Not For Profit Specialists presentation

2experience. new thinking

Insights into Philanthropy in Australia

Presented byFiona Maxwell

Philanthropy Australia

Speed dating with NFP Specialists


About Philanthropy Australia

• Our role: to encourage The planned and structured giving of time, information, goods and services, voice and influence, as well as money, to improve the wellbeing of humanity and the community.

• Membership organisation – how NFPs can be involved

• Policy and Advocacy

• Education and Professional Development

Philanthropy in Australia

• Earliest known trusts/foundations

• The Marvelous Melbourne era – death duties

• The establishment of PA

• Tax reform - the arrival of PPFs (PAFs)

• How does Queensland compare?

Are Australians generous?

Are Australians generous?

Estimates as some PAF contributions from Companies

Competition for the Philanthropic dollar

• Size of sector – 600,000 NFPs in Australia• Concern about duplication or ineffective use of

resources

• Critical issues: Measuring impact and using data to better track duplication

• Scope for collaboration, mergers and acquisitions

• The growth of social enterprise and diversification of income streams

Future Trends in Philanthropy

• Recognition that everyone can – and does – give, not just wealthy

• New approaches to giving: giving circles (Women & Change), affinity groups, workplace giving

• Impact Investing and Social Finance• Corporate engagement and closing the gap between NFP

and corporate approaches

www.philanthropy.org.au

10

experience. new thinking

Tax Efficient Giving and Bequeath Strategies

Presented byJamie Towers

Hanrick Curran



Tax Efficient Giving & Bequeath Strategies• Understanding what can be claimed as a tax

deductible gift (inter vivos)

• Deceased Estates


Tax Efficient Giving – Inter-Vivos

• What can be claimed as a tax deductible Gift?

• Gifting Money

• Gifting Assets (in kind)

• Gifting as part of a fundraising event ticket price


Inter-Vivos Giving


Type of Gift Deduction

Money $ spent

Property purchased < 12 months ago Lesser of Market Value** and Cost

Trading Stock If Disposed outside ordinary course of business & no election made-Market Value**

Property Valued at > $5,000 and purchased > 12 months ago

Commissioner's Valuation *

Listed Shares value at < $5,000 and purchased > 12 months ago

Market Value**

Fundraising Tickets > $150# Cost of ticket less Market Value** of right to participate in fundraising event

* Applies for private ruling to get Commission’s valuation** GST inclusive market value on date of the gift# Only deductible if Market Value of fundraising event does not exceed lesser or $150 and 20% of cost of ticket

Bequeath Strategies

• Estate Planning – how to reduce tax on the Estate

• Understand how Deceased Estate’s are taxed

• Have charities as ‘residuary beneficiaries’

• Ensure Executor and Tax Agent prepare the Estate tax returns in most efficient manner


Bequeath Strategies

• Understand how Deceased Estate’s are taxed

• No capital gain on disposal of assets under a legacy in the will

• Capital gain to estate if executor sells assets

• Estate is taxed on income if ‘no beneficiaries are entitled’

• Residuary beneficiaries should be entitled to income if all liabilities ascertained and provided for and income not required


Bequeath Strategies

• Gift ‘tax inefficient assets’ to charities –specific exemption for Deductible Gift Recipients

• Make charities as ‘residuary beneficiaries’ so no tax on estate income if they are presently entitled to income


Bequeath Strategies

• Key to tax efficiency is ensuring the testator, the executor and the tax agent preparing the estate tax return understand the tax issues for estates.

• Review opportunity for estates with Charity beneficiaries – object to prior assessments to get back money that should not have been taxed.


18


Digital Disruption – the impacts on NFPs

Presented byDamien Cramer

Westpac Social Sector Banking



Presented by

BANKING.SOCIAL SECTOR

About social sector bankingWestpac’s vision is to transform the way the Social Sector organisations are banked:

Dedicated Bankers – a national team of Social Sector Bankers who are 100% dedicated to not for profit organisations.

Specialised products – cost effective products developed specifically for the social sector.

Social enterprises – helping you establish and run a social enterprise as a commercial business with a social conscious.

Beyond banking – connecting you with additional, non-banking services such as organisational mentoring, promotional and educational opportunities or simply networking via bank events.

Damien Cramer

Presented by


The Westpac Foundation

Damien Cramer

The Westpac Foundation supports not-for-profits run by

community leaders who have the vision, courage and

determination to give disadvantaged individuals in our

community opportunity through education and employment.

Through our grants, we seek to address the root causes of social

disadvantage by investing in community-led programs that address

genuine social need in the communities where we live and work.

