COVID-19 Relief Measures for Not For Profit Organisations

The Federal and State Governments have provided various relief measures for not-for-profits ( NFPs ) to assist with the economic impacts caused by the COVID-19 pandemic.

The following is a summary of the various relief measures available.

JobKeeper Payment Scheme

The JobKeeper Payment ( JKP ) provides a wage subsidy to eligible employers, which importantly includes NFPs and charities, which have experienced a decline in turnover as a result of the COVID-19 pandemic.   The JKP will help to offset the cost of ongoing employees and will encourage employers to maintain a connection with employees that have been stood down. 

Under the JKP scheme, the employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged to receive the JKP.

Eligible Employers  

NFPs (excluding charities) will be eligible for the JKP if, at the time of applying:

• they have an aggregated turnover of less than $1 billion (for income tax purposes) and they estimate their GST turnover has fallen or will likely decline by 30% or more ; or
• they have an aggregated turnover of $1 billion or more (for income tax purposes) and they estimate their GST turnover has fallen or will decline by 50% or more .

Charities registered with the Australian Charities and Not-for-profits Commission ( ACNC ) will be eligible for the wage subsidy if they estimate their turnover has (or will likely) decline by 15% or more relative to a comparable period.

This lower turnover decline test (ie. 15%) does not apply to universities and non-government schools that are registered charities, which will remain subject to the turnover decline tests set out above for other not-for-profits.

Decline in Turnover

To establish that a NFP has faced (or is likely to) face the relevant decline in turnover, the test has been derived from the "GST turnover" rules, which is an amount typically reported on Business Activity Statements ( BAS ), with some modifications. 

The "GST turnover" rules includes all taxable supplies and all GST free supplies, but not input taxed supplies.   For consistency, NFPs who do not report through a BAS statement are required to use the same rules for calculating their turnover. 

For registered charities, they may also include donations they have received (or are likely to receive) in their turnover for the purpose of determining if they have been adversely affected.

Where a NFP was not in operation a year ago, or where their turnover a year earlier was not representative of their usual (or average) turnover, the Commissioner has discretion to set out alternative tests that would establish eligibility in specific circumstances.   Also, NFPs that have had a liquidator appointed are not eligible for this payment.

Eligible Employees

Eligible employees are employees who:

• were employed by the Employer at 1 March 2020;
• are currently employed by the eligible Employer (including those stood down or re-hired);
• are full-time, part-time, or long-term casuals (ie. casual employed on a regular 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, or a Special Category (Subclass 444) Visa Holder; or
• are not in receipt of a JKP from another employer.

Employees receiving Parental Leave Pay from Services Australia are not eligible for the JKP, however employees on parental leave from their employer will be eligible. 

If your employees receive the JKP, this may affect their eligibility for payments from Services Australia (ie. Centrelink) and those employees will need to report their JKP as income.

Application Process  

To participate in the JKP scheme, employers must:

• Register an intention to apply on the Australian Taxation Office ( ATO ) website and assess that they have (or will likely) experience the required turnover decline (of 30% or 15%).
• Provide information to the ATO on eligible employees.  This includes information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or rehired).
• Ensure that each eligible employee receives at least $1,500 per fortnight (before tax). Employees who receive $1,500 per fortnight or more from their employer will continue to receive their regular income according to their prevailing workplace arrangements.  For employees that have been receiving less than this amount, the employer will now need to pay them, at a minimum, $1,500 per fortnight before tax.
• Notify all eligible employees that they are receiving the JKP.
• Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.

Process & Timing

The JKP wage subsidy will start on 30 March 2020 , with the first payments to be received by employers in the first week of May.   Businesses and NFPs will be able to register their interest in participating in the JKP from 30 March 2020 on the ATO website ( see ATO enrolment page here ).

The ATO has now extended the time given to enrol for the initial JKP periods, from the original date of 30 April, until 31 May 2020.  If eligible NFPs enrol by 31 May 2020, they will still be able to claim for the four fortnights in April and May, provided the NFP meets all of the eligibility requirements for each of those fortnights.  This includes having paid eligible employees by the appropriate date for each fortnight.

For the first two fortnights (30 March - 12 April, 13 April - 26 April), the ATO will accept that eligible NFPs will now have until 8 May 2020 to pay the minimum payment of $3,000 gross wages.

Boosting Cash Flow for Employers

The Government is providing at least $20,000 and up to $100,000 to businesses and NFPs with aggregated turnover under $50 million and that employ workers .   This relief measure is structured via "two boost payments", which will help businesses and NFPs' cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff. 

NFP employers will receive the first boost payment equal to 100% of the PAYG withheld from salary and wages up to a maximum of $50,000.   The minimum payment will be $10,000. 

