The AFR Magazine recently ran a major piece on the levels of giving of some Australians  —  with Twiggy and Nicola Forrest (and their 24-year-old daughter) featuring on the cover. The magazine included a list of the top 50 givers in Australia and generally overly positive stories about all these “amazing” philanthropists.

The AFR also produces its Rich 200 list annually, so with these two lists we can review and perhaps posit a thesis as to the giving patterns of our most fortunate. Before embarking on a meta analysis of the lists maybe I should spend a little time on the argument: why should people donate/give?

My rationale here is simple and was made to me nearly 30 years ago by Bill Gates’ mother, Mary. Of the many incredibly insightful things she said to me over the few times we met, the one that stuck with me most was the way she thought about philanthropy or giving back. She made the point that “if you are fortunate in life to do well financially, then it is your responsibility, not your choice, to give back”.

If you happen to be a rich banker, property developer, retail icon, mining magnate, legal eagle or tech whiz, you have made your pile of wealth from this society (and maybe other societies around the world). Your success is not just about hard work. It is a combination of hard work, luck and (in Australia) a functioning society where there is a rule of law, people pay their bills, etc. So anyone who is wealthy has not just made gold from air in an underground bunker, but been a beneficiary of Australia’s resources, land, its people and its legal and business structures.

Sure, you can choose to not give back and not acknowledge how the society helped you become wealthy. No one can force you to give back. But we should acknowledge such people (those that fail to give back) as probably not great members of society.

A new benchmark for philanthropic success

Before we unpack the numbers in both AFR lists I want to lob in one ratio (50/20) and one specific number (20%). Let’s call this the Petre Benchmark. My thesis is that anyone who has at least $50 million in net worth can allocate 20% of their net worth to philanthropy. The most common way to do this would be to take the 20% of net worth and put it in a foundation  —  where you have to (under foundation guidelines set by the government) give away 5% of the corpus every year (as a minimum). So, in essence, you are giving away 1% of your net worth per year (5% of 20% = 1%).

Stay with me.

I arrived at this benchmark from spending years working with Bill Gates and subsequently watching his work with The Giving Pledge, where the most wealthy commit to allocating more than 50% of their wealth to charity either while alive or when they pass. I took this and then tried to find a percentage lower than 50, but where the donor could easily make the allocation to philanthropy while they are alive — while not having to make any changes at all to their lifestyle (regardless how extravagant it was).

My argument is that if you are living happily with $50 million of net worth, you can live just as happily on 80% of this ($40 million) without having to suddenly start buying clothes at Vinnies.  This would allow you get to give away $500,000 annually (5% of the $10 million that is now sitting in your foundation  — $10 million being 20% of $50 million) to worthwhile charities that you care about. You live a great life without any changes at all, and others less fortunate are better off. Win  win.

Clearly if someone with $50 million of net worth can live happily on 80% of this, then anyone with more than $50 million also has to be able to live happily. Using the Petre Benchmark someone with $1 billion could easily move 20% of their wealth ($200 million) into a foundation which would then have to donate at least 5% (which is the required donation rate for foundations)  — $10 million a year. You see how this works … but what does it look like in action?

NEXT: the full breakdown of how Australia’s richest people stack up

Do you think wealthy families have a duty to give back? Send your comments and letters to [email protected]