The approach of our foundations is not just about dollars; integral to

the sustainability of the programs we fund is the non-financial

support we provide - lending the skills and expertise of Westpac

employees to help build the capacity of the organisations we

support to ensure they are around for the long-term.

For more information about our approach and grant programs,

visit www.westpac.com.au/westpacfoundation

Presented by


The Disrupted Consumer

Damien Cramer

Presented by


It’s a scale game

Damien Cramer Oct 2014 22

Presented by


Reputation is Everything

Damien Cramer

Presented by


Name Surname XX MMMM YYYY 24

Things you should know. This information does not take your circumstances into account. Before acting on this information, you should consider its appropriateness. Before

making a decision about products mentioned in this presentation, you should read the relevant Terms and Conditions, which are available at westpac.com.au, and consider if

the product is appropriate for you. Seek independent financial advice before you make any investment decision. Unless otherwise specified, the provider of products and

services described in this presentation is Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian credit licence No.233714

25


Common misunderstandings surrounding NFPReporting

Presented byMichael Georghiou

Hanrick Curran Audit



Reporting issues and opportunities for NFPs

Challenge the status quo of General Purpose reporting VsSpecial Purpose

Key questions determine the level of reporting required

Reporting and disclosure requirements

Impacts of reporting decisions

Material Adverse Effect – in practise

Employee Benefits balance sheet categorisation

ACNC and ASIC regulators

Valuation of Assets – all or nothing

Capital Funding Agreements


General v Special Purpose Financial Statements

To decide which type of financial statement your charity needs to prepare under the Australian Accounting Standards, your NFP must work out whether it is a ‘reporting entity’ or not.

If people use and rely on your NFP's financial statements to help them make decisions (for example, about how to spend money) then your charity is most likely a reporting entity. The Australian accounting standard AASB 1053 includes a definition of a reporting entity as:

'an entity in respect of which it is reasonable to expect the existence of users who rely on the entity's general purpose financial statements for information that will be useful to them for making and evaluating decisions about the allocation of resources. A reporting entity can be a single entity or a group comprising a parent and all of its subsidiaries'.

Ultimately, whether your NFP is a reporting entity or not is a judgment based on considering a number of indicative factors (under Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity, which should be referred to for greater detail in making this determination).


http://www.aasb.gov.au/Work-In-Progress/Reduced-Disclosure-Requirements/Tier-2-Requirements.aspx

http://www.aasb.gov.au/Pronouncements/Statements-of-accounting-concepts.aspx

Questions to be answered

Is there a spread of ownership/membership or is there a level of separation between management and owners/ members/ others that have an economic interest in your NFP?

Does your NFP have economic or political importance/influence?

Is your NFP large in size, or have a high level of sales/ assets/ debt/ funding from governments or other parties, or a high number of employees?

The more your NFP answers 'yes' to these questions, the more likely your NFP is a reporting entity.


Reporting and disclosure

If your charity is a reporting entity it must submit to us a general purpose financial statement that complies with all applicable Australian Accounting Standards. The standards are issued by the Australian Accounting Standards Board (AASB) and provide ways of accounting for and presenting the financial information of your charity.

Your charity can choose whether to report under a reduced disclosure regime (RDR), which allows significantly less disclosure in the notes to the financial statements.

If your charity is not a reporting entity, it can submit a special purpose financial statement to us.

This means you must apply as a minimum the following six accounting standards to the extent they are relevant:

AASB 101, Presentation of Financial Statements

AASB 107, Statement of Cash Flows

AASB 108, Accounting Policies, Changes in Accounting Estimates and Errors

AASB 1031, Materiality

AASB 1048, Interpretation of Standards

AASB 1054, Australian Additional Disclosures.


Impact of reporting decision


General Purpose Reporting

Special Purpose Reporting

Complexity Highly complex Less complex

Cost and Advice Costly and specialised Lower cost and less advice requirements

Accounting Standard adoption

All Accounting Standards must be adhered to

No need to adopt all accounting standards

Transparency and information disclosure

High level of information disclosure and transparency

Simplified and more summarised reporting

Material Adverse Events

A lot of lenders (mainly banks) are inserting these clauses in loan documents.

What the clause basically says is:

If there is a material adverse event the bank can call in the loan.

A material adverse event is anything the bank thinks is “materially adverse” to its position.

In other words – the bank could call up a loan at anytime whether the loan is fixed or variable for any reason.

A lot of annual reviews give the bank the same powers.

What does this mean?

where the cause exists, all debt is current

review all borrowing documentation


Employee Benefits

There still appears to be some confusion about the current v non-current classification of liabilities.

