Thinking | 24 March 2020

COVID-19 and charities – impacts and government relief

By Frank Hinoporos and Todd Bromwich 

The impact on charities and NFPs

The COVID-19 pandemic has the potential to overwhelm Australia’s charity and not-for-profit (NFP) sector.

As the economy dips and times get tougher for more and more Australians, we expect two consequences for charities and NFPs:

  1. Funding sources for charities and NFPs may begin to dry up. This includes donations of cash and goods from individuals (many of whom are being stood down or having salaries cut) and from corporates (whose revenues are taking a hit).
  2. An increase in the demand for the services of charities and NFPs, particularly those that provide assistance to those in need of emergency housing, food, medical services and other essentials. We are already seeing this happen, and that this need will continue to climb in the coming months.

Managing cash flow and keeping above water

With the pandemic expected to last for a significant period of time, it is crucial that charities and NFPs revisit their short and medium term budgets and cash flow forecasts.

As cash and goods donations dwindle and demand increases, charities will need to consider how best to apply their limited resources in an efficient and effective manner - not every dollar spent produces the same outcome!

They will also need to consider alternative funding sources, or calling on greater support from existing donors. For charities with Deductible Gift Recipient (DGR) status, this may include seeking a greater degree of support from Private Ancillary Funds, which in many cases have vast capital reserves that may be released.

Government relief measures

In its second set of economic responses to COVID-19, the Federal Government has announced that eligible entities, meaning charities and NFPs that employ workers, can receive cash payments capped at $100,000. The minimum payment is $20,000. This measure is available to NFPs and charities with an aggregated annual turnover under $50 million.

These payments will be made via the PAYG withholding regime, by essentially refunding amounts that are withheld by the charity or NFP. The intention is that by linking the payments to the PAYG withholding regime, this will incentivise these organisations to continue to employ workers during this time. The Government confirmed that this measure will benefit around 30,000 NFPs including charities.

Of course, there will be teething problems as these measure are implemented. We know our colleagues at the ATO are working hard right now, so be patient! Also, we anticipate that these benefits will be distributed to those charities and NFPs that have their general tax compliance up to date.

In Victoria, many NFPs may already receive an exemption from payroll tax. However, following the Victorian Government announcement as part of its economic stimulus package, entities that are currently paying payroll tax may be entitled to a refund of payroll tax paid in the 2019-2020 year, subject to certain requirements (such as having a payroll of less than $3 million). There are also future deferrals of payroll tax up until January 2021. This follows similar announcements in other states, including NSW, Queensland, Tasmania and Western Australia.

Please keep in mind these announcements are subject to change until they are enacted into law.

ACNC updates

The ACNC has published comments on its website this week in response to issues faced by charities and NFPs in light of the COVID-19 situation. Some key points:

  • The ACNC advice line will be only open weekdays 1-5pm (Melbourne time) until further notice.
  • Charities should ensure they comply with their governing documents in respect to holding meetings remotely, including AGMs.
  • An extension to lodging an Annual Information Statements may be sought, if this cannot be approved at meetings or an AGM.
  • Ensure your activities are consistent with your charity’s purpose.

Importantly, the ACNC has also acknowledged that where charities are required to cancel or postpone fundraising, there are questions around the application of money already donated. We recommend that charities be transparent about what they will do with funds and ensure that they follow their stated purposes and requirements set out in their governing documents.

We understand that this is a highly stressful time for charities, NFPs and business generally. We are here to help. Please call or email Frank, Jacinta or Todd if you have any questions.


Frank Hinoporos

Frank Hinoporos the Hall & Wilcox Tax team. He advises on direct taxes, international structuring and taxation disputes.

Todd Bromwich

Todd is a taxation lawyer with experience in charity law, general commercial matters, trust law and estate planning.

Related industries

Related practices

You might be also interested in...

Webinars | 24 Mar 2020

COVID-19 and your business – webinar 1

An overview of the tax strategies to assist businesses manage and make tax easier, including the Australian Government’s Economic response phase 1 and 2; and administrative tax measures to assist Australians experiencing financial difficulty as a result of COVID-19.
Property issues, in particular what to do when you or your tenant can’t use their premises or parties are seeking to withdraw from current transactions. Presented by Natalie Bannister.

Tax | 23 Mar 2020

Talking Tax – Issue 182

This week in Talking Tax we look at Queensland’s payroll tax deferrals plan as well as what the Optical Super Store appeal denial means for medical healthcare providers. We also provide a reminder about the super guarantee amnesty and an update on the proposed changes to foreign duty surcharges in NSW.