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A quick Google search about Australia in 1986 reveals that the average capital city median house price was just over $80,000, people were still renting VHS tapes for movie nights, and salary-sacrificing options for Not-For-Profits were introduced as a fantastic tool for attracting top talent.

But here we are, nearly 40 years later. The cost of living has skyrocketed, wages have increased, and house prices have reached unprecedented levels. Despite these seismic shifts, the salary-sacrificing caps for the not-for-profit (NFP) sector have stayed more or less the same.

What once gave NFPs a competitive edge is outdated and ineffective, eroded by inflation and wage growth.

In other words, salary-sacrificing advantages have been whittled down to become relics of a bygone era. Without government action, they will continue to hinder the sector’s true potential.

The Evolution (and Inertia) of NFP benefits

The introduction of the Fringe Benefits Tax (FBT) system in 1986 was a game-changer for the not-for-profit (NFP) sector. By offering concessional treatment and the ability to ‘salary package’, the government gave NFPs a powerful recruitment tool, allowing them to attract and retain skilled talent through tax-exempt salary packages. This move helped level the playing field between charities and the commercial sector, making it easier for NFPs to compete for top talent.

In 1994 new tweaks to the FBT calculation method threatened to disrupt the sector’s newfound advantage. However, the introduction of rebates for income-tax-exempt employers ensured they wouldn’t bear the brunt of these changes, allowing NFPs to continue benefiting from the system.

Caps were introduced from 1 April 2001 to limit the concessional tax treatment provided. The caps were set at $30,000 per employee for Public Benevolent Institutions (PBIs) and health promotion charities and $17,000 per employee for hospitals and ambulance services. It’s important to note that these caps are ‘grossed-up’ values, meaning that the actual ‘cash’ value that someone can salary package is actually $15,900 for PBIs and $9,010 for hospitals.

The system was further tightened on 1 July 2005, and charities needed to be endorsed to access the FBT concessions.

In 2016, a Meals cap of $5,000 grossed-up ($2,650 cash) was a major change, as previously, it was uncapped. A cap on Meals, entertainment, Holiday Accommodation and Venue Hire benefits remains in place.

While the government has occasionally flirted with reforming NFP sector arrangements, meaningful action has yet to be taken. In 2012, Treasury released a discussion paper from the NFP Sector Tax Concession Working Group, exploring various reform options – but that went nowhere.

Despite discussions, little changed in the decades that followed. As living costs soared, the benefits intended to support the NFP sector began to erode, leaving charities at a distinct disadvantage when competing with businesses for skilled workers.

Diminishing benefits

Statistics from the ABS and Fair Work Commission reveal that over the years, there has been no indexation, and the percentage of wages covered by the FBT concessions has diminished.

YEAR	MINIMUM WAGE EARNER (NFP)	COVERAGE – MINIMUM WAGE	AVERAGE WAGE EARNER	COVERAGE – AVERAGE WAGE	MAX SALARY (FBT EXEMPT NFP)	ENTERTAINMENT CAP (FBT EXEMPT NFP)
2001	21,496	34,745	74%	34,745	46%	uncapped
2013	32,354	77,932	49%	77,932	20%	uncapped
2023	45,905	98,202	40%	98,202	15%	2,650

Observers of the NFP sector have noted that rising costs of living have, in effect, diminished the benefits of concessions. Tony Vitacca, from Go Salary, an external Salary Sacrifice provider, says:

“Although salary packaging remains an integral part of an NFP’s remuneration and benefits offering, it has remained somewhat of an afterthought when it comes to indexation. The rapidly rising costs of living have meant that the tax savings derived from salary packaging are not what they used to be.”

Where once salary sacrificing arrangements could potentially equalise the two sectors when competing to recruit the same talent, that is no longer the case. It’s just not enough and charities are struggling to retain and attract talent.

The government needs to acknowledge that charities play a critical role in society by protecting our most vulnerable members.

What will need to change?

NFP salary sacrificing benefits should be brought up to pre-2024 levels. Ideally this would include the adjustment of salary sacrifice benefits for indexation of the last 20 years. However, since budget challenges are a given, the very least the government could provide is a commitment for the cap to be indexed moving forward, among many other tax regimes.

There have also been calls to change the workings of the charity sector, with an emphasis on making charitable organisations more like companies so they can operate effectively and have greater impact on society.

The popular book Uncharitable by Dan Palotta, based on his 2013 TED Talk and recently made into a documentary film, argued for a change in how charities are perceived. This would involve a shift from the public asking how much of their donation goes into overheads, rather than the cause, to the public understanding that the overhead costs of a charitable organisation provide essential investment in impact.

Tony Vitacca comments, “We see first-hand the important and varied roles that NFPs play in the community. In a competitive employment environment, it’s crucial for employers in the social sector to have access to a fairer playing field when it comes to remuneration.”

If the government truly recognises the critical role NFPs play in protecting Australia’s most vulnerable, then it’s time for salary sacrificing to get a much-needed update. Bringing the system into the modern age, with indexed caps and refreshed benefits, could once again make NFPs competitive with the commercial sector.

NFPs shouldn’t be left relying on outdated tools from a bygone era. It’s time to swap the retro for relevant, ensuring that these organisations can thrive and continue their vital work in today’s challenging economic landscape.

About Brendan Lucas Brendan founded Next Dimension Accounting (NDA), an outsourced accounting company, in 2021, building on his experience with a top-tier accounting firm. Focused on supporting NFPs and charities, NDA has successfully grown to become one of Australia’s leading outsourced accounting companies focused on the NFP sector.

A messy toolkit makes any job longer, more difficult and more annoying – if not impossible. This applies to your software toolkit as well. Your tools should be well chosen, able to automate routine tasks and work with other tools to minimise compatibility issues. They should also enable customised solutions for your accounting needs.

By selecting apps and integrations that automate tasks and connect with Xero, you acquire a streamlined toolkit to untangle accounting processes and enhance efficiencies, in turn boosting productivity and success.

