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A new self-review reporting obligation introduced by the Australian Taxation Office (ATO) for non-charitable not-for-profit (NFP) organisations takes effect from the 2023-24 income year.
 
If your NFP has an active Australian Business Number (ABN), you must lodge an annual NFP self-review return to self-assess your income tax exemption status under one of eight specified categories.
 
The first self-review return is due by 31 October 2024, or after the end of your reporting year if you have an approved substituted accounting period.
 
Most NFPs will likely confirm their income tax exemption through this self-assessment. However, some may find they are taxable for the first time.
 
The NDA team is here to assist our clients through this process, and we will contact you with further details.

Organisations seeking or already having Deductible Gift Recipient (DGR) status should ensure they have sound accounting processes, as reforms aimed at strengthening DGR administration and oversight come into play. 

In late 2023, the Australian Government’s Productivity Commission released its ‘Future foundations for giving Draft report’ as part of its inquiry into philanthropy. The follow-up report is due in 2024. 

The inquiry into philanthropy has identified DGR status as a key proposed area for reform of philanthropic management, as we highlighted in our January 2024 article.

ACNC recommendations

The Australian Charities and Not-for-profits Commission (ACNC)  addressed non-compliance issues in the Commissioner’s March 2024 column, ‘With Charity Status Comes the Need For Accountability’, with links to a summary of their extensive Reviews of DGR-endorsed Charities.

Administrative issues noted in the overall outcomes of the ACNC reviews included:

• Governing documents that are inadequate or missing
• Failure to meet  the number of Responsible People required according to the charity’s legal structure
• Extra subtype registrations that did not appear to be connected to the charity’s purpose.

The ACNC recommends that charities take actions to avoid administration issues, including:

• Maintain entitlement to registration
• Update your charity’s information as it appears on the Charity Register
• Submit your charity’s Annual Information Statement on time.

ATO recommendations

With ongoing reforms to the NFP sector, the need for good records and transparent accounting processes is increasing. The ATO advises that NFPs prepare their organisations to enhance their transparency and integrity.

From 14 December 2021 Australian government legislation has required all non-government DGRs to register as a charity (with the only exceptions being for ancillary funds or DGRs specifically listed in tax law). Any previously issued extensions of time to meet the new requirements will close by 14 December 2025.

The ATO has revoked the DGR status of organisations that did not register as a charity by the required time. 

Reducing DGR complexity

To reduce DGR complexity, the ATO is continuing  to make the application process for organisations seeking DGR status simpler.  

Since 1 January 2024 the remaining four unique categories of the 52 general DGR categories (as per Division 30 of the Income Tax Assessment Act 1997) have been transferred to the ATO for administration purposes.

The Productivity Commission has also made a point of highlighting the complexity involved in becoming a DGR, and there may be more reforms in the future. Until the process become easier, your organisation may need accounting or legal advice in navigating the system.

Currently there are different online tools that could also help with your understanding of DGR status and compliance.

These include:

• Justice Connect – The DGR tool can help you work out if your organisation is eligible for DGR endorsement and the relevant DGR category.
• ACNC – a self-assessment tool can help DGR-endorsed charities check if they are complying with the ACNC’s key registration requirements.

Charity status is the first step. So if your charity is yet to obtain DGR status, start by applying to the ACNC and indicating on your form that you are seeking DGR status.

How Next Dimension Accounting can help

Next Dimension Accounting provides services to assist with your DGR requirements, including:

• The appropriate issuing of tax receipts
• Acting as your Agent when dealing with the ACNC
• Ensuring your information on the ACNC Charity Register is up to date
• Ensuring your ACNC Annual Information Statement is lodged on time
• Providing the right advice and technology recommendations to keep track of your compliance requirements.

Have your activities moved away from their original mission?

It is also recommended that you do an annual check-up of your DGR status.  

A particular problem with DGR status is that over time, a charity evolves, and its activities can move further away from the original mission and, therefore, may not be aligned with its registered charitable purpose.

Use your annual DGR self-check to ensure that your charity’s activities have remained consistent with the purpose statement you submitted for your DGR endorsement.

