Andrew Forrest’s $5 billion gift comes with a bonus

With the stroke of a pen, billionaire Andrew Forrest has established a new high watermark for charitable giving in Australia, and made significant progress towards his goal of giving away the lion’s share of his $30 billion wealth.

As Forrest sees it, all individuals have particular skills – from carpentry to farming or the arts – but his self-professed talent is “accumulating wealth”, which he says should be used for the greater good.

Andrew and Nicola Forrest up the anti on giving.Credit: Kate Geraghty

He is transferring one fifth, or $5 billion, of his private company Tattarang’s shares in iron ore giant Fortescue Metal Group to Forrest’s charitable trust Minderoo.

In doing so, he and his wife, Nicola, have effectively created their own Future Fund, which will generate billions of dollars to be directed towards the couple’s particular causes.

And the beauty of it is that it appears to be both tax effective and allows the billionaire to retain the same degree of control over Fortescue, given Andrew and Nicola Forrest founded and sit on the board of the Minderoo.

Already Forrest has declared that Minderoo won’t be selling any of its newly endowed stake in Fortescue, thus avoiding any possibility of an overhang in the market for Fortescue shares which would have put pressure on the share price.

It appears to be both tax effective and allows the billionaire to retain the same degree of control over Fortescue.

The charitable trust set up by Forrest and his wife will become the fourth-largest shareholder in Fortescue and could ultimately become its largest shareholder.

The rule of thumb for donations such as those announced by Forrest is that the gift will be personally tax-deductible for Andrew and Nicola Forrest, who each own 50 per cent of Tattarang – the entity from which the Fortescue shares were transferred.

And generally charities don’t pay capital gains or income tax, so dividends that Minderoo receives won’t be lost to the Tax Office.

In 2022, FMG paid out a combined interim and full-year dividend of $2.07 a share. If that payout was sustained, the charity would receive close to $500 million in annual payments from Fortescue alone.

Cleaning the ocean of plastic pollution has been a focus of the Minderoo Foundation.Credit: AP

While analysts are forecasting Fortescue will shave its dividend in 2023, the dividends will still remain a huge source of revenue for Minderoo, one which would escalate at times when the iron ore price hits cyclical highs.

Previously Minderoo had a stake worth about $500 million in Fortescue alongside a diversified portfolio of international holdings. The foundation’s $7.6 billion in assets will now be dominated by Fortescue shares.

And there’s an expectation that this will be the first of several tranches of the Forrest family wealth that will find its way to the Minderoo Foundation as they make good on signing the Giving Pledge – a commitment to donate most of their wealth rather than pass it to the next generation.

The timing of the donation seems to coincide with the coming release of Minderoo’s 2030 strategy.

The Forrest approach to giving has been criticised in the past for containing a lack of coherence and being a little scattergun. From cleaning the ocean of plastic bags, to tackling modern slavery, and from involvement in cancer research to improving early childhood or bettering fire and flood resistance, the list of and range of causes seemed vast.

It appears that the Minderoo’s new strategy will become more focused with a couple of marquee issues, one of which seems sure to be environmental.

The couple donated record $400 million to the foundation in 2017, and topped this again in 2020 with $500 million, earmarked among other things for buying health equipment to help with the pandemic.

The fact that Forrest devotes so much time and breath to trumpeting his causes, suggests the money will be matched by the publicity.

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