Welcome to our first newsletter update on useful information for directors and senior management of Not-for-Profit Enterprises.
At MVA Bennett, celebrating 80 years in 2021, we have a rich history of supporting the needs of Not-for-Profit Enterprises with accounting, governance, risk, audit and assurance services. In addition, despite the sector being income tax exempt, there is an increasing need for advice on other taxes including GST and Fringe Benefits.
With the onset of COVID and resulting restrictions on the movement of people, we have also seen an increased need for Not-for-Profit Enterprises to access advice on issues ranging from accessing government grants, to business continuity and cyber-security to solvency and cashflow management.
In this newsletter we focus on current governance matters of interest. The team at MVA Bennett stands readily available to support directors and senior management through the challenges of their ever-changing responsibilities.
In this newsletter:
- Director Identification Number
- Board Papers Guidance
- Ancillary Funds must lodge Returns
- Self-assessment Charity Status
- Salary and wages compliance
- ASIC focus for 30th June reports
Director Identification Number (DIN)
As part of the Treasury Laws Amendment (Registries Modernisation and Other Measures Act) 2020, directors, including alternative directors and those of registered foreign companies and companies governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will be required to apply for a director identification number (DIN).
DINs hope to combat illegal phoenixing by providing more effective tracking of directors and their corporate histories. The move also improves data integrity and security.
A DIN will be a permanent unique identifier and will be issued only once a director has established his or her identity to the satisfaction of the registrar of the Australian Business Registry Services. The registrar is the commissioner of taxation.
DIN provisions began on 4 April, and testing, which ends on 31 October, aims to ensure their effective operation.
Deadlines set by Treasury through various legislative instruments for DIN implementation are:
- Directors will need to obtain a DIN by 30 November 2022
- CATSI-Act directors will need to obtain a DIN by 30 November 2023, and
- Persons wishing to be appointed as a director after 30 November 2022 must have a DIN before appointment.
Penalties for non-compliance, such as applying for several DINs or misrepresenting a DIN, include infringement notices and civil and criminal penalties, including imprisonment.
Governance Institute – Board papers Guidance
The Governance Institute of Australia has released Board papers guidance aiming to arm decision-makers with clear, relevant information.
Well-prepared board papers are vital in equipping directors with the information they need to make effective, timely decisions.
Too often board papers are overwhelming in volume and information while providing insufficient detail for good decision-making.
Sub-standard board papers can cause serious consequences, recent corporate crises having highlighted inadequate information flows as contributing to failures.
The guidance outlines:
- The purpose of board papers: They are the primary means by which directors gain the necessary information required to fulfil their governance of organisations
- Tips on writing style: Adopt a formal business-writing style that is factual, dispassionate and, where possible, evidence-based, and
- Tips on developing guidelines for board-paper preparation: Ensure that papers contain key information so that directors can make informed decisions, but not so much information that critical elements are obscured.
Ancillary Funds must lodge returns
Public and private ancillary funds must lodge annual information returns.
Ancillary funds that are ACNC-registered charities must complete an online ACNC annual information statement. Funds that are not registered as charities with the ACNC must continue to lodge a return with the ATO and might also need to lodge an income-tax return.
Funds must meet respective ancillary-fund guidelines, and failure to comply might mean penalties.
Self-assessment changes on the way
Non-charitable Not for Profit (NFP) entities may self-assess their eligibility for income-tax exemptions without an obligation to report to the Australian Taxation Office (ATO)
From 1 July 2023, the ATO will require income-tax-exempt NFPs with an active Australian Business Number to submit online annual self-review forms with the information they ordinarily use in self-assessing.
NFPs will need to ensure that as part of governance they satisfy requirements to retain income-tax exemptions.
Salary and Wages Compliance
Paying in accord with legislated requirements is a hot top for management and governance. The laws are complex and vary from State to State and include the Commonwealth.
The Fair Work Ombudsman is reminding employers that the national minimum wage increases to $20.33 an hour (up from $19.84) or $772.60 a week (up from $753.80).
The Fair Work Commission announced on 16 June a 2.5 per cent increase to the national minimum wage following its annual review. This increase applies from the first full pay period starting on or after 1 July.
Employees covered by awards will also have base rates increased by 2.5 per cent, the increases beginning on different dates for different groups of awards.