Sound accounting and internal processes for DGR will improve your organisation’s integrity and transparency, ensure compliance with ACNC and ATO measures, and support the common goal of increasing public trust and confidence in the charity sector.

Get in touch with our team to find out more.

The Australian Charities and Not-for-profits Commission (ACNC) has brought to light a significant governance issue in the non-profit sector: over-reliance on the organisation’s founders. This is a form of key person dependency where founders wield continual influence to the detriment of governance standards. In this comprehensive examination, we explore the ACNC’s review, its implications, and the risks associated with founders who retain key roles. We also consider how outsourcing crucial accounting functions can fortify an organisation’s governance structure and financial oversight, fostering sustainable operations that remain true to their charitable missions.

‘Key person dependency’ can create governance risks in organisations of any type or size. Reviews of the Australian NFP sector have noted a common pattern where a small charity’s dependence on its founders lacks balance and may pose risks. In these cases, the charity’s original founders still exert their influence on operations but do not uphold current governance standards, leaving the organisation exposed. 

ACNC Commissioner Sue Woodward wrote in the February 2024 Commissioner’s Column, “While founders often bring passion and drive to their charities, an imbalance of power and influence within the governance structure can pose risks. This imbalance, often stemming from excessive trust placed in one individual, can erode a charity’s culture, hinder its operational effectiveness, and jeopardise its sustainability.”

The ACNC Reviews

The ACNC has been undertaking compliance reviews of charities which shine a light on common compliance issues. Funded by the Australian government since 2020–2021, the reviews focus on charities at risk of failing to meet their obligations under ACNC governance standards or external conduct standards. 

Findings are published on the ACNC website and make valuable reading as they highlight issues that many charities struggle with, and offer insights on addressing them proactively through robust policies and procedures. The recent ACNC review ‘Risks to good governance where founders maintain key roles’ has identified potential issues for NFPs and measures that they could take to reduce risks by introducing “robust policies, procedures and processes to ensure good governance”.

Key findings on charities where founders maintain key roles

Instances where Australia’s charity founders maintain a substantial role beyond the charity’s initial phases are not unusual. Founders who continue to provide deep knowledge and a sound guiding hand make an important contribution to NFPs.

However, good governance often suffers when “founder’s syndrome” occurs and the founder maintains a “disproportionate power and influence over a charity and its board”, without formal processes. There is also a lack of guidance on, “what to do in circumstances where people – including founders – are not doing the right thing.”

 The ACNC review noted these specific risks associated with charity founders maintaining key roles:

• the founder appointing friends and family to boards
• charity activities evolving over time and not being aligned to the registered charitable purpose
• poor financial management
• failure to have, or adhere to, decision-making policies and procedures
• lack of objective and independent decision-making
• failure to recognise and manage conflicts of interest and related party transactions 
• remuneration paid to founders in paid positions lacked evidence of objective and independent decision-making
• failure to keep proper records.

There are ways for organisations to address problems related to founder dependency and the review reported that “In some cases, the founders themselves identified risks and took steps…”

How outsourced accounting is particularly suited to NFPs

Risks to good governance where founders maintain key roles related to financial management can be mitigated by stronger accounting procedures.

A charity that is serious about long-term sustainability and growth can draw on the expertise of an experienced outsourced accounting team to break the cycle of over-reliance on a founder.

The outsourced accounts service can provide a range of accounting functions that strengthen the organisation’s governance and processes, up to an on demand CEO service. 

Scenarios raised by the ACNC review

Good accounting can play a critical role in your organisation’s move to greater transparency and avoiding the inherent risks of undue reliance on founders. Outsourced accountants can provide solutions to address the following examples of poor practice raised in the ACNC review.  

• “Poor financial management practices, including a lack of independent and proper financial oversight, especially in the areas of charity income and expenditure.”

• An outsourced accounting team can provide impartial advice on income and expenditure. They also employ independent software that monitors expenditure in real-time and can automatically flag points of concern.

• “Substandard processes for proper tendering /or obtaining independent quotes for services,  automatically awarding contracts to related parties.”