The second boost payment is also being introduced for the tax periods from July to September 2020, where eligible entities will receive an additional payment equal to the total of all payments they have received under the first boost payment (above).   This means that eligible entities will receive at least $20,000 and up to a total of $100,000. 

For those NFPs that are not income tax exempt , the payments will be treated as tax free.   The Boosting Cash Flow for Employers relief payments do not impact taxes paid by employees in respect of their salary and wages received.   The ATO will continue to recognise the full amount that was withheld from the employee's salary or wages in calculating the PAYG credit the employee is entitled to.

Eligibility

NFPs with aggregated turnover under $50 million that employ workers will be eligible, and this can include companies, trusts and other eligible NFP structures.

• NFP entities who do not employ salary and wage staff but who have a PAYG withholding obligation in relation to other forms of remuneration may also be eligible where they satisfy the other eligibility requirements.  Examples include payments to contractors where the contractor has voluntarily requested withholding.
• The payments will only be available to eligible NFP employers established prior to 12 March 2020 .  However, charities registered with the ACNC will be eligible regardless of when they were registered, subject to meeting other eligibility requirements.  This recognises that new charities may be established in response to the COVID-19 pandemic .
• Eligibility for taxable NFPs will be determined on prior year aggregated turnover as these entities lodge income-tax returns; eligibility for income-tax-exempt NFPs registered for GST will be estimated from GST reported amounts through the BAS statement; and eligibility for registered charities will be estimated based on information derived from Annual Information Statements provided to the ACNC or GST reported through the BAS statement.  Where an eligible NFP entity is inadvertently omitted by one of these tests, the ATO may require additional information to assess eligibility for the bonus.

Process & Timing

The payment will be delivered by the ATO as an automatic credit  in the activity statement system upon businesses lodging eligible activity statements from 28 April 2020.

Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme

The Coronavirus SME Guarantee Scheme ( the Scheme ) aims to enhance lenders' willingness and ability to provide credit, supporting many otherwise viable SMEs (including NFPs) to access vital additional funding to get through the impact of the COVID-19 pandemic. 

Under the Scheme, the Government will guarantee 50% of new loans issued by participating lenders to SMEs (including NFPs), and the Government will support unsecured loans of up to $250,000 .   These loans are intended to provide for current and upcoming cash flow needs, including rent and staff expenses. 

The loans provided under the Scheme will be available with a term of up to three years.   Also, a six month repayment holiday will be available on all loans.

Eligibility

NFPs are eligible for the Scheme, provided they have an aggregated turnover of less than $50 million and have an ABN.   As is the case for other businesses, NFPs will be eligible for loans of up to $250,000 via commercial lenders participating in the Scheme.

• The Scheme will be available to SMEs, including NFPs, with turnover of less than $50 million in the previous financial year or expected turnover of less than $50 million in the current financial year.
• The ability of SMEs, including NFPs, to access the loans is ultimately a decision for participating lenders.  Credit assessment processes will be undertaken, however lenders are expected to look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

Process & Timing

NFPs seeking to apply for a loan under the Scheme should contact their current financial institution or any other participating lender.   A list of participating lenders is available on the Treasury website ( see approved list here ). 

The Government is not directly participating in the lending process, but instead providing a guarantee to lenders.   The Scheme will be available for new loans made by participating lenders until 30 September 2020 .

$200 Million Community Support Package

The Government will provide an additional $200 Million Community Support Package to support charities and other community organisations which provide emergency and food relief, as demand for these services surges as a result of the Coronavirus.

This Support Package will provide flexible funding to boost support to services where demand is quickly increasing, including:

• Emergency Relief which will help vulnerable Australians who need assistance with bills, food, clothing or petrol and increase and retain workforce capacity including volunteers.
• Assistance for food relief organisations to source additional food and transport for emergency relief service providers, and rebuild workforce capacity.
• Immediately scale-up services through the National Debt Helpline - which is often the first point of contact for people experiencing financial difficulties, and to support one-on-one tele-financial counselling.
• Creating a short-form Financial Counselling course through Financial Counselling Australia to train new financial counsellors to boost the workforce, potentially providing hundreds of new jobs.
• Expanding access to safe, affordable financial products through the No Interest Loan Scheme which provides an immediate financial relief alternative to other high-risk, high-interest products such as credit cards and payday loans.

ATO Payment Deferrals

For NFPs experiencing difficulties, the ATO can defer some payments by up to six months.   The relevant payments that may be deferred include income tax, activity statements, PAYG instalments, Fringe Benefits Tax and excise payments. 

NFPs which need to access this relief measure will need to contact the ATO's Emergency Support Infoline on 1800 806 218 for more information.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.