Victoria pioneers wage-theft laws
Victoria has become the first Australian state to pass laws – the Wage Theft Act 2020 (Vic) – establishing criminal penalties for employers who deliberately underpay or don’t pay their workers.
On 1 July, it became a crime for an employer in Victoria to deliberately underpay employees or dishonestly withhold employee entitlements.
Wage-theft offences involve deliberate and dishonest conduct. Honest mistakes made by employers who exercise due diligence in paying wages and entitlements are not included.
It becomes a crime for an employer in Victoria to:
- Deliberately underpay employees
- Dishonestly withhold wages, superannuation, and other employee entitlements
- Falsify employee-entitlement records to gain a financial advantage, and
- Avoid keeping employee-entitlement records to gain a financial advantage.
Wage crimes are punishable by a fine of up to $198,264 or up to 10 years’ jail for individuals, and a fine of up to $991,320 for companies.
Wage Inspectorate Victoria will educate businesses and workers about their rights and obligations, investigate wage theft, prosecute offenders, and respond to reports and tip-offs about wage theft.
For more information visit www.vic.gov.au/vHYPERLINK "http://www.vic.gov.au/victorias-wage-theft-laws"ictorias-wage-theft-laws.
Other States have their own legislation.
Super-guarantee rate rises
The rate of the Superannuation Guarantee Charge (SGC) rose on 1 July from 9.5 to 10 per cent. Entities will need to ensure that payroll and accounting systems are updated to incorporate the increase.
Grey areas on the eligibility for SGC contributions exist particularly in respect of contractors.
The super rate is scheduled to progressively increase to 12 per cent by July 2025.
ASIC focus areas for 30 June financial reports
ASIC has highlighted key focus areas for financial reporting for periods ending 30 June 2021.
ASIC expects directors, preparers of financial reports, and auditors to pay particular attention to asset values, provisions, solvency and going-concern assessments, events occurring after year end and before completing reports.
The Commission has extended the deadline for both listed and unlisted entities to lodge financial reports under chapters 2M and 7 of the Corporations Act 2001 by a month for balance dates from 23 June to 7 July.
The extended deadlines will assist with any pressures on smaller entities’ resources and provide adequate time for completing audits given COVID-19.
When deciding whether to depart from normal statutory deadlines directors should consider the information needs of shareholders, creditors, and other users of their financial reports. They should ensure that they meet borrowing covenants and other obligations.
Pandemic-related rent concessions extended
AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessionsamends AASB 16 Leases to extend by a year the application period of a practical expedient.
The expedient permits lessees not to assess whether rent concessions that occur as a direct consequence of the COVID-19 pandemic are lease modifications.
The standard extends the practical expedient to rent concessions that reduce lease payments originally due on or before 30 June 2022, provided other conditions for applying it are met.
This standard applies to annual periods beginning on or after 1 April.
Transitioning to simplified disclosures
The Australian Accounting Standards Board has issued AASB 2021-1 Amendments To Australian Accounting Standards – Transition To Tier 2: Simplified Disclosures For Not-For-Profit Entities.
It provides entities with optional relief from presenting comparative information in the notes to financial statements where they failed to disclose comparable information in their most recent general-purpose financial statements.
NFP definition stays
The AASB has decided to discontinue an attempt to redefine ‘not-for-profit entity’ and will retain the current definition in Australian accounting standards.
The board noted that initial feedback to the invitation to comment ITC 37 The AASB’s Standard-Setting Frameworks for For-Profit Entities and Not-for-Profit Entities amounted to a request for more guidance. It failed to indicate significant issues with the current definition.
The AASB also recognised that while the majority of the respondents to exposure draft ED 291 Not-For-Profit Entity Definition and Guidance supported the proposals, many raised reservations about the clarity of the implementation guidance, the level of judgement required, and the expected transition effort and cost for some entities.
The board acknowledged stakeholders’ concerns and concluded that the potential benefits of the proposals were unlikely to justify the cost of their implementation.
MVA Bennett team is available to support your needs, or if you wish for further information.
Shaun Evans – 0439 355 654
David Gibbs AM – 0488 488 707
MVA Bennett acknowledge the Traditional Custodians of the land on which we work and live, and recognise their continuing connection to land, water and community. We pay respect to Elders past, present and emerging.