• Related party transactions may be hard to avoid in smaller organisations, but you can take a transparent and proactive approach to managing related party transactions. Risk mitigation policies are essential.

• “Decisions about contracts awarded to, or remuneration paid to, founders or their family members lack transparency”

• “Founders holding paid position not managed by independent persons”

• An outsourced accounts team can provide the independent body that supervises and manages both contracts and remuneration.

• “The founder is responsible for oversight of expenditure and not subject to review from persons who are independent and have relevant skills.”

• In most situations a professional accounting service will have more targeted skills in bookkeeping, payroll, tax and financial reporting than the founder, as well as current knowledge of accounting software, and is ideally placed to conduct an oversight of expenditure and regular reviews. 

Outsourced accountants can contribute the independent, ethical and technically adept services that are essential for the future of NFPs that make a substantial contribution to the community. The input of professional accountants, combined with robust policies and procedures, can ensure your valued founders meet their compliance obligations effectively, and that the organisation is independent enough to endure and thrive.

In February, after enduring years of being politicised, debated and tossed from one side to another, the Stage 3 Tax Cuts ‘football’ was finally grounded. All tax payers will receive a cut in the tax they pay.

The Senate has passed the revised Stage 3 Tax cuts, so Australia’s new tax regime will come into effect from 1 July 2024. 

The legislated tax cuts incorporate recent revisions that are designed to spread benefits to low and middle income earners. 

Government announcements

The government stated in a press release, “Our tax cuts are good for middle Australia, good for women, good for helping with cost-of-living pressures, good for labour supply and good for the economy.”

The Senate also passed the Treasury Laws Amendment (Cost of Living—Medicare Levy) Bill 2024. It raises the low income threshold amounts for the Medicare levy and Medicare levy surcharge on individuals, families and individual taxpayers and families eligible for the seniors and pensioners tax offset.

What will the reformed tax schedule look like?

From 1 July 2024, the tax cuts will reduce the amount that everyone who is taxed pays, from low to high: 

The 19% tax rate reduces to 16%

The 32.5% tax rate reduces to 30%

The 37% tax rate will apply at a higher threshold –  $135,000 instead of $120,000.

The 45% tax rate will apply at a higher threshold –  $190,000 instead of $180,000.

For further information see the ATO website.

What general impacts are expected?

The key driver behind the tax cuts revision was the need to provide cost-of-living relief for Australians. The original proposed tax cuts were formulated pre-pandemic and would have seen tax payers on less than $45,000 per year receive no cut. Years later and with the cost-of-living crisis in full swing, revisions were designed so that low and middle income earners received a break. 

Both houses of parliament agreed to pass the revised tax cuts, with the general response being that the tax cuts will have mostly positive consequences. 

On the positive side, low-income workers will have more money in their pockets, and the tax cuts could encourage more workforce participation. The relief of some cost-of-living pressures should flow on to benefit the economy, including small businesses.

On the negative side, there may be a marginal effect on inflation. However, Treasurer Jim Chalmers said that the Reserve Bank Governor indicated that she did not expect the revised tax cuts would “alter the Reserve Bank’s forecasts or expectations for inflation.” In the Treasury advice on the tax cuts it describes the expected impact: “This option is broadly revenue neutral, will not add to inflationary pressures and will support labour supply.”

On the Medicare levy changes, the government press release stated: “This will benefit more than a million Australians, ensuring people on lower incomes continue to pay a reduced levy rate or are exempt from the Medicare levy.”

Potential impact on the charity sector

One of the few negative issues that could affect NFPs is that they may lose some volunteers who re-join the paid workforce because the new tax cuts are favourable for their personal circumstances. 

Otherwise, the overall contribution to cost-of-living relief – through the tax-cuts and Medicare threshold changes – should be beneficial for NFPs that depend on public donations to keep doing their work.

