What can Not-For-Profits gain from Government stimulus packages?

09 April 2020

Anthony Whyte, National Leader, Not-For-Profit
Partner, Audit & Assurance
Ali Bolbol, Partner, Tax |
Leah Russell, Partner, Audit & Assurance |

National government stimulus packages

The Australian government have released a number of stimulus packages in response to the COVID-19 pandemic, aimed predominately at small to medium sized businesses and eligible individuals, some of which are accessible to NFPs. The economic stimulus bills have passed parliament and have received Royal Assent. There are a number of schedules within the bill that may be accessible to NFPs over the coming months.

JobKeeper payment

Eligible entities will be able to receive the JobKeeper Payment from the government following registration. This will entitle those eligible entities to a $1,500 payment per fortnight per eligible employee for a maximum of six months. While legislation has been introduced, it contains very little in the way of detail and is merely enabling legislation, enabling the Treasurer to make rules.

For more information on the JobKeeper Payment and the Treasury rules, please refer to the Treasury JobKeeper Payment fact sheets available on the treasury website.

Eligible entities include:

  • Businesses with a turnover less than $1 billion who have experienced a 30% reduction in turnover relative to a comparable period a year ago (of at least a month); or
  • Businesses with a turnover greater than $1 billion who have experienced a 50% reduction in turnover relative to a comparable period a year ago (of at least a month); and
  • Their business is not subject to the Major Bank Levy; or
  • Charities registered with the Australian Charities and Not-for-Profit Commission (ACNC), they will be eligible for the subsidy if they estimate their turnover has or will likely fall by 15% or more relative to a comparable period a year ago.

Turnover will be defined according to the current calculation for GST purposes and is reported on the Business Activity Statements. Under the GST law, only Australian based revenue is included and therefore, only Australian based turnover is relevant.

Your current GST turnover is the value of all the supplies (sales) you make during the current month. This is based on your gross income, exluding all of the following:

  • Sales that are input taxed sales;
  • Sales not connected with an enterprise that you carry on;
  • Sales that are not made for consideration (unless the sales made to associates); and
  • Value of gifts received.

If a business does not meet the turnover test at the start of the JobKeeper scheme on 30 March 2020, the business can start receiving the JobKeeper Payment at a later time once the turnover test has been met. In this case, the JobKeeper Payment is not backdated to the commencement of the scheme. Businesses can receive JobKeeper Payments up to 27 September 2020.

Eligible employees are employees who:

  • Are currently employed by the eligible employer;
  • Were employed by the employer at 1 March 2020;
  • Are full-time, part-time, or long-term casual (being a casual employed on a regular and systematic basis for longer than 12 months as at 1 March 2020);
  • Are at least 16 years of age;
  • Are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa holder who has been residing in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
  • Are not in receipt of a JobKeeper Payment from another employer.

Payment Process

Where employers participate in the scheme, their employees will receive via the employer the payments as follows:

  • If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will assist the employer to continue operating by subsidising all or part of the income to their employee(s).
  • If an employee ordinarily receives less than $1,500 in income per fortnight before tax, the employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
  • If an employee has been stood down, the employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
  • If an employee was employed on 1 March, subsequently ceased employment with the employer, and then has been re-engaged by the same eligible employer, the employee will receive, at a minimum, $1,500 per fortnight, before tax.
  • It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.

Payments will be made to the employer monthly in arrears by the ATO.

Where the Commissioner has overpaid an entity, the entity must repay the overpaid amount to the Commissioner. Where there has been an overpayment which the entity is required to repay, the entity is liable to general interest charges for the overpaid amounts that have not been repaid and will apply automatically. However, the Commissioner can make a written determination whereby an entity will not have to repay where an honest mistake has been made and no retained or personal benefit from the overpayment has been received. The Commissioner also retains existing powers to remit general interest charges in particular circumstances.

Employers with casuals who commenced employment after 1 March 2020 will not qualify for the JobKeeper payment through their employer. However, individuals aged between 22 and Age Pension age who are looking for work, under the income test limits of Centrelink and meet the residency rules can access the ‘JobSeeker Payment’. More information on the JobSeeker Payment can be found on the Australian Government website.

