Paul Mondo, ACA President, shares his COVID experience and highlights full range of support available
The last six weeks have been a period of immense uncertainty for the early childhood education and care (ECEC) sector.
In a short period of time, the ECEC sector has been forced to evolve in a way that could never have been predicted. During the best part of ten years, the implementation of change and new legislation has been a constant for our sector, but the world we live in now makes those changes feel like a mere speed hump when compared to the changes that have taken place at a sonic speed over the last six weeks.
Looking back to February it seemed inconceivable that we would have enrollments drop by over 40 per cent in a large majority of cases, coupled with those families who remained enrolled keeping their children at home in almost 50 per cent of cases almost overnight.
But they did. This was the cold, harsh reality for the majority of providers.
The tension in the sector was at fever pitch from 23 March, with the nation-wide situation creating an urgent need for financial certainty for our sector and a response that would need to address the range of scenarios that could eventuate during this ongoing health crisis, while responding to the ever-present health concerns for our children, educators and families.
With the future of Australia’s economy at stake, the Australian Government moved quickly to launch a series of business support mechanisms with the vast majority aimed at the broader economy, along with one sector-specific policy – the Early Childhood Education & Care Relief Package.
Its release on 2 April, three days after the Government’s JobKeeper Payment package came as a surprise to the sector and it is fair to say that the responses to these announced relief mechanisms have varied quite significantly, with those who were in the midst of sudden and catastrophic enrolments falls and resultant revenue hits more likely to welcome the changes than those who had not yet been hit with a significant amount of withdrawn enrolments, despite low attendance numbers.
With every one of our Australian Childcare Alliance (ACA) board members, at both a national and state level, being approved providers themselves, with the large majority having between one and five services, ACA is very sensitive to the impact of policy decisions that impact the sector and try to use our collective experience and policy and political knowledge to guide our responses.
However with ACA’s membership base in excess of 3,000 services nationally, it is always difficult to capture the feelings of each individual member when such significant announcements are made.
What is clear though is that the range of government support made available to our sector can and will work in combination and in so doing provide the opportunity for providers to ride through the challenges that the next few months will bring, especially when one also considers more recent announcements.
In order for service providers to maximise their chances of weathering the storm, it is critical that they understand and avail themselves of all of the financial support available.
The ACA has therefore created a COVID 19 Business Continuity Spreadsheet to assist with the urgent assessment of the true impact of the various support mechanisms on each individual service provider which has been sent to all members.
In addition to this I would like to also highlight what the key support packages available to early learning service providers right now are and have provided a summary of these mechanisms below:
Early Childhood Education & Care (ECEC) Relief Package
By now most services are aware of how the ECEC Relief Package is working and the amount of money they are receiving weekly. April of course has been slightly different to the new normal for providers as they would have received previous CCS payments on April 1 and 8, a Business Continuity Payment (BCP) on April 9, a double BCP on April 16 and single BCP’s on April 23 and 30. They may have also had some parent gap payments for the period pre-dating the relief package.
When the Australian Government first announced the changing funding mechanisms for the sector, Prime Minister Scott Morrison and Education Minister Dan Tehan Minister referenced that the ECEC Relief Package was designed to work hand in hand with the JobKeeper Payment package.
With many service providers fearing they may not meet the revenue reduction comparison test given the structure of support payments in April, or alternatively due to associated entities, there was great relief from the ATO ruling that Business Continuity Payments were not considered a supply for GST purposes and therefore not included in revenue calculations. This ruling ensured that a large majority of ECEC providers would qualify for JobKeeper and also be deemed as eligible from early April.
ECEC Relief Package Exceptional Circumstance Supplementary Payment
The Exceptional Circumstance application is another mechanism for supporting providers.
Specifically, this application can be used for three possible circumstances:
1) Where attendance is the same or exceeds the relevant reference period
2) For providers who are not eligible for JobKeeper (ie Associated with Independent Schools, Local Councils or Church Groups)
3) For new services who have opened since the relevant reference period.
As this process is still relatively new and is slightly different for each of the circumstances above, ACA encourages service providers to explore the application process and determine what sort of evidence is required and whether their service meets the criteria.
Cash Flow Support for Small and Medium Businesses
A number of small to medium size businesses will qualify for these payments but can have vastly different outcomes depending on the structure of your organisation.
For example, a multi-site operator which operates all services under one legal entity will need to spread those credits across their number of services. For those services that operate under independent entities it is highly likely they will qualify for the maximum amount in their “initial and additional cash flow boost”, totalling $100,000 as a result of the high proportion of payroll expenses in the early learning sector.
Payroll tax exemptions and refunds
Payroll Tax is of course administered by State Governments and is a cost that is not incurred by the “Not For Profit” sector. As a consequence each State Government has provided a different response to whether exemptions have been applied. In Victoria, for example, payroll tax was not only exempted for 2019-20, but refunds were given for any payments made from the beginning of the financial year.
ACA encourages service providers to find out how their relevant State Government policy in this space applies to their centre.
Trainee and Apprentice incentives
Trainee and apprentice support has been made available but some of these employees may also be eligible for the JobKeeper Payment.
Individual service providers are only eligible to claim one of JobKeeper or Trainee and Apprentice Incentives so once a service provider has determined which option is more appropriate for their trainee or apprentice, they should be sure to apply for the most appropriate option.
Lease Deferments and Discounts
The National Cabinet recently released the National Code of Conduct for SME Commercial Leases during COVID-19 (the Code). The Code provides a framework for landlords and tenants to negotiate specific arrangements required as a result of the impact of the COVID-19 pandemic on small to medium businesses.
ACA recently provided a template letter for its members to initiate these conversations. This is one important way of reducing one of the more significant expenses at this time.
State-based Small Business Support Mechanisms
Many states have provided a range of support for small businesses at this time which are many and varied. Again service providers are encouraged to assess these options, and how they apply to their business.
Service providers can review the range of state-specific stimulus mechanisms here.
The coming weeks may provide further challenges for our sector, particularly if the wonderful news of reducing infection rates results in the easing of the range of social distancing restrictions. The short term impact of this great news may unfortunately put pressure on our sector under the current support arrangements.
In spite of all of the above ACA recognise that some providers are unable to operate at 100 per cent capacity under the current models. This rapidly changing scenario is at the forefront of our work. If the last six weeks have shown us anything, it is that it is impossible to predict with any sense of accuracy what may lie ahead.
As always, ours is a resilient and diverse sector, and within that exists a range of different perspectives. We have survived and thrived through the most recent decade of change and whilst the next few months will very much require us to switch to survival mode, I have no doubt that we will have a sector that comes out the other side.
Our survival will allow the early learning sector fill our vital role in supporting working families and more importantly ensuring that every child in Australia has access to high quality, affordable and sustainable early learning services, and therefore the best start in life.