Integrated solutions

A recent Forbes magazine article noted, “One of the major barriers to adopting automation is the tool sprawl that burdens countless organisations.”

If that’s your organisation trying to work with a “sprawl” of tools that lack compatibility and common purpose, it is most likely falling behind.

The array of accounting software tools to power the modern office is so extensive that its size can be a drawback to non-experts. Discernment is the foundation of a really effective toolkit, especially for accounting departments with limited time, funds and expertise. 

The Next Dimension Accounting team has the expertise and experience to recommend digital tools that automatically integrate with accounting software. We can also develop bespoke solutions that bring insight and efficiency to new levels.

The benefits of digital tools that enhance efficiency

In accountancy key goals are: straightforward transactions, thorough checks, timely oversight, sound compliance, robust data security and smooth communications between personnel. The select range of apps and integrations that connect to Xero accounting software can help you achieve these goals. 

A consistent benefit of Xero-compatible tools and integrations is that they enable the accounts department to automate tasks. And because the tools are integrated, the automation functions more effectively.

Automation delivers critical benefits to the accounting departments of businesses and NFPs, such as:

• It reduces the time spent on tasks, reducing many hours of personnel time with associated savings in costs and staff deployment.
• By taking on the mundane tasks that often swamp managers, it frees them up for more creative and strategic work that will increase business
• Automated tasks can take place around the clock, which is especially crucial for cyber security and to combat human error.
• A new level of oversight is achieved for management and board reporting in real-time.

At a recent community transport conference, Next Dimension Accounting Founder and Managing Director highlighted some of our team’s recommended tools of the trade.

ApprovalMax is a key tool for managing invoices and jobs. It alleviates the need for streams of approval emails by automating approvals for accounts payable and accounts receivable.

BoardPro is highly productive governance and management software that cuts through the workload and provides an easy-to-access portal.

Deputy is a great payroll and time tracking tool for managing staff rostering that is paperwork-free. It resolves communication problems by sharing rosters and shift swaps. It also simplifies timesheets and improves their compliance.

Dext is a bills and e-commerce tool that revolutionises paperwork storage and data entry by electronically capturing receipts, invoices and supporting documents. Less tedious manual entry, substantial time savings and secure storage are a winning combination, whether your accounting operations are small or large.

Eftsure is software that mitigates the risk of payment error, fraud and cyber-crime. It provides automation and security for accounts payable and receivable.

Payrix integrated payment solutions provide an all-in-one payment platform that supports a trouble-free payment experience.

XBert is an AI Audit and Practice Management tool that connects with Xero’s cloud accounting software and transforms bookkeeping. It delivers precision and efficiency 24/7, with alerts for errors, inconsistencies or behavioural patterns. It also manages your reporting in one place, providing Workflow templates and BI reports. 

Contact Next Dimension accounts team today if you would like to learn more about how we support our clients with compatible tools and integrations for automated accounting solutions.

Securing government funding and winning a major or minor grant is a time for celebration for many not-for-profit organisations.

Yet, managing the budget, reporting and acquittal components can take time and effort. Future funding evaluations also often draw on past activities, underscoring the importance of accurate reporting and getting it right the first time.

At Next Dimension Accounting, our team supports clients, helping them manage funding and reporting obligations effectively through our expertise and knowledge of the right technology.

In this article, we share our key tips for success:

1. Setting your NFP up for success
Effective accounting systems and processes can help prepare your organisation for funding and grants. Cloud accounting software like Xero can be readily integrated with various apps to streamline your processes and ensure high-quality data. Knowing your financial position before you apply for funding will also strengthen your success once new services or projects are integrated into current operations.

2. Collaboration on grant or funding budgeting
If you have the appropriate accounting systems and processes in place, you can easily draw on current information within your organisation to assist with developing a grant budget. This information will also help determine in-kind elements that could be part of the activities or project.

3. Understanding your reporting requirements
The reporting requirements for your funding will be detailed in your contract. Review all reporting requirements thoroughly to put in place a proactive plan for systems and processes that will ensure reporting and acquittals are submitted on time. A strong accounting system and professional advice will help you meet deadlines and timeframes.

4. Tracking and reporting
Tracking expenditure, cashflow, actual v budget, activities and outcomes can be assisted by the use of customised reports within Xero, or connecting to apps such as Power BI, Syft and Fathom. Timeframes for reporting can also be managed using technology so that acquittals are completed efficiently and on time. Keeping track of receipts that may need to be submitted can also be supported by the right technology such as DEXT and ApprovalMax.

5. Adjusting and reviewing
By using appropriate technology, activities can be regularly reviewed, and reports developed to measure activities’ success and/or cost. Any possible gaps or shortfalls can also be flagged before they become problematic. Board briefings and updates about projects and funding can be easily developed, providing real-time insight into activities.

6. Acquittals and final reporting
Acquittals and final reporting are assisted by experienced NFP accounting and technological systems and processes that have been in place to manage the activity or project. Drawing on historical information or running reports to compare actual v budget will ensure that acquittals are completed accurately and on time. Your success in completing these reports may boost your chances of more government funding based on your compliance record.

Next Dimension Accounting works with several NFPs that receive government funding. We are an experienced outsourced accounting team that can take pressure of NFPs to ensure they can carry out funded activities knowing they are on budget and on track to submit reports and acquittals accurately and on time.

Get in touch with us today for a free 30 minute consultation.

Next Dimension Accounting is experienced at delivering effective outsourced accounting services, with ‘On Demand CFO’ services among the most popular. 

While the concept of a CFO is often considered just for big business, this type of service can be of considerable value to a not-for-profit organisation.

So, what is a CFO?

The Chief Financial Officer or CFO oversees the organisation’s financial activities rather than handling the daily financial tasks. The role often involves the management of KPIs, presenting financial results, developing strategies to offset risk, and forecasting budget and cash flow. 