Amendment of the Fair Work Act 2009

Changes to the Fair Work Act have been introduced to work with the JobKeeper Payment, to support business recovery. The amendments made will enable the greatest number of workplaces to access and make best use of the JobKeeper Scheme, with a view of preserving the greatest number of jobs.

Employers who qualify for the JobKeeper Scheme are able to give:

  • Enabling stand down direction to an employee (including to reduce hours of work) upon consultation with the employee or representative of the employee;
  • Direction to an employee about the duties to be performed by the employee, without being unreasonable and within the employee’s skill and competency; and
  • Direction to an employee about the location of the employee’s work, where safe to do so.

A JobKeeper enabling stand down direction cannot reduce an employee’s hourly base rate of pay, requiring employers to stand down employees on an hourly basis. For employees that are paid by means other than hourly, the employee’s base rate of pay is the amount specified in an employment instrument or the amount worked out using a standardised method to work out the employee’s base rate of pay. This is designed to ensure that employees paid other than by reference to hours, such as on an annualise salary arrangement, have clear rules of how their pay arrangements are treated for the purpose of the hourly rate of pay guarantee.

The amendments also facilitate employee’s (whose employers qualifies for the JobKeeper Payment Scheme in relation to them) to consider their employer’s request to take paid annual leave and to agree to take annual leave at half pay. An employee must consider (and must not unreasonably refuse) their employer’s request to take annual leave, provided that the leave arrangement would not result in reducing the employee’s leave balance to fewer than two weeks.

Boosting cash flow for employers

The government is providing temporary cash flow support of up to a $100,000 through tax-free payments to small and medium-sized businesses with aggregated annual turnover of less than $50 million that employ workers, between 1 January 2020 and 30 June 2020. These eligible businesses will receive a payment equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000 even if the amount required to be withheld is zero. The payment will be delivered as a credit in their BAS from March to June 2020.

Monthly lodgers will receive a credit that is calculated at three times the rate (300%) in the march 2020 activity statement to align with quarterly lodgers.

Eligible businesses do not need to apply with a separate form. Upon lodgement of their activity statement, the first amount will automatically be credited to the business’ account, but no earlier than 28 April 2020. A business that lodges early will not receive the cash flow boost before this date.

Your NFP is eligible if you:

  • Make payments subject to withholding obligations;
  • Held an ABN on 12 March 2020 and continue to be active;
  • Have an aggregated annual turnover of less than $50 million (generally based on prior year turnover); and
  • Made eligible payments that you are required to withhold from (even if the amount you need to withhold is zero).

Charities registered with the Australian Charities and Not-for-Profits Commission are eligible, regardless of whether they held an active ABN, if they meet the other eligibility requirements.

Early Childhood Education and Care Relief Package

Many early childhood education and care services are NFPs. This particular sector is receiving additional assistance through the Early Childhood Education and Care Relief Package.

It is important to note that if services decide to close and they have not been directed to do so on public health advice or for other valid health and safety reasons, no payment will be made to these services.

Services do not need to apply for funding under this relief package. The package includes voluntary concessions for the period prior to 5 April, and mandatory concessions applying after this date. Payments commenced being made from 6 April.

For further information regarding this relief package, please refer to the Department of Education, Skills and Employment website.

ATO administrative measures

The ATO have also announced administrative measures in response to COVID-19 that apply to all businesses impacted by the pandemic. The measures do not apply automatically and the ATO will assess each taxpayer on a case-by-case basis. The measures are as follows:

  • Deferring up to six months the payment date of amounts due through the business activity statement, income tax assessments, fringe benefits tax assessments and excise;
  • Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to;
  • Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities; and
  • Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.

Please note that the ATO are not allowing the deferral of superannuation payments. Each taxpayer must continue to make these payments by the statutory due dates.

We are able to liaise with the ATO on your behalf in order to seek application of the abovementioned measures upon request.

How can we help?

At BDO we have a wealth of experience in assisting with financial and taxation advice and can apply your business key facts to the circumstances outlined, to determine if you qualify for any benefits the government has on offer.

For boards and directors of companies and charitable organisations concerned about the impact of COVID-19, we have provided a range of resources on our COVID-19 page including checklists, webinars, technical updates and more. For assistance with developing a crisis management plan, conducting risk management assessments or accessing federal and state stimulus please contact your local office.

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