULL FOUNDATION GHOST
To make matters even murkier, the Turnbull Foundation, although listed on the Business Register as a charity, is not listed on the charity regulator ACNC’s register.
IA contacted the ACNC to find out about this apparent discrepancy and their representative told us the information “may have” been withheld from the register at the Foundation’s request.
We asked the ACNC to simply confirm the Turnbull Foundation was a charity, as listed in the ABR. The ACNC representative said that, because of secrecy provisions, he couldn’t even tell us that.
IA then asked how we could find out if the Turnbull Foundation really was a charity, as has been claimed. The helpful staff member said the Foundation has a “duty” to disclose evidence they are a charity “before someone makes a donation to it”. However, since private ancillary funds like Malcolm’s Foundation are not able to take donations from the general public, this was not particularly useful advice.
In any case, Turnbull’s private fund does not appear to have a webpage, Facebook page or a listing in the White or Yellow pages. To all intents and purposes, the Turnbull Foundation is a ghost.
TIME FOR TURNBULL TO COME CLEAN
This is not to say that Turnbull really is using the Turnbull Foundation as a way to provide himself with an extravagant tax-free slush fund — for all IA knows, everything may be totally above board. At the same time, it is also impossible to conclude that it isn’t. That’s because apart from a few unverifiable news reports, there is almost no information about this Foundation and how it is administered.
So, before lofty, conceited mainstream journalists like Peter van Onselen baldly declare their admiration for Malcolm Turnbull’s generosity, perhaps they should make sure they have all the facts at their disposal, because otherwise they may end up looking rather stupid:
Because of our progressive tax system, in fact you get $301,768 "in the pocket" on a $500,000 income. https://t.co/I831vS4zUO Maybe best not to vainly proclaim you will "explain" to everyone how something works when you clearly do not fully understand the subject yourself.— Dave Donovan (@davrosz) June 26, 2018
Turnbull should be transparent. He needs to open the books of the Turnbull Foundation and provide his income tax returns for the last several years. We need to make sure we don’t have a tax evader in the Lodge.
MALCOLM TURNBULL’S SCANDALOUS PAST
And in case you were thinking former Goldman Sachs banker Malcolm Turnbull is above any possible suspicion, here is a list of just some of the serious financial scandals he has been embroiled in over the years:
- Solomon Islands clear fell logging scandal (1991-92)
- Siberian gold scandal (1993-95)
- HIH insurance company collapse (2001-03)
- Russian Rain Man scandal (2007)
- Cayman Islands tax haven scandal (2015)
- Named in Panama Papers (2016)
- Donated $1.75 million to the Liberal Party to be elected (2016)
IA wonders if that $1.75 million came from the Turnbull Foundation?
As Balzac said, behind every great fortune is a great crime. It is time for Turnbull to open his books.
This editorial was originally published as part of the Independent Australia weekly newsletter. These editorials are usually only available to subscribers. It takes less a minute to subscribe to IA and costs as little as $5 a month, or $50 a year — a very small sum for quality journalism and many great extras.
Managing editor David Donovan is a qualified accountant. None of the above should be considered financial advice. You can follow Dave on Twitter @davrosz. Follow Independent Australia on Twitter at @independentaus and on Facebook HERE.
I'm saying that the statement that he donates his $527,852 salary to charity is deceptive. Most of these foundations are primarily established for tax minimisation purposes and the average donation from them to "good causes" is only around 8%: https://t.co/k6ZJmNC8qP— Dave Donovan (@davrosz) June 27, 2018
A private ancillary fund is obliged to donate only 5% of its revenue to other DGR charities, so obviously there will be some donations. The question is, how much of the quantum was donated and whether tax otherwise applicable would have been greater.— Dave Donovan (@davrosz) June 27, 2018