Some key findings on donations in Australia presented recently by Martin Paul, an NFP fundraising and marketing consultant, indicate that charities are increasingly reliant on a dwindling number of the same donors for support. The majority, which includes below-average income earners, have been forced to tighten their belts – four out of five Australians surveyed have adjusted their lifestyles in response to the higher cost of living. While wealthier donors are driving an increase in annual giving, the actual level of online giving has declined over the last year. 

With below average income earners better off after 1 July, the prospects for community donations to NFPs look brighter.

Grant-giving organisations often ask for details about in-kind contributions in project budgets.  Many NFPs struggle to consider the value they will assign to in-kind and are also unsure how to maintain record keeping for acquittal purposes.

Our team has compiled some handy hints to help you develop the perfect budget for your next grant application.

Typical In-kind contributions

Some common in-kind contributions may include:

• Volunteer specialised labour, such as videographer,  IT or legal services
• Free venue hire, such as free office or meeting space
• Free equipment hire, such as marquees or lighting at launch events
• Donated goods or property, such as computers, medical supplies or food
• Free marketing includes newspaper and online advertisements, logo designs or brochure printing.

Where to itemise in-kind contributions

A grant application form usually asks you to itemise the relevant in-kind contributions within your proposed project budget. 

Some applications require the completion of a specific In-kind Contributions Worksheet. For example, a community infrastructure project may ask for minimum matched contributions for the funding categories.

When you draw up a budget, list the in-kind contribution values under both income and expenditure.

Record keeping in your organisation

Written records of the contribution, such as a letter of donation or receipts, may not need to be submitted with the application. However, you should ensure that this evidence is available on request, as your organisation is responsible for keeping records of in-kind support committed or received. 

For accounting purposes, in-kind contribution records for NFPs should follow Australian Accounting Standards Board (AASB) regulations. AASB 1058 requires NFPs to record the value of gifts in accounts, recognising assets at fair value. 

Pertinent records can become a time-saving tool. As part of your organisation’s internal procedures, maintain a list of standard market prices and fees for valuing the types of contributions that often feature in your project events. If you must apply for a grant at short notice, this list will help you formulate a realistic budget more rapidly.

Putting a value on an in-kind contribution

Where the value is not clear, it is the donor’s responsibility to advise the recipient of the donation’s market value.

When developing your grant application for a proposed project, using standard fees for contributions can help you draft the budget. 

Standard fees (example: current guides provided by Victorian government) could start with:

• Volunteer general labour – $20 per hour
• Volunteer specialist labour – $45 per hour
• Donated goods should be calculated at the price you would pay for them (market value).

Note that if you want to include local council in-kind contributions to the project, for example, you must ensure the contribution requests – such as requesting council to contribute the venue hire or rubbish removal – are approved before inclusion in your budget. 

Deductible Gift Recipient (DGR) Status and GST

In-kind contribution donors will typically provide goods or services to the NFP for either no cost, or for some reduced cost. Note that your organisation must be endorsed by the ATO as a Deductible Gift Recipient (DGR) if donors of in-kind contributions are able to obtain a tax deduction. The ATO website has more information on DGR endorsement for NFPs.

The Arts Law Centre of Australia provides useful information about the GST and In-Kind support. It notes that, “Where both parties to the in-kind support are registered for GST, the supply by one party is generally a creditable acquisition by the other, so the GST is cancelled out.”

Case study:  

Your NFP is holding an event which will promote community health and wellbeing, and is applying for a grant to help with costs. 

In your proposed budget for the grant application, the in-kind contribution detail could include:

In-kind Contribution	Income	Expense
Posters promoting launch event • Design work – $75 • Printing – $250	$325	$325
Temporary shade sails hire	$150	$150
Portable PA system hire	$25	$25
General volunteer – staffing for reception desk 6 hours @ $20 per hour	$120	$120
Skilled volunteer – project management 10 hours @ $40 per hour	$400	$400
Skilled labour (setting up and operating PA system)  8 hours @ $40 per hour	$320	$320
Council special event bins and rubbish removal  • 5 bins delivered – $100 • 5 bins emptied – $150 (5 x $30)	$250	$250

There may be variables, for example:

• Check the grant funding guidelines first in case they exclude some types of in-kind contributions. Contact the grant funding body directly if you are still unsure of the eligibility of proposed in-kind contributions. 

