Australia’s charities increase their income

May 2021 – Australia’s 48,000 registered charities employ 11 per cent of the workforce, although 51 per cent of them have no paid staff.

The latest figures from the Australian Charities and Not-for-profits Commission (ACNC) finds charities earned revenue of $166 billion in 2019, the latest figures available and, of course, collected before the COVID-19 pandemic and bushfires early in 2020 hit the economy.

The wealth of data in the annual charities report will be scrutinised even more carefully next year to see how finances were affected by COVID, bushfires and floods.

In 2019, the sector performed strongly, with total revenue up 6.8 per cent to $166 billion, of which $11.8 billion came from donations and $78 billion from governments.

Expenses rose 6 per cent to $157.6 billion and the sector turned in net income of $11.1 billion, up 12 per cent.

The information comes from information statements that charities have to lodge with the regulator.

It found 52 per cent of charities had an online presence, which seems low but compares with only 34 per cent in 2018.

The report is available here

COVID boosts complaints to financial ombudsman

The COVID pandemic caused a 15 per cent rise in complaints to the financial ombudsman in the year to March 30.

April 2021 – In the year since lockdowns began in Australia,  the Australian Financial Complaints Authority (AFCA) recorded a sharp rise in consumer complaints about scams.

It received more than 11,000 complaints related to COVID-19 in the year leading up to the anniversary of the pandemic’s declaration.  

More than 3500 related to travel, presumably travel insurance when travel plans had to be cancelled.

Complaints about car and home insurance dropped because people stayed at home.

AFCA says it has resolved 90 per cent of the COVID-related complaints it received. The financial organisations it regulates fine-tuned their responses to consumers’ issues as the pandemic progressed.

It’s no surprise that scammers acted to take advantage of COVID, and AFCA advises consumers to discuss the risks with family and friends who may be vulnerable.

AFCA information about scams is here www.afca.org.au/scams. There is also advice at the Australian Competition and Consumer Commission’s Scamwatch site www.scamwatch.gov.au

Demand for bank notes rises during COVID

March 2021 – It’s a paradox: the use of cash dropped during the COVID lockdowns of 2020, but demand for bank notes rose.

The rise in demand for cash can be shown in the chart below. The Reserve Bank of Australia (RBA) attributes it to people wanting to hold cash in an emergency, noting the jump in demand for ‘real money’ began in mid-March 2020, around the time that lockdowns were imposed.

source: Reserve Bank of Australia

It says citizens may have wanted to hoard cash in case of bank systems breaking down. The RBA went back to recessions in the 1960s, 1970s and 1980s and the dotcom boom to find that demand for cash rises in times of economic uncertainty.

The value of banknotes in circulation grew by 17.1 per cent over the year to February 2021, reaching $97.3 billion. This compares with average annual growth in banknotes outstanding of around 5 per cent over the previous decade, says the RBA in a study.

Around 70 per cent of the volume of banknotes issued since mid-March 2020 were $50 notes and almost 20 per cent were $100 notes. Apart from people being in lockdown and businesses closed, many retailers don’t welcome receiving a $100 when they have to hand back a load of change.

The RBA notes there has been little issuance of low-value notes during the pandemic as consumers can’t spend in person and merchants don’t need to hold change.

The use of cash for payment has been in a long decline, from 69 per cent in 2007 to 27 per cent in 2019 and as we move out of lockdowns, more retailers are not accepting cash payment.

The RBA notes it received a small number of inquiries about the virus risk around handling cash (it recommends good hygiene).

More people moved to online purchases during the pandemic lockdowns and it is widely assumed that this will continue. Only time will tell. It will also be interesting to see if people start spending their cash hoards now that we can move about more freely. Interest rates aren’t forecast to rise for a couple of years but, until then, there isn’t much incentive (apart from risk of robbery) to returning cash to bank accounts.

Student debt rising

Photo: Andrea Piacquadio @Pexels

The average higher education (HELP) student debt stood at $23,280 in the year to June 2020, compared with $14,401 in 2011.

Student debt has been rising steadily and so has the time needed to pay it off, 9.3 years from 7.3 years in 2005.

There are 2.85 million HELP debtors.

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Private health complaints drop but COVID issues increase

Complaints to the regulator about private health insurance dropped by 14.5% in the June quarter (year-on-year), probably because consumers could not access their benefits due to COVID-19, says the Commonwealth Ombudsman.

There was, however, an increase in complaints that could be related to COVID-19 and the hardship it has caused.

“We observed significant and rapid changes within the industry over this period due to consumers experiencing financial hardship and being unable to access planned hospital treatments and routine general treatment services,” says the Ombudsman’s latest report.

Most health insurers deferred their April 1 premium increase for six months and introduced measures to help people struggling to pay for cover.

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Early release from super due to COVID-19

The COVID-19 pandemic is taking its toll on the nation’s retirement savings. More than 2.4 million people applied to withdraw money from their superannuation fund between April 20 and June 21, 2020 under the COVID-19 Superannuation Early Release Scheme.

Super funds paid out $17.1 billion, an average of $7492 per person, according to data provided by 177 funds to industry regulator the Australian Prudential Regulation Authority (APRA).

A second run of applications will be made in the first week of July. Processing time is likely to take two weeks. APRA is releasing a weekly update on the scheme.

Concerns are being expressed that COVID withdrawals mean people are eroding their retirement savings and will suffer in their senior years. 

At the end of March superannuation funds held a total $2.7 trillion in assets. This had fallen 0.3% in value on the December quarter due to COVID-related losses.

June 2020

The end of cheques?

Who still has a chequebook? I do. 

I last wrote a cheque for $15 in May 2018 for cat registration and before that I hadn’t written one since 2016. 

Reserve Bank of Australia Asst Governor Michele Bullock says the banking industry is discussing closing down the cheque system as consumers move to cards and online payment and financial institutions use electronic transfers. The chart tells the story.

June 2020

The declining use of cheques

Strata, insurance payments on ACCC radar in 2020

The cost of insuring property in Northern Australia – battered by cyclones every year – has seemed an insurmountable problem since premiums jumped around eight years ago.

Householders and business complain they can’t afford to insure their properties while insurers say the risk of loss is high and they have to price for it. Some insurers have left the market, deliberately priced themselves out of it or stopped taking business when their exposure reaches a certain level.

The Australian Competition and Consumer Commission (ACCC) says insurance markets in northern Australia are characterised by “high prices, high costs and low profits”.

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Overseas student complaints increase

The Commonwealth Ombudsman has called for private education providers to be clearer on fees with international students who have pre-paid for courses.

The Ombudsman investigates complaints by international students against private providers and says the most common complaint is from students wanting pre-paid tuition fees refunded before they have finished their course.

“Students’ ability to seek this refund should be stated in their written agreement with the provider,” it says.

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Charitable donations in Australia

In the 2016-2017 tax year, Australians donated $3.5 billion to charity.

The actual figure will be higher because the figure above comes from tax returns lodged with the Australian Taxation Office (ATO). Not everyone lodges a tax return and many people make donations but don’t claim for them. There is also all the time donated by volunteers who work in op shops, environmental projects and sit on committees such as kindergarten and school councils.

The ATO notes that for those who did donate, and who it recorded, the average donation was $770.

“The most generous state was Western Australia, with 30% of residents claiming an average deduction of $1,190,” it says.

This is possibly because some very wealthy Western Australians donated large amounts.

The 2016-17 Tax Stats are available here.