Where an accountant deals mainly with past financial activity, the CFO focuses on the future, to create a financial plan, project results, troubleshoot and offer solutions to the organisation. This, in turn, builds the organisation’s success and promotes resilience.

What role do CFOs play in an organisation?

The role of CFO requires expertise and entails responsibility, so it is traditionally a senior position within an organisation’s hierarchy. The CFO often reports to the CEO or works alongside them.

Many small-to-medium-sized operations don’t have a full-time CFO, or their structure isn’t set up for a multi-level hierarchy.

A CFO’s tasks might be juggled between the CEO, Managing Director, and accountant/bookkeeper. A volunteer Treasurer might have to take them on in a small NFP. In practice, this often means important, but less immediate ‘big picture’ CFO tasks are put off indefinitely. 

What impact can CFOs make to NFPs?

An outsourced CFO is a hugely beneficial addition to an NFP.  It may be necessary to change the organisational mindset, but some expenditure on CFO expertise could reap considerable dividends for the organisation’s security, productivity and longevity.

Problems the outsourced CFO can alleviate include:

• Key person dependency risks
• Financial staff on leave
• Succession planning dilemmas
• Sets of figures that become redundant due to unforeseen events
• Attempting to audit and restructure staff
• Lack of technical knowledge 

Some typical scenarios where an ‘on demand CFO’ adds significant value to your NFP include:

• Presenting scenarios to the Board, with full financial figures and clear reporting.

• Using broader business experience to anticipate budget shortfalls and help set up solutions.

• Step up when the team lacks the financial expertise to manage organisational growth and seize new opportunities.

• Covering financial matters so management can focus on different aspects of operation, such as marketing.

How does the role work in terms of outsourcing?

Your organisation can appoint an ‘On Demand CFO’ from a professional outsourced accounting service such as Next Dimension Accounting. 

Our organisation fits in with your existing structure by collaborating rather than competing with your accountant. 

Contact our team today for an obligation free discussion about our On Demand CFO services or find out more here [link to website].

In 2023 smart NFPs are embracing technology and automation to empower their finance teams.  As a trusted advisor to a wide range of NFPs, we stay on top of the latest technology and work alongside our clients to apply the right tools for their success.

Key benefits include:

Improved Efficiency

With many organisations experiencing decreasing productivity, technology and automation offer the chance to improve the efficiency of financial processes significantly. Digital financial management systems and software can automate tasks such as data entry, report generation and reconciliations. For the finance team, this saves much time, allowing them to focus on value-added activities. 

Protects Against Human Error

Manual processes can be prone to errors, leading to large, costly mistakes. Automation can assist finance teams by reducing errors. Automated systems perform precise calculations and data analysis, minimising the chance of flawed calculations and ensuring accurate financial reporting.  

Real-time Reporting

Technology enables finance teams to access real-time financial data and generate reports instantly. This helps NFPs with quick decision-making by providing up-to-date information on cash flow, revenue, expenses and budgets.  We are proud of Xero Gold Partners, but other options, such as MYOB or Sage, may be worth considering.

Data Analysis and Forecasting

Advanced financial software equipped with data analysis capabilities allows finance teams to analyse large volumes of financial data and identify patterns or trends. This helps forecast financial performance and supports strategic planning at a management and board level. Some of our favourite tools include Power BI, Calxa and Fathom.

Improved Financial Visibility for Reporting and Accounts Payable

Technology-driven financial reporting functions provide management teams with a broader and more detailed view of their financial activities and performance, including tracking budgets accurately, zeroing in on overspending or identifying potential areas for cost savings.

Streamlining Accounts Payable functions with technology supports greater internal efficiencies and oversight and improves vendor relationships. Technology can be used to process documents, facilitate reimbursement, issue virtual debit cards and implement financial controls over approvals. We love ApprovalMax, DEXT and Weel.

Better Cash Flow Management

Efficient financial systems and automation tools help finance teams manage cash flow more effectively. This benefits other parts of the organisation by ensuring funds are available when needed. Improved cash flow management enhances stability and flexibility for the entire organisation.

Artificial Intelligence

We can’t write an article about technology and automation without mentioning AI. Many platforms mentioned in this article are also beginning to integrate AI and machine learning into their product offering. The evolution of technology will be increasingly focused on these concepts, which will benefit organisations in ways we can’t even predict today.

Our use and knowledge of technology and automation sets us apart from other accounting firms. 

Next Dimension’s NFP clients are often amazed when we work with them to implement the latest technology in their organisation. Our forward-looking approach to accounting backed by technology strengthens our clients’ success and allows them to grow and expand into new areas that have yet to be identified.

Book a meeting today for an obligation-free discussion about tools to empower your finance team.

New inflationary pressures could spell trouble for NFPs as well as businesses, so developing an action plan to tackle them head-on is critical. Now is the time to address key target areas that will strengthen your organisation for a new financial year that could be challenging.

NFP CEOs, CFOs and Boards will understand the importance of carefully managing the organisation’s budget. In many ways, NFPs are impacted by internal and external pressures as the community reigns in spending and donating as cost-of-living pressures continue to bite. At the same time, for many NFPs and charities, the demand for their services continues to increase alongside operational costs.

There are positive steps you can take today to tackle inflation:

Action plan

Track – Ensuring you regularly review your projected year-end result v budget is key to measuring any inflationary impacts. All good accounting systems will have a standard budget variance report, or you can easily customise it.

Review – Go back to your original business plan. Is what you were trying to achieve still relevant now? The broad goals may be the same, but you will probably need to adjust the plan due to higher inflation levels.

Reforecast – You know that inflation is increasing costs, so if your income will be less than the plan/budget allows, don’t stall; you need to re-forecast now.

Identify loss makers –  Review programs/business units. Identify anything losing money that could be cut off. Beware of looking at profit after fixed costs for programs. Remember, if you cut the program, another program has to bear that cost now.

Trim excesses – Undertake a more detailed analysis of costs, starting with the staffing/organisation chart. Is there anything you could do without?

