The Federal Government has declared the COVID-19 pandemic a disaster for the purpose of establishing Australian disaster relief funds as deductible gift recipients (DGRs), allowing them to receive tax-deductible donations.
Donations to Australian disaster relief funds will now be tax deductible when made within two years of the day specified in this declaration as the first day of the event.
Disaster relief funds will need to apply for formal endorsement as a DGR fund with the ATO. This requires charity registration with the ACNC.
You can read more on the ATO website here.
Changes to ancillary fund guidelines
The Federal Government has announced amendments to the ministerial guidelines for public and private ancillary funds to 'provide a credit for funds that make total distributions in financial years 2019-20 and 2020-21 that are at least four percentage points above the minimum required distributions'.
The credit may be used to reduce the minimum distribution by up to one percentage point in 2021-22 and future financial years until the credit is exhausted.
The amendments aim to encourage ancillary funds to increase their granting during this time.
Giving Tuesday has launched #GivingTuesdayNow in response to the global COVID-19 pandemic. #GivingTuesdayNow is a month-long campaign to support and thank everyone who has helped in some way, large or small, throughout the pandemic.
Each Tuesday in May has a specific theme; giving thanks, giving local, giving time, and giving together.
Even though it is the middle of May, it is not too late to get involved and say thanks.
Visit the Giving Tuesday website for more information and stay tuned to our social media pages for more information.
Financial challenges of COVID-19 for charities
Charities are not immune from the economic and health consequences of COVID-19. We know that many are struggling with increased demand, while trying to adapt to changing conditions and deal with significant financial uncertainty.
The challenges associated with the pandemic include establishing arrangements for staff to work from home, following rules for social distancing, managing sudden changes in demand for services, and the effects on income streams.
Financial viability is a growing concern across the charity sector.
Most charities have diverse sources of revenue including government grants, donations, and good and services. However, in the current climate, revenue from donations and goods and services is likely to be affected.
The ACNC understands many charities will be concerned about their financial position if their income sources change or their services need to cease. For some charities, despite the best efforts of their boards, facing insolvency may be an unfortunate result of the current crisis. For charities faced with this difficult situation, there are some important considerations to keep in mind.
Governance Standard 5 requires a charity’s Responsible People to ensure the charity does not operate while insolvent. In response to the COVID-19 pandemic, the ACNCs approach to interpreting this Governance Standard has been aligned with the amendments made to the Corporations Act 2001 (Cth) by the Coronavirus Economic Response Package Omnibus Act 2020 (Cth).
Further details about the ACNCs compliance approach during the COVID-19 crisis can be found on our website.
It is important to note that there are ‘Safe Harbour’ provisions in the Corporations Act 2001 (Cth), which means that a charity does not have to put itself into the hands of administrators if it can plan its way out of insolvency.
If your charity finds itself facing insolvency, the board should consider seeking professional advice.
If the decision is made to wind up, a charity must follow the rules of its governing document. This will include a ‘dissolution clause’ or a ‘winding-up clause’ which requires any surplus assets be given to another charity with similar purposes.
Winding up a charity, like establishing one, has requirements for the charity's Responsible People, with or without the assistance of an administrator or liquidator. These include having the charity's ACNC registration revoked. When a charity does have to wind up, doing so in accordance with its governing documents and legislative requirements will ensure the best use is made of any remaining assets, the charities legacy and support public trust and confidence in the broader charity sector.
We urge charities that may be at risk of insolvency to get professional advice as soon as possible to understand their options.
Visit our website for more information about insolvency.
Deductible Gift Recipient (DGR) Reform update
Earlier this week, the Hon Zed Seselja, Assistant Minister for Finance, Charities and Electoral Matters, reaffirmed the Commonwealth Government’s commitment to reforming the administration and oversight of organisations with Deductible Gift Recipient (DGR) status.
The scheduled reforms were due to be implemented on 1 July 2020.
However, given the current COVID-19 situation, and legislative delays, these reforms will now commence three months after Royal Assent.
At this stage, there is no indication of when Royal Assent will be achieved.
We will continue to keep you updated on this as more information becomes available.
If you’d like more information, you can read the Hon Zed Seselja’s media release here.
Tax inVoice podcast
Last week the Australian Taxation Office released the third episode of their special JobKeeper Payment podcast series.
This episode specifically covers what employers, not-for-profits and charities need to do, key dates for the program and where to go for more information.
Have your say
Equity Trustees and the Xfactor Collective have launched RESET 2020 - a free online support program for social purpose organisations.
To map the needs of the sector and help shape RESET 2020's content, social sector organisations are invited to have their say through a survey.
The survey closes on Friday 22 May 2020.
If you are interested in having your say, you can find out more here.
The Hon Dr Gary Johns