Finalising the grant application budget

After drafting the in-kind contributions in your grant application budget, review all items and ensure you can back up their values with realistic quotes, market values or confirmation letters from donors. 

The Next Dimension team can work with you to develop a grant budget that is compliant and considers the most cost-effective way for your project to be shaped, boosting your chances of funding success.

Get in touch with us to find out how.

Community Refugee Sponsorship Australia (CRSA) is a relatively new independent charity with a big agenda, as it was appointed by the federal government to deliver Australia’s ground-breaking ‘Community Refugee Integration and Settlement Pilot’ (CRISP).

Next Dimension has worked with CRSA since the start-up phase, setting up the accounting systems and providing ongoing daily support.

Choosing Next Dimension

Before the CRSA was established in 2021, CEO Lisa Button and her team began looking for an outsourced accounting service.

For the start-up team, the priority was to obtain accounting systems that were robust, and would minimise complexities. As a registered charity with Public Benevolent Institution (PBI) status, CRSA also needed to work with accounting professionals who had a thorough understanding of the rules and regulations governing a PBI’s finances. In addition, their fledgling organisation required cost-effective accounting services. 

Looking into the experience and reputation which Next Dimension Accounting had in the NFP sector and assessing the accounting package offered to them, Next Dimension was the “no-brainer” choice, says Lisa. CRSA engaged Next Dimension to deliver outsourced accounting services.

Stand-up start

“Next Dimension’s outsourced accounting services offered us a system that was already reasonably adaptable to our needs,” says Lisa. “Next Dimension had established ways of working with NFPs using key software and platforms.” 

Integrations and apps such as Xero, Approval Max and Dext were key features in managing workflow and getting the start-up off and running. 

Staff training

“We were very new,” says Lisa, “so Next Dimension assisted in setting up systems for the team from scratch.” 

Next Dimension took on the day-to-day financial management, including bookkeeping, payroll and supplier payments, as well as budgeting and cashflow forecasting for phases of the program. 

Next Dimension introduces technology to clients that is user-friendly and has fully integrated systems so they can train or upskill the client’s staff quickly, resulting in a feeling of assurance with managing any new technology.

Lisa comments, “Next Dimension provided good instructions – we needed minimal staff training, Next Dimension was also there to guide us through on a task-by-task basis.” 

The benefits of outsourced accountants with NFP experience

Choosing an outsourced accounting arrangement provided a range of benefits to an organisation that was modest in size but had a big program to implement across Australia. 

Instead of relying on an inhouse bookkeeper they could access a whole team of qualified accountants with broader capabilities plus specific knowledge of the financial environment of PBIs. The accounting service also stays on top of new government and taxation requirements for NFPs and relevant technology updates, which relieves pressure on the client’s staff.

From the CEO’s perspective these were key benefits, “Being able to plug into established accounting systems supported growth. By choosing a good service we didn’t have to worry about them being up to date. We could also learn how other NFPs dealt with financial issues,” says Lisa.

CRSA benefited from the strategic guidance of Next Dimension and practical connections such as links with auditing firms.

The outsourced arrangement also provided the great quality of flexibility. “As a growing organisation it helps to have an outsourced accounting firm,” says Lisa, “as it gives us more resources when we need them.” An outsourcing arrangement can be adapted to suit both quiet times and busy times.

Confidence in partnership

Confidence is a critical quality that Next Dimension has provided. “Because Next Dimension specialise in NFPs we had confidence that our values aligned”, says Lisa. 

Demonstrating transparency, good ethics and values are the Next Dimension standard.

CRSA meeting challenges and achieving goals

CRSA is busy delivering an innovative approach to supporting refugees with federal government backing, and it has a lot to achieve over the next few years.

One of the challenges is “to get the word out to more and more Australians,” says Lisa. To inform the broadest possible section of the community, CRSA needs to engage people who are not already engaged with refugee issues. Ultimately, these people often rate their involvement in supporting refugees as the most rewarding experience.