Explore cost savers – Look for grants, and NFP discounts offered.

Stay connected – Use your network to keep up with what’s happening in the NFP sector and get some moral support. Stay connected with the business community to help you identify upcoming threats and opportunities. Utilise your management team and board network. Board members probably have experience with the longer cycles of the Australian economy, including the 1970s when average annualised inflation was 10.5%, and can help broaden your financial perspective.

What have you learnt?

You should have acquired greater knowledge of and confidence in the organisation’s resilience by working out the action plan. It will put you in a better position to identify milestones/triggers and the best actions to take if the cycle of rising inflation continues.

Do you need more forecasting/monitoring of regular cash flow? Outsource to an accounts service if you don’t have time or are afraid, you’ll miss something, good or bad. The right accountants will have more experience and knowledge of the NFP sector.

The good news

It’s easier to respond to an event that you are prepared for it.  Book a free 30-minute consultation with one of Next Dimension Accounting’s experienced team today to discuss how we can help you navigate the bumpy financial waters ahead.

You’ve fine tuned the figures, set down the goals and delivered your annual budget.  But what’s next?

An approved budget is just phase one; ongoing skilled budget management makes all the difference.

Whether you’ve spent days crafting the budget details or have just walked into a new role and been handed an unfamiliar budget to work with, how you manage that budget is critical. 

For NFPs, understanding the key traps and tips will improve your progress. Learn how to navigate any potential obstacles to achieving your budget goals.

Budget management traps for the inexperienced

The fundamental error made with budgeting is taking a ‘set and forget’ approach. Be prepared from the outset to monitor your budget, feed in up to date figures every month and keep on reviewing your forecasts. 

To avoid common pitfalls:

• Don’t leave budget tracking to the end of the financial year, do it monthly at a minimum
• Be aware of cash flow issues in particular, such as the cash flow implications of  major purchases like IT equipment or vehicles plus insurance payments 
• Be flexible enough to accommodate small changes and prepared for reforecasting
• Where negative figures are substantial and necessitate financial intervention or major pivots, be prepared for an overhaul of the budget
• Don’t overlook the possibility that your organisation might do unexpectedly well, and the budget may need to accommodate very positive unforeseen developments.

How to start budget monitoring

Your organisation’s budget needs to be monitored, with ongoing measurement of actual expenditure and income against the budget.

The recent Covid-19 pandemic introduced many unknowns that were disrupting for budget makers. In situations which create considerable uncertainty, like the pandemic, you must track financials in greater detail, more frequently, and reforecast regularly.

The first step in effective budget monitoring is to upload your budget to a suitable accounting system. 

Look for software to monitor the budget which will offer:

• compatibility with the existing system
• customisation to match your organisation’s requirements
• real-time monitoring
• clear reports for staff or board members who don’t have accounting expertise.

The monitoring process

Note that at critical times you may need to monitor daily rather than monthly. 

After your first month results are in, monitoring involves these steps:

1. Do a budget comparison. 
2. Considering actual figures, re-forecast how you think the rest of the year will go
3. Repeat this process each month at a minimum
4. Keep the projected end of year result in sight
5. Reforecast and adjust assumptions where the internal or external operating environment has changed substantially
6. Communicate results with the relevant parties – such as CFO, CEO or Board members.
7. Consult with them to ensure they understand forecasts they have committed to. Answer queries, encourage buy-in, flag key issues, and update the next budget accordingly.

The process is important to ensure that your organisation continues to meet its budget. Larger ACNC member charities will need it for reporting public information. It can also inform grant acquittals. 

Seek outside expertise

If you encounter difficulties with managing the budget and don’t have the resources inside your organisation to help, an external accounting team can provide expertise and solutions. 

If you get the right people on board, you can profit from their knowledge of the NFP sector.

The ways an accounts service can help you manage the budget include:

• Analysis and financial modelling
• Stress-tests of your budget
• Grant acquittals.

Set up your organisation for success

The aims of a smoothly managed budget include accurate tracking, sound comparisons of financial data, useful forecasting and financial early warning alarms.  These will enable your organisation to look ahead with clarity.

A solid foundation for constructing the next budget is a desired outcome of good management.

For NFPs especially, reducing organisational stress by being prepared for change and having action plans already in place is another important outcome.

Most budget managers encounter problems; the successful ones have the will to explore solutions and to learn from any errors they make. To maximise your capacity to manage, external accounting expertise may help.

Let us help you put your budget to work. Book a free 15 minute consultation today! https://calendly.com/brendan-nextda/free-15-min

Some measures will be introduced to smooth the path of doing business in the latest Federal Budget, which has as its main focus the assistance of Australians in need.

The Federal Budget for 2023–24 is the second handed down by Australia’s Treasurer, Dr Jim Chalmers. The budget announcement includes a surprise small surplus of 4.2 billion for the 2022–23 financial year, the first since 2007–08. The symbolic surplus is based on better-than-expected conditions, including higher prices for key exports and a strong labour market with wage growth and low unemployment.

For small to medium businesses, welcome budget features include power bill relief that will help an estimated 1 million small businesses, an extension of the instant asset write-off and support for cash flow.

Reducing the cost of doing business

The Government has announced some measures aimed at boosting efficiencies and reducing expenses involved in operating a business. Key offerings for those running small and medium enterprises include the following:

$20,000 Instant Asset Write-off: Small businesses with an aggregated annual turnover of less than $10 million can immediately deduct their eligible depreciating assets costing less than $20,000. This measure is estimated to decrease receipts.

Ease of doing business: Initiatives worth $2 billion are designed to simplify the interface between businesses and government services. The ‘Buy Australia Plan’ will help businesses compete for tenders, update the AusTender system, and improve SME awareness of federal government contracts.

Industry growth program for SMEs: The Government will improve support for SMEs and startups, with $431.9 million over four years from 2023­–2024 (and $79.2 million per year ongoing). Eligible businesses that focus on priority areas listed in the National Reconstruction Fund can get help commercialising their concepts and expanding their operations.

