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We saw COVID threaten the sustainability for many not-for-profit (NFP) organisations, forcing some to make operational changes or to shut their doors, and others to adapt and drive innovation to achieve their mission. But what does it mean to be a sustainable NFP, and how do these organisations then remain sustainable for years to come?
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Client Alert Electric car FBT exemption expected to soon become reality
Many people are getting excited about the Government’s pre-election promise to exempt electric cars from Fringe Benefits Tax (FBT) as of 1 July 2022. But before you rush to order your new vehicle, there are a few considerations for you to take into account. While this measure is expected to take effect shortly, there is no legislation for this yet – not even in draft – and parliament’s next sitting days have not been announced. This means any new legislation will no doubt need to be retrospective to have effect from 1 July 2022.
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With only 3 weeks remaining in the financial year, builders should immediately test their compliance with the Queensland Building and Construction Commission’s (QBCC) Minimum Financial Reporting Requirements (MFR) to ensure there is enough time to rectify any deficiencies before FY22/23 year end.
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Hearing the words ‘Division 7A’ is often accompanied with a twinge of anxiety – and for good reason. This area of tax legislation is incredibly complex, and for family businesses, Division 7A can be a particularly difficult concept to navigate.
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As the economy continues to battle ongoing waves of COVID-19, businesses who are struggling to pay legacy debts may be left wondering what their future might look like.
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Living through the pandemic has delivered a clear reminder that some things are simply beyond our forecasting or our control. That’s the kind of wildcard CFOs can do without! CFOs are in the box seat with a once-in-a-career opportunity to create a whole new – and ideally improved – business ‘normal’ by considering talent, digital transformation, cyber resilience, post-pandemic growth, diversity and inclusion.
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We discussed some of the key findings of our Women in Business research with female industry leaders across our global Grant Thornton network, exploring how the banking sector can keep the momentum going to attract, retain and nurture women to build a more inclusive future.
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CLIENT ALERT $2bn Breakthrough Victoria Fund, now investing in research, