Can a charity pay its staff from charity funds?

Borthwick Chris Jul2019lg

In this help sheet series, Our Community’s resident agony uncle, Chris Borthwick, offers answers to frequently asked questions about issues not-for-profits are facing.

Dear Agony Uncle,

I am helping out a new charity and I need some information on paying employees from charity funds. How much do I allocate for wages? Can I access charity funds for this, or do I have to get other sources of income? What about tax, super, leave loading, holidays, sick pay, etc? Can they be paid at casual rates?

Agony Uncle's answer

At Our Community we give advice about not-for-profit problems. Many of your problems are general commercial problems, common to any business, and I'll send you to look elsewhere on those.

The NFP content of your mail is the bit that asks “Can I access charity funds for this, or do I have to get other sources of income?”

The answer is “Yes, you can”, with an associated “That’s all the funds there are.” If you get other sources of income, those are also then charity funds. It all goes into one bag. You are authorised to carry out the purposes in your constitution, and to do any activities necessary to carry on those purposes, which includes spending money on staff.

Another NFP point you do not mention (and may not be aware of) is that as a charity you are probably able to have a special break on your fringe benefits tax, which means that you can pay your employees partly in ordinary salary and partly in untaxed fringe benefits, giving them an increased income at no cost to you. This is rather too technical to cover in an email; all I can say is that it is definitely worth your while hiring an accountant to fix this up.

Best wishes,
Agony Uncle.

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