$20,000 Small business energy incentive: Most small and medium businesses could be eligible for up to $20,000 in tax relief under the Energy Incentive scheme if they invest in energy-efficient equipment or electrification of cooling and heating systems. Eligible assets or upgrades must be used or installed between 1 July 2023 and 30 June 2024. 

Energy Bill Relief Fund: Small businesses will get power bill rebates through the jointly funded Energy Bill Relief Fund from 1 July 2023.

Small business cyber wardens: A $23.4 million program to train in-house cyber security wardens will help small businesses combat cyber threats. The Council will deliver training for Small Business Organisations of Australia.

Migration Program Skill Stream Increase: The Permanent Migration program will return to higher levels, with a greater percentage (70%) allocated to the Skill Stream.

Pacific Australia Labour Mobility: The PALM scheme, which provides working visas for people from Pacific countries, will be expanded with an extra $370.8 million in funding over four years.

Workforce assistance

For Australia’s small to medium business workforce, the budget provided key changes and benefits, including the following.

Fee-free TAFE places:  300,000 new fee-free TAFE places will be available to train Australians in critical and emerging sectors.

Superannuation harmony: Superannuation and salary payment will be more synchronised from 1 July 2026 to reduce the risk of unpaid superannuation and boost retirement savings. Employers will be required to pay superannuation on the same day as wages. The other fundamental budget change to superannuation is reduced tax concessions for balances above 3 million from 1 July 2025 (about 0.5 % of super holders).

Pensioner work extension: There will be an extension of measures enabling aged and veteran pensioners to work extra hours. Pensioners can earn up to $11,800 before their pension is reduced, supporting pensioners who want to do some work without losing their pension.

International student work hour increase: Until 31 December 2023, students in the aged care sector will be exempt from the 48-hour per fortnight cap.

Tougher conditions ahead

The Budget changes will compel some small businesses to become more rigorous. The ATO will get extra funding to improve GST compliance among businesses ($588.8 million over four years).

Looking ahead, Budget forecasting indicates there could be significant challenges for Australians in 2023–2024, with predictions that unemployment will rise and GDP growth will halve to just 1.5%. However, if inflation is tamed, it is expected that there could be real wage growth.

Consult your accountant and work together to prepare your business or NFP for upcoming changes in the financial landscape.

Get in touch with our team at Next Dimension Accounting if you would like more information or to discuss any of the elements outlined in last night’s Budget announcement.

Australian NFPs are experiencing significant shortfalls in philanthropic funding. But stronger government relationships could provide a solution that offers financial stability to NFPs, plus options for growth.

A recent Perpetual article on philanthropy in Australia flags the concerns held by many NFP organisations over current funding shortfalls. 

Perpetual Trustee Company’s ‘Philanthropy Snapshot: How to give well in 2023’, is a precursor to the October Philanthropy Insights report. It draws on data collected from Perpetual’s IMPACT Philanthropy Application Program, which had more than 1400 applications for funding, and from the community sector. Some of the big challenges Australian NFPs experience include:

• Inflation, with the cost of delivering community services increasing sharply just as the community requires more assistance 
• Talent shortages, with NFPs vulnerable to high staff turnover and competing with the private sector when recruiting, plus confronting critical shortfall in volunteers since the pandemic
• Cyber risks, with NFPs struggling to find the funds and the people needed to protect their organisation and their clients from cyber risks.

However, the snapshot also notes that: “Government relationships can underpin predictable funding. They can help drive crucial policy changes that help the communities that not-for-profits serve.”  

Focusing on these government relationships could put your NFP in a stronger position to access government funding.

Government funding sources for NFPs 

Key sources of government funding for NFPs are:

• Federal, state or local government grants 
• Federal, state or local government tenders.

At Next Dimension Accounting we can assist your organisation to boost its prospects for securing government funding.

Changing relationships

The Perpetual report commented on a key problem with government relationships, “Today many not-for-profits say they are struggling to get the ear of government because they lack staff with necessary lobbying and policy skills.” A constructive approach would be to engage people who can help your NFP connect with government opportunities.

New opportunities have opened up following recent changes in federal and state governments. Where funding previously favoured ‘bricks and mortar’ and sports, there will now be more government funding for soft skills and the arts, such as the new Creative Australia agency established under the Australia Council.

Having organisational policies that chime with government objectives will strengthen your NFP’s position, so where needed use an agency to create appropriate content, messaging and strategies.

Being aware of upcoming opportunities is important, so your organisation is prepared even before government grants or tenders are advertised. As was demonstrated during the pandemic, NFPs fare better if they can offer suitable services quickly when governments introduce new measures in response to changing conditions.

Government grants

At Next Dimension we have considerable experience with preparing submissions for grant-making bodies. 

You can enlist an accounting service at the pre-submission stage to help with costings and budgets for government grant funding applications. If the grant is awarded, the accounts team can monitor the spending of grant funds, and track projects through to the acquittal stage. NFP outsourced accountants like Next Dimension are experienced in tracking funding that is project based, and will manage accounts receivable, cash collection apps, invoicing, transfers, financial reports, review of expenditure compliance and program closeout.

There has been a sharp increase in public scrutiny of government grants, with conditions tightening after recent examples of extreme ‘pork-barrelling’ that pushed grant practices into the media spotlight. Your accounts team can help your NFP ensure plans for spending any government grant money are justified and grounded in realistic budgets.

Government tenders

Securing a government tender is a practical way to ensure your NFP has a reliable income stream. The federal state or local government might procure services from NFPs such as counselling, construction, transportation and more. 

Devise your organisation’s game plan for winning an Australian government tender. Become familiar with tender requirements and processes. The Federal Government, for example, operates under a Commonwealth Procurement Framework. Work to ensure your organisation is tender-ready and agile. Keep the organisation’s figures up to date with Xero. 