CRSA’s outreach to all corners of Australia means reaching out to clubs, businesses, faith groups and schools to engage local citizens and support them as they welcome refugee newcomers into their cities and local communities. 

Lisa notes, “Having robust accounting systems and support means we can focus squarely on doing this.”

Since Next Dimension was founded in 2021 by Brendan Lucas, we’ve been able to expand the company sustainably by ensuring our team and our clients are prepared for change and equipped to grow. In 2023, this focus became especially important.

In our last update for 2023, we have pulled together some highlights from our articles, which reflect the year’s key developments that impacted our clients, with advice on accounting measures that support resilience and growth. 

Rebuilding after the pandemic years

With the new pressure of rising interest rates and without the safety net of pandemic-related government support, 2023 presented some new risks and major shifts for businesses and NFPs. Compliance measures essential for good governance in the NFP sector became tighter, and new federal government regulations further impacted small businesses and NFPs.

We investigated the ATO’s announcement of its plans to disrupt sham NFPs, meaning greater scrutiny of legitimate NFP activities. We also highlighted how to prepare for ATO changes to work-from-home deductions.
In April, we discussed new Related Party Transactions regulations preventing private benefit and conflict of interest and how they relate to Australian charities, NFPs established as a company or public companies. We recommended practical policies for disclosure, safeguarding the organisation’s interest and good communication.

In May, we showed how ongoing budget management is critical. We noted the common pitfalls like relegating budget tracking to the end of the year and highlighted preventive actions to avert budget crises, including frequent budget monitoring, using the right software, expert accounting input, and timely responses to reality with budget adjustments.

Emergency action plans were on the agenda, and in September, we looked at one solid move NFPs could make before inflation pressures escalated – developing an action plan to tackle inflation.

Not all change is negative, so organisations must be ready to make the most of positive change and ensure accounting processes will support future growth. 

In January, we highlighted official workplace giving programs, also known as “payroll giving”, as an increasingly popular tool to help Australia reach its national target for philanthropic giving. 

In 2023, many NFPs experienced a concerning decrease in potential donors and volunteers, as well as cost hikes in delivering services, staff shortages and the cyber risks that affected Australia’s business sector. Nevertheless, in April, we showcased the available tools and strategies for positive growth, namely grants and tenders offered by local, state and federal governments.

In May we reported on government measures to smooth the path of doing business, including the ‘Buy Australia Plan’ that will help businesses compete for tenders, update the AusTender system, and improve SME awareness of federal government contracts.

Importantly, we also highlighted that harnessing the skills of a CFO is one way for NFPs to grow. Based on the outsourced CFO service that Next Dimension provides through our On Demand CFO services.

Next Dimension’s Journey

Next Dimension has followed its advice by focusing on becoming resilient to change and preparing for expansion. 

We have increased the size of the company significantly since we started. We train our team members in the best technology so we can provide a full range of skills and knowledge to our clients. Our team’s collective experience puts us in a strong operating position to meet sudden changes in the future.

Many positive opportunities came our way in 2023, indicating that Next Dimension’s good reputation will continue to grow. Founder and Managing Director Brendan Lucas gave presentations, contributed to media interviews and articles and joined the Approval Max team. In October, he attended the launch and highlighted his involvement with Benefolk, a network of professionals supporting charities and NFPs with professional services.  It was also great to catch up with Community Transport providers at the ILLUMINATE conference.

The Next Dimension team members were delighted when we were named finalists in several categories at the Australian Accounting Awards in Sydney – Boutique Firm of the Year (less than 20 employees), Fastest-Growing Firm of the Year and Start-Up of the Year.

We look forward to an equally positive 2024. We hope you enjoy the festive season, the New Year and summer break. We’ll inform our clients of new developments in early 2024, including issues raised in the Productivity Commission’s Future Foundations for giving Draft report.

The Department of Social Services is currently co-ordinating a call for comment from Australian NFPs and charities to chart a better future for the sector. A Blueprint Expert Reference Group (BERG) has been established to develop the sector-led roadmap.