AASB 119 deals with whether an employee benefit is a short term or long term benefit.

The classification issue is dealt with under AASB 101 - Presentation of Financial Statements.

Specifically paragraph 69.

“Unconditional right to defer settlement". If your company does not have the right to defer settlement and therefore the LSL to which an employee has a legal entitlement to take (i.e. the 1st tranche for which the employee has meet the service period) is a current liability - but described as "other long term liability" within that class.


ACNC is now your Regulator

While the ACNC will now be your main regulator, ASIC continues to have responsibility for a number of areas, including:

the registration (incorporation) of companies

winding up (closing)

insolvency, and

raising funds.

Any changes to your company apart from those 4 exceptions above are to be notified to the ACNC.


Governance Standards

From 1 July 2013, some requirements under the Corporations Act have been replaced by the ACNC governance standards. These standards are principles-based and allow for greater flexibility.

1 Purposes and NFP character of a charity

2 Accountability to members

3 Compliance with Australian laws

4 Suitability of Responsible Persons

5 Duties of Responsible Persons


Valuation of Assets

According to AASB 116 Property Plant and Equipment, if the Company considers revaluing an asset, it will be required to revalue the entire class of assets to comply with the Standard.

The valuation of the assets would also be required to comply with AASB 13 Fair Value Measurement to have the assets measured using the asset in its highest and best use or by selling to another market participant that would use the asset in its highest and best use.

It’s all or nothing and instructed for highest and best use


Capital Funding Agreements

Usually granted by the State Government for the purchase of land and building

Two types – repayable and non repayable submit to release condition

Significant difference as one is a liability and one is only contingent

Detail about repayment is often difficult to locate


37


Topical Legal Considerations for NFPs

Presented byMelissa Sinopoli

MacDonnells Law



Overview

• Board Governance

• Directors and Officers Liability – Insurance and

Indemnity Deeds

• Consolidation in sector – issues to consider in a merger

or acquisition

Board Governance

The main issues with Board governance:

• Conflict of interest

• Lack of diversity/succession planning.

Tips for managing real and perceived

conflicts of interest:

Directors who have either a direct or indirect interest in a matter should:

• Disclose the possible conflict. If unsure, err on the side of caution

and disclose.

• Not take part in any deliberations on the contract or matter. The

person should step out of the meeting for that part of the discussion.

• Not vote in relation to the contract or matter.

• Communicate with the shareholders.

Tips for Board diversity/succession planning:

• Structure the Board to have an effective composition, size and commitment of

persons on the Board in order to discharge responsibilities and duties.

• Admit Board members such that the collective Board understands the business’

issues, exercises independent judgment, encourages enhanced performance of the

company and reviews the performance of management. The ASX recommends that

most members of the Board, as well as the Chair, be independent directors

• A Board, if it does not have a formal nominations committee, should have processes

in place for selection and appointment of directors, determination of desired

competencies of directors, creation of succession plans and methods for evaluation

of performance.

Tips for Board diversity/succession planning:

• It is recommended that Boards develop a skills matrix, which is used to identify any

gaps in the skills and experience of current directors. Then create a role description

and seek to appoint directors who ‘fill in’ these skill gaps when selecting new

directors.

• A Board should be large enough that it comprises a wide range of skills and

experience, and allows the best interests of the company to be represented, without

being so large that effective decision-making is hindered. Most Boards have less than

ten members, with research suggesting that decision-making efficiency is decreased

by 10% for each person added to the Board above that.

• Early identification of potential Board members with desired skills, as well as strategic

planning on future Board needs and the direction of the company, assist in

streamlining succession planning.

• Current Boards need to be actively planning for the recruitment of directors to future

positions in order to provide continuity in the Board and the correct skill set.

Directors and Officers Liability –

Insurance and Indemnity Deeds

A Deed of Indemnity should contain provision for the following (which are not

automatically covered by legislation):

• That the company only has the right to settle a claim on the director’s behalf if it

has gone through a specific process

• That the director has an entitlement to access company documents to ensure an

adequate defence can be conducted by the director.

• That the company be required to maintain Directors and Officers Insurance for

the director during the time that the director holds office and for seven years after

the director ceases to hold office.

Consolidation in sector – issues to consider

in a merger or acquisitionKey issues to consider in a merger or acquisition:

• How the Board of the entity being acquired is to be represented on the

continuing Board.

• How the members of the entity to be acquired are to be dealt with – do they

all wish to become members of the other organisation? You also need to

consider whether they meet the eligibility criteria for membership of the

other organisation.

