Coronavirus support for not for profits
A message from Kirsten Forrester, CEO, Accounting For Good:
“Where to start? I feel confident that what I write today may likely be out of date by tomorrow as COVID-19 makes itself felt across the globe and creeps inexorably throughout our community.
The not for profit (NFP) sector is often considered ‘recession proof’ but it has quickly become apparent that this particular recession is biting the sector already by mid-March.
Accounting For Good (AFG) has clients needing to cancel or postpone key revenue raisers, such as annual conferences and major fundraising events. Some have the reserves to weather that financially, others are already reeling from changes in funding… like the move to fee-for-service under the National Disability Insurance Scheme. Many organisations will not be able to deliver services if there is a wide-scale shutdown – those with sympathetic funding agencies will be okay, but those that have to generate their own income will really struggle.
I worry for those organisations, I worry for our team’s favourite coffee shop downstairs and I worry for the casual workers in many sectors. I worry about our old folks – mine and everyone else’s. I am pleased to see the quick release of financial support from the government but I know it won’t be enough to save every affected organisation.
AFG has taken the opportunity to be a good citizen and contribute to ‘flattening the curve’ by implementing work from home from 17 March and many organisations seem to have done the same – the Sydney CBD has emptied out quickly in advance of an official directive. So as well as worry, I also hope… that good citizens can contribute to containing the spread of the disease and give the health system the best chance of responding, that communities will care for each other and that there will be cake for all in the coming months – all that flour has to be used somehow, right?
I hope you and yours remain well. I have my fingers crossed for all of us.”
There’s no shortage of news on the Coronavirus and COVID-19 at the moment, but we thought we could pull together some resources for NFPs.
Government financial support
The Federal Government’s ‘Boosting Cash Flow for Employers’ measure is available to not for profit organisations as well as commercial businesses. Legislation was passed on 23 March and the detailed mechanics should be available in the coming days.
An organisation is eligible if it:
- Employs staff
- Had turnover less than $50 million last year
- Was in business before 12 March 2020
A maximum of $100,000 is available and it is tied to the PAYG reported via your Business Activity Statement (BAS).
After lodging the March BAS, eligible employers will receive a payment equal to 100% of the PAYG withheld from salaries and wages for the quarter ending 31 March, up to a maximum of $50,000.
Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax, for example if all staff are under the tax-free threshold.
A second set of payments are available, up to a maximum of $50,000. Payment will be made following submission of your June and September quarter BAS, with each payment equal to half of the initial payment received for the March quarter.
Organisations that lodge activity statements monthly will receive the second payment following monthly lodgements for June, July, August and September.
The ATO will deliver the payment as a credit to the entity upon lodgement of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.
There are other measures available including temporary relief for financially distressed businesses, government supported business loans up to $250,000 and an increase to the instant asset write-off provisions – although the latter provides no benefit to NFPs that are income tax exempt.
Payroll tax relief
The NSW and Victorian state governments have both implemented payroll tax relief measures, along with other supports for small businesses.
NSW is lifting the payroll tax threshold to $1 million for the financial year beginning 1 July 2020 for organisations with payroll up to $10 million annually, and will rebate 25% of the FY19/20 annual payroll tax liability.
Victoria will refund to organisations with annual payroll of less than $3 million any payroll tax paid this financial year, and the first three months of next financial year can be deferred.
Cash is king
While solvency is critical, most NFPs don’t tend to live on the edge like small sales-driven businesses do. Not for profits are notoriously conservative with money and it is not typical for an NFP to borrow to fund its operations. However, these are not typical times.
We know already that major revenue raisers such as conferences, fundraisers and events are being cancelled and are having an immediate impact. This may be the time to consider an overdraft or a government-guaranteed loan to tide you over.
Whether this is an appropriate course of action for your organisation depends on many factors, including your view of how well you think you can bounce back post-COVID-19 and the risk-appetite of your Board.
Whatever you do, we encourage you to get a handle on your cash flow as a matter of urgency.
The banks are providing a variety of business supports, including deferral of corporate credit card repayments, extension of overdraft facilities and waiver of merchant terminal fees. Check with your bank to see what they have to offer.
SafeWork NSW has a comprehensive guide for employers covering infection control, safe working from home arrangements and management of a suspected COVID-19 case. Did you know that you must notify SafeWork NSW if a person was infectious while at work? Well, you must.
Unfortunately, some organisations might find themselves having to make changes to staffing if they are unable to operate – this could range from asking staff to take leave, changing hours of work, standing employees down or at worst, implementing redundancies. Fair Work has useful information on your rights and obligations as an employer in these unprecedented times.
How can we help?
We understand that this is a stressful time and we will support you as best we can. Our team of highly skilled NFP accounting specialists is dedicated to working with our clients to help them navigate cash flow challenges and offer any guidance within our area of expertise. Please contact us if you have any questions.