Accounting for NDIS advance payments

On 21 March 2020, the Minister for the NDIS announced a number of new measures to support participants and providers during the coronavirus (COVID-19) pandemic.  Included in these temporary measures was an advance payment to eligible registered providers to increase their immediate availability of funds.  Eligible registered NDIS providers received a one-off advance payment in the week commencing 30 March 2020. The advance payment represented approximately one-third of a provider’s payment claims processed via the NDIS my place portal between December 2019 and February 2020.  Further details on the payment can be found here.
 
The one-off advance payment:
  • has been made to eligible NDIS providers by electronic funds transfer
  • is part of a proportionate and coordinated strategy in line with the whole of government response
  • represents a pre-payment for disability services which must be provided to NDIS participants to deliver reasonable and necessary supports approved in their plans.
The advance payment will be recovered through an offset method, starting 1 October 2020. Over six months, from October 2020 to March 2021, the NDIA will apply offsets against a provider’s monthly payment requests until 16.67 per cent of that provider’s total advance payment has been recovered each month.  For example, if a provider received an advance payment of $10,000, the NDIA will offset against all claims by that provider until a total of $1,666.70 (16.67% of $10,000) is reached per month. Any payment requests above $1,666.70 in the month will be processed and paid to the provider as per normal.
 
A key question is how to account for this advance payment as at 30 June 2020 in your annual report.
 
We believe this payment is revenue in advance and should be recorded as a contract liability under AASB 15 Revenue from Contracts with Customers (effectively unearned revenue).  Whilst no interest has been charged on these advance payments there is no significant financing component under AASB 15 since the period between when the funds were received and the provision of services is one year or less (AASB 15.63).  That is, in the example above you would Dr Cash $10,000 Cr Contract liability $10,000 when the funds were received (no discounting or present valuing requirement to account for an interest component).  You would then Dr Contract liability $1,667.70 Cr Revenue $1,667.70 each month from October 2020 to March 2021.
 
In the event the advance payment balance is not fully recovered through the offset method by 31 March 2021 any remaining amount is payable within 30 days of the agency issuing a demand to pay.  We believe any remaining balance as at 31 March 2021 should be recorded as a liability (other payable).