• The ability to transfer funding arrangements.

• Thorough due diligence into the entities and the people including

considering cultural fit.

• How the merger will structurally and practically be implemented.

45

Contact details

For further information on this topic, please

contact:

Melissa Sinopoli, Senior Associate

Direct phone (07) 3031 9718

Email [email protected]

© 2014 MacDonnells Law

This presentation is subject to copyright. No part of this presentation may be reproduced or copied by any process

whatsoever, electronic or otherwise, without the specific written permission of the copyright owner. No part of this

presentation may be stored electronically in any form without written permission of the copyright owner.

Enquiries should be directed to The Chairman of Partners, MacDonnells Law, Cairns, Queensland Ph: 07 4030 0600.

46


Establishing Social Enterprise

Presented byAnthony Tuite

Hanrick Curran



Objective

• Highlight the key elements and considerations required to establish social enterprise

• Illustrate this by way of case study


Introducing Stepping Stone Clubhouse

• Brisbane based organisation providing support to adults with a mental illness to rebuild their confidence, stamina, concentration, social and vocational skills

• People suffering from a mental illness experience disproportionately high levels of unemployment: as high as 85%

• They have the desire and skills to work and with the right support can successfully gain and maintain employment


Barriers to employment

• Anxiety, a broken work history and stigma impact employment opportunities

• Employment within communities for mental illness suffers is linked to overall wellness and quality of life

• Stepping Stone Clubhouse have been supporting members back to employment for 15 years.

• The mission for the Clubhouse is to breakdown these barriers.


Dilemma

• Clubhouse members were accessing an outsourced service for Transitional Employment positions via Aftercare

• Change in policy resulted in onerous paperwork for members to obtain positions


Clubhouse Cross Roads

• Do we continue along the same path – taking assistance and being reliant on government assistance?

• Do we take matters into our own hands?


Solution – Social Enterprise

A number of issues needed to be considered in establishing the social enterprise.

- Physical structure and ownership of the entity- Contracts and HR issues- Pricing and ensuring profitability- Insurance- Record keeping and accounting

After consideration of these issues it was agreed to create MHE Enterprises Pty Ltd.


The Future – Clubhouse

MHE Enterprises Pty Ltd was established in July 2014.

MHE Enterprises Pty Ltd combined with other commercial projects will generate over 70% of their income by the year ended 30 June 2017.


Key Message for NFPs

For NFPs to take a positive step towards self sufficiency and reduce reliance on government funding, a number of initial activities should be explored:

• Consider any outsourced functions that could be performed internally

• Explore ways of further commercialising that capability to generate revenue

• Seek advice to establish correct structure to preserve tax-exempt status

• Perform forecasting and due diligence as per a normal business establishment

• Maintain corporate governance standards as required by the parent organisation


www.hanrickcurran.com.au

Hanrick Curran offers a diverse range of services for Charities and Associations in the Not-For-Profit Sector. Please contact any of our industry specialists for additional information.

Jamie Tower, Tax Partner

Michael Georghiou, Audit Director

Anthony Tuite, Business Improvement Consultant

www.hanrickcurran.com.auTel: 07 3218 3900

http://www.hanrickcurran.com.au/

56


State Tax Exemption for Charitable Institutions

Presented byScott Pease

PPM Tax and Legal



© 2014 PPM Tax & Legal Pty Ltd

Overview

• Application to register an institution as a

“charitable institution”

• Potential exemption from:

• Payroll Tax;

• Land Tax; and

• Stamp Duty

• Requirements for registration

• Key opportunities for NFPs to access the

exemption


Requirements (Qld)

1. Charitable Object

2. Disqualifying Purpose

3. Pursuit of Charitable Object

4. Income and Property

5. Prohibition on Distribution

6. Transfer on Dissolution


Key Opportunities for NFPs

• Retrospective refund

• Exemption going forward following appropriate amendments to the constitution

General information only

This presentation is provided as general information only and does not consider your specific objectives, situation or needs. You should not rely on the information in this presentation or disclose it or refer to it in

any document. We accept no duty of care or liability to you or anyone else regarding this presentation and we are not responsible to you or anyone else for any loss suffered in connection with the use of this

presentation or any of its content.

Our liability is limited by a scheme approved under Professional Standards Legislation.


Scott Pease

Director

Email: [email protected]

Tel: 07 3012 9254

Mobile: 0428 334 433

mailto:[email protected]

Not For Profit Specialists presentation

Government & Nonprofit

Transcript of Not For Profit Specialists presentation