The Blueprint aims to establish a 10-year vision and priorities for action. It will become a roadmap for government reforms and sector-led initiatives to boost the sector’s capacity to support and reconnect Australian communities. There will also be a Review of Philanthropy to understand trends in philanthropic giving, with The Productivity Commission tasked with delivering an inquiry into philanthropy by May 2024.

In reviewing the document, we can highlight the following key points:

Discussion points for Australian NFPs

To develop a better future plan for NFPs, the issues paper raises general questions about the not-for-profit sector in Australia. It identifies these key areas for discussion:

• Measurement, outcomes and quality of services 
• Policy, advocacy, communications and engagement 
• Philanthropy and volunteering 
• Governance, organisation and legal environment 
• Leadership and staff development 
• Government funding, contracting and tendering 
• Information Technology, communication and marketing 
• Leveraging assets and social finance.

Highlights of the issues paper

The issues paper highlights some of the recurring pain points for NFP management – such as outcome measuring for grant funding, taxation transparency and unlocking the potential of assets – and makes some interesting observations. 

Outcomes based funding 

NFP funding is shifting to prioritise outcomes over projects, but there are financial burdens to the NFP from these outcomes-based funding approaches. 

The paper notes that measuring outcomes means new costs for the NFP in operations and service delivery. “Outcomes measurement requires new skills and organisational systems… New skills and systems needed are not broadly accessible to NFP organisations (Gilchrist 2020) and measurement expectations from funders are often not uniform.” It points to a lack of current models of sector-led coordination that build capacity and reduce costs in outcomes measurement. The collection of new outcomes data, “can create an administrative burden in terms of tracking outcomes and additional training and analysis costs. Recent research finds only 38% of NFP organisations collect any kind of outcomes data.”

Taxation inconsistencies and transparency

NFPs’ regulatory accountabilities sit across multiple levels of government, and this has led to inconsistencies in the sector in terms of accounting standards and taxation, the issues paper notes. 

“Unlike the United States, the United Kingdom and Canada, Australia does not have a bespoke accounting standard for charities, which limits consistency in accounting, reporting and auditing.” Inconsistencies in tax concessions are another feature. “Australia also has a history of discretionary application of concessions such as public benevolent institution status by political leaders.” And only half of Australian charities have Deductible Gift Recipient (DGR) status, which is the main mechanism through which the federal Government incentivises Australian taxpayers to donate. The paper notes, “This means the processes by which concessionary tax status are conferred are not always transparent to NFP organisations or taxpayers.”

Ways to unlock the benefits of assets

The NFP sector is host to considerable and growing material and financial assets, although assets are unevenly held across the sector. The paper asks, “How can NFPs best use their assets?”

Charities reported more than $422 billion in assets in the 2021 ACNC reporting period, an increase of nearly $31 billion from the previous reporting period. “The overall growth of sector assets raises a question of whether and how sector-level resources might be unlocked in support of a more financially resilient and operationally healthy sector.” 

Social impact investing (SII) is gaining attention as a means of leveraging capital across sectors to support social outcomes. “SII investments range from social impact bonds to payment by outcomes contracts, and layered or ‘blended’ financial products, which combine grants, loans and/or investments. A typical characteristic of many SII approaches is cross-sectoral partnership to support effective investment for specified outcomes.” However, the paper notes that many SII products are finance-driven –“not fit for the needs, structures and financial realities of the majority of NFPs and do not overcome some of the reasons why this sector makes relatively limited use of external finance.” Newer SII products are “providing more patient – or long term – capital and broader access to blended and grant finance than early SII products offered.”

Next Dimension Accounting will stay across these issues as they are developed as they ultimately strengthen our ability to work with clients to achieve the best outcomes in the existing or future environment.

How you can contribute

The issues paper contains relevant questions, the NFP Sector Development Blueprint Issues Paper and the NFP Sector Development Blueprint Issues Paper Summary Vision. 
NFP responses are due by 20 December 2023. You can answer their questions for NFPs via the guided questionnaire or by uploading a submission. Your submission will form part of the next phase of work on the NFP Sector Development Blueprint.

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.