When compiling your tender bid, your accountants can help project figures and cost a bid that is realistic for your organisation in terms of financial investment and human resources. A wide range of contacts, with expertise in different areas, can add value to the submission. 

The ‘predictable funding’ provided by government grants or tenders can boost NFPs of different sizes attempting to manage shortfalls across many areas and represent a stable platform on which future capability can be built. Contact Next Dimension Accounting for assistance in addressing philanthropic shortfalls and maximising opportunities to win government grants and tenders. To find out more, please contact our team.

Note: Perpetual’s comprehensive 2023 Philanthropy Insights report will be published in October 2023.

New regulations on Related Party Transactions that have been designed to prevent private benefit and conflict of interest are now in place. Understand the specific actions your charity needs to take and use this opportunity to review your organisation’s policies.

Reporting on Related Party Transactions (RPTs) will now apply to all Australian charities in their 2023 and later Annual Information Statements.  A related party is a person or organisation that is connected to the charity and has significant influence over the charity.

Charities preparing Special Purpose Financial Statements (SPFS) have a new mandatory accounting standard.

It is wise to ensure that your charity has updated its reporting processes for 2023:

• An end of financial year AIS must report RPTs from 1 July 2022
• An end of calendar year AIS must report RPTs from 1 January 2023.

In preparing the report, it is a good idea to review some of the wider implications of Related Party Transactions and how your organisation should manage RPTs going forward.

Australian RPT regulations for different organisations

Disclosure obligations vary for different organisations. Related party disclosures for charities of different sizes are detailed in the Australian Accounting Standards (AASB 124 Related Party Disclosures).

NFPs and charities:

Disclosure is now required regardless of whether you prepare general purpose or special financial statements. The charity’s auditors have to state within their report if material-related party transactions are not disclosed. Basic Religious Charities are an exception, but those Basic Religious Charities that choose the option of submitting a 2023 Annual Information Statement would disclose RPTs.

NFPs established as a company:

Directors of NFPs established as a company should exercise particular caution as the rules are complex when it comes to transactions of with a person of influence.

Public companies:

For public companies, Related Party Transactions require shareholder/member approval but exceptions can include arm’s length transactions; small amounts eg under $5000; and reasonable remuneration of officers and expenses of related parties.

Underlying principles

Initially, complying with regulations for Related Party Transactions may seem difficult. For the director of a long-established NFP that has served the community well by managing its connections in good faith so very modest resources stretch a long way, the change of approach could appear daunting – or, if you come from a family business background or operate in a regional or isolated area where nearly everyone and every business is connected. However, the underlying principle of the regulations is to ensure actions are in the best interest of the organisation.

RPTs represent a risk, so it is good business and good governance to minimise this risk through careful management.

Charities especially must avoid RPTs that use publicly donated funds to provide a benefit to a private individual, as this would erode their philanthropic mission.

Key steps in reducing RPT risks

In daily life and business, related party interactions may be unavoidable, but any transactions can be managed through the following key steps.

1: Disclosure

Disclose related parties in the accounts. Note that some information may be personal or sensitive so will need to be managed properly when disclosed.

To aid disclosure, good record-keeping is important. Internal records should include a register of all related parties. There should also be a system to identify and record all transactions with related parties.

CPA Australia provides a factsheet on Related Party Disclosures that includes a disclosure checklist.

2. Safeguard the organisation’s interests

An organisation can introduce numerous checks and balances to prevent future RPT issues from escalating or even potential fraudulent activity. A few examples include:

• Obtain additional quotes before major purchases to establish that a payment to a related party would not be excessive.

• Undertake a tender process for major provision of services or contracts.

• Establish rules for awarding grants or gifts to avoid transactions involving undisclosed related parties or conflicts of interest.

• Clarify when related parties cannot take part in discussions (such as at a board meeting) to avoid a conflict of interest.

• Review recruitment and hiring procedures. For example, ensure roles are adequately advertised and an independent panel assesses candidates. Any candidate should have experience and qualifications suited to the role, not just connections.

Consult the ACNC website for more guidance on managing conflicts of interest.

3. Communicate expectations

The ACNC points out on its website that “Related Party Transactions are common and not necessarily a problem”. Clear communications can resolve many potential issues.

Ensure your directors, staff, contractors, volunteers and other stakeholders understand the organisation’s expectations regarding Related Party Transactions by:

• Developing a policy and procedures document covering Related Party Transactions for your organisation.
• Educating staff and encouraging them to flag issues relating to potential RPTs.

Public trust and confidence are vital for NFPs. Taking a transparent and proactive approach to Related Party Transactions can minimise the financial and reputational risks to your organisation.

The team at Next Dimension Accounting can work with you to put in place systems and processes to ensure compliance and also assist with the new reporting requirements. Contact us today to find out more.

Since the COVID-19 pandemic began, many employees have started to work from home as they adapt their schedules and lifestyles.

The Australian Taxation Office (ATO) has changed the work-from-home deductions available to employees in the following way:

• The COVID 80 cents per hour shortcut method has been scrapped.
• The fixed-rate method rate has increased to 67 cents per hour. 

The changes announced by the ATO relate to the fixed rate method and apply from 1 July 2022 for 2022/23 income tax returns.

The new fixed-rate method.

The revised fixed rate method can be used from the 2022–23 income year onwards. 

Employees using this method cannot separately claim deductions that include:

• Energy – Electricity or Gas
• Stationery
• Computer consumables, such as printer ink
• Internet or phone
• The decline in value of assets used while working from home, such as computers and office furniture.
• The repairs and maintenance of these assets.
• Costs associated with cleaning a dedicated home office.

You can still claim a separate deduction for:

• The decline in value of assets used while working from home, such as computers and office furniture.
• The repairs and maintenance of these assets.
• Costs associated with cleaning a dedicated home office.

Stricter record-keeping rules

In addition to the new rate, stricter rules apply for keeping records of hours worked and from 1 March 2023 onwards, taxpayers will be required to keep a record of the total number of hours they work from home.

Another significant change is that employees will no longer need a dedicated home office to use this method.

If more than one person is working from home at the same time, each person can use the fixed rate method. 

No changes have been made to the “actual cost” method.

Many who work from home will predominantly be better off if they spend the time maintaining the required records.

To discuss new fixed-rate changes and what they may mean to your employees, please get in touch with our team today.

The ATO has ramped up efforts to uncover sham NFPs that are set up for tax evasion purposes. Tighter controls will mean more ATO attention is paid to legitimate NFP activities, so take steps to keep your organisation in line.

Assistant Commissioner Jennifer Moltisanti from the ATO’s NFP centre wrote in a February 2023 blog, “We’ve received intelligence about the promotion of ‘private’ not-for-profit foundations created to avoid or evade tax.”

The Assistant Commissioner added that because NFPs provide an important service, “It is critically important that we remain vigilant to those who seek to undermine or take advantage of the available supports.” 

The figure provided of around 144,000 NFPs in Australia self-assessing income tax exemption suggests that tax evasion issues could have a widespread impact. Here’s what the ATO are doing about scam practices, and steps for NFPs to ensure their house is in order as regulation of the sector tightens.

ATO investigations

The ATO announced that it is investigating potential scams that involve tax dodgers streaming their incomes through a sham foundation that pays no tax. 

Also under ATO scrutiny are cases of registered Public Benevolent Institutions (PBIs), where the employees undertake charitable or commercial activities of other entities that are not benevolent in nature.

The Assistant Commissioner said, “These arrangements involve the provision of employment services by the PBI to another entity within the group and typically include a charge-back or labour-hire agreement.

“The arrangement is purportedly claimed with the purpose of providing funding to the PBI to achieve its benevolent purpose.”  

The ATO can prosecute a range of summary offences or refer to serious cases of tax fraud. Actions taken against NFPs that fail to keep in line might include removing their income tax exemption or their Deductible Gift Recipient (DGR) status.

A broad view of the NFP sector

While bad practitioners are a grim prospect for the NFP sector, the racketeers and fakes do not represent the majority. CPA Australia’s spokesperson commented on the NFP investigations issue that “only a very small minority intentionally broke the rules” [source Pro Bono News]. 

Those NFPs and charities experiencing taxation difficulties reported that their problems sometimes arose from “a lack of expertise, complex and excessive regulatory requirements, and a shortage of resources,” added the CPA Australia spokesperson.

At Next Dimension Accounting our work with genuine NFPs overcoming any difficulties regarding taxation and superannuation obligations shows that a mix of outside expertise and internal rigour can enable your organisation to stay on the right side of the ATO.

Actions your NFP can take

To avoid areas of potential concern, a genuine NFP can take several steps:

1. Acquire expertise – If your organisation lacks expertise in taxation and your staff numbers are limited, hire the expertise you need. An outsourced accountant who knows Australia’s NFP sector can be hired to work with you on a regular basis and ensure you are prepared properly for annual reporting or returns. A trusted outsourced accountant can also step in to help when you run special programs that are complex financially.

2. Review practices – An external accountant can commence with a review of your bookkeeping and reporting. This will enable the accountant to analyse the effectiveness of the company’s current procedures and advise on better pathways and technology to help meet ATO requirements.
   

3. Self-assess – The ATO has plans for all registered Australian NFPs to lodge an online Annual Self-Review Form for the 2023–2024 income year. In the following years, NFPs will confirm or amend their details using a pre-filled self-review ‘return’. No doubt the ATO will use this information to target their compliance resources accordingly.  An accountant can help you work through your requirements to meet the ATO test.
   
4. Raise awareness levels – All staff members should be aware of key ATO requirements that apply to their work. An experienced accountant can conduct in-house information sessions if there are major ATO reforms. And if you do come across misconduct anywhere in the sector, the ATO provides an avenue to report it. 

To learn how we can support your NFP to meet taxation and superannuation obligations, contact the Next Dimension team.

Workplace giving programs are in the spotlight as a tool for reaching Australia’s national target for philanthropic giving. This donation method does present real opportunities – for the socially responsible employees and businesses, and for the NFPs that receive their generosity.

Prior to the election it was pledged that an Albanese Labor government would “work to double philanthropic giving by 2030 by engaging collaboratively with the charitable sector.” As Andrew Leigh, Assistant Minister for Competition, Charities and Treasury, noted in a pre-election press release, this target would simply “bring charitable donations as a share of GDP into line with countries like New Zealand”. Late last year he recommended more action to support workplace giving programs, saying, “The sooner we can remove barriers to workplace giving, the better our whole community will be.”

Official workplace giving programs, also known as “payroll giving”, have been around in Australia for many years, and this new focus may result in greater engagement.

How workplace giving works

An Australian employee donates a portion of pre-tax salary under a giving program. The employer then matches that contribution. The employee donation is reported through the employee’s tax return, using the “workplace giving” category.

The ATO records for 2020–2021 suggest that around 4.3 million Australians have a workplace giving program at their place of work. Around 4.7 per cent of these workers participate in a program. On average they give $258 per annum. Interestingly, employees of micro-businesses were most generous, contributing $714 per person on average, compared to government employees at $169 each.

Potential growth to benefit NFPs

In the USA more than 49% of nonprofit respondents identified workplace giving as a growth strategy for their organisation.

At a recent roundtable with the Business Council of Australia,  Assistant Minister Leigh said that “Workplace giving in Australia isn’t living up to its potential, but applied correctly, it could help get Australia to its charitable giving target by 2030.”

Does it work well in other countries?

In New Zealand, where it is known as ‘payroll giving’ employees inform their employer of the charity they want to donate to, as long as it is on the list of inland revenue approved organisations. NZ Inland Revenue figures show that over the past decade payroll giving donations climbed to $71 million per annum in 2022 (from $2.3 million in 2011).

In the UK it is estimated that more than a million people donate to charities through “payroll giving”. More than 8500 organisations facilitate the programs for their employees to donate. An estimated 2 billion pounds has been raised for charitable causes through payroll giving.

February 2023 will be Payroll Giving Month, celebrating 35 years of payroll giving in the UK.

In India, where corporate social responsibility laws require companies to give 2 per cent of their profits to charity, it is estimated that payroll giving will grow at 30% and 50% annually. Microsoft India’s Corporate Giving Campaign is one of the largest corporate giving programs in the world. It is based on three aspects – the employee contributions via payroll, the Microsoft Match program and an Employee Volunteering Policy.

In the USA, a survey of employers found the majority of companies (66%) have an ‘open’ matching gift program, which means that employees can donate to most non-profit organisations and the company will match that contribution. (Source: America’s Charities Corporate Benchmarking Analysis). The surveys suggest average employee participation in employer matching gift programs is 10% in the USA. This compares to about 4.7 % in Australia. A survey of approximately 1,200 workers across the U.S. by Fidelity Investment, found that: 42% of respondents said it was important for employers to match employees’ charitable contributions through a workplace giving program. Among millennials, it was 75%.

The US trends suggest that in Australia will also see an increase in workplace giving in the future. With the younger demographic notably more motivated by corporate social responsibility, as they start to replace older members of the workforce the take up of workplace giving should increase.

Next Dimension Accounting will stay across Workplace Giving updates and work with our clients to ensure they are able to take advantage of donations received through this method. We can also assist with setting up Workplace Giving programs and if you would like to find out more please get in touch.

We are proud to launch Next Dimension Accounting and welcome you to our new website where you will find information about our team, our services, client stories and helpful and up-to-date news and information that will help your business or NFP succeed.

We look forward to hearing from you soon.

The Australian government changes to charity financial reporting announced during July 2021 represent some mixed messaging for NFPs of different sizes.

In good news for grassroots organisations, smaller charities will have fewer financial reporting obligations under the new reforms agreed to by the Council on Federal Financial Regulations. In turn, this reduction in red tape comes with greater accountability to donors, beneficiaries, and the public, including reporting related party transactions. The larger charities will also have to report key remuneration under the new rules.

The ACNC states that it will “work with the charity sector to develop appropriate guidance and education resources to allow the sector to easily understand and meet these new reporting requirements.”

So, how will your charity or NFP respond to these changing conditions? As always, it depends on how your organisation is classified – small, medium or large. As the classification thresholds for ACNC registered charities will take effect from the 2021-22 financial year, it is worthwhile reconfirming the status of your NFP as a start.

Go back to the thresholds

The tiered system for regulating the Australian NFP sector is based on classifying organisations as small, medium or large. It is essential be sure which tier your NFP belongs to as the new legislation is raising the ‘small, medium and large’ thresholds.

The following new thresholds will take effect from 1 July 2022 (reporting against the 2021–22 financial year):

• Small  entity – less than $500,000 annual revenue.
• Medium entity – $500,000 or greater but less than $3 million annual revenue
• Large entity – $3 million or greater annual revenue.

The government estimates that some 2,500 Australian NFPs will be classified as small and around 2,700 as medium. However, given the recent financial rollercoaster years, which featured large public donation events like the bushfires, but also the disruptive pandemic impacts, many borderline medium organisations will find it hard to predict how they will fit into the new thresholds.

The benefit of professional advice

When projecting future revenue, consider both typical and atypical years. The pandemic’s impacts have been significant and in many cases have negatively affected NFP staffing numbers, assets, participation of volunteers and normal funding sources. Calculating annual revenue for thresholds and budget plans is not a straightforward task, because previous revenue can no longer be assumed.

While the ACNC 2019 report showed charities employing 1.38 million people and sector revenue growing by 6.8 per cent, in contrast, Social Ventures Australia (SVA) and the Centre for Social Impact (CSI) review, produced more than a year on from the dual crises of COVID-19 and the 2020 bushfires, reported that: “More than half of charities faced some form of temporary closure, and more than 80% made some shift towards at least partial online service delivery.

All NFPs

In line with the Review’s recommendations, the Government will also enhance charities reporting obligations to provide greater accountability to donors, beneficiaries, and the public. From 1 July 2023, all charities will be required to report related party transactions in their annual reporting to the ACNC. “This will increase transparency of transactions with related people or organisations that pose a higher risk of conflicts of interest,” says the government press release.

Large NFPs

From 1 July 2022, large charities with two or more key management personnel will be required to report remuneration paid to responsible persons (directors) and senior executives on an aggregated basis in their 2022 Annual Information Statement to the ACNC.

Medium NFPs

Medium charities registered with the Australian Charities and Not‑for‑profits Commission (ACNC) will no longer be required to produce audited financial statements to the ACNC.

Small NFPs

Small charities registered with the Australian Charities and Not‑for‑profits Commission (ACNC) will no longer be required to produce reviewed financial statements.

But even if you are freed up from one layer of reporting obligations, don’t neglect to collect the relevant figures as your organisation will still need them for internal review purposes or possible audits.

Conclusion

Red tape reduction is always welcome but responsible NFPs should stay focused on financial realities.

Public donor and volunteer expectations of NFP management and conduct are only increasing. Many small to medium organisations will go to the wall if conditions don’t improve. NFPs that lose their ACNC charity registration due to financial reporting breaches are not entitled to a range of Commonwealth charity tax concessions.

NFPs still need to focus on the numbers.

All organisations need good controls and reporting in place to raise funds and operate effectively. Any of the latest exemptions outlined above do not change this fundamental requirement. Be transparent, informed and proactive. Talk to your accountant today for more guidance.

At Next Dimension Accounting, we provide outsourced accounting services for NFPs of different sizes. Having expertise in the NFP sector makes it easier for us to streamline NFP client processes and ensure that sound reporting practices meet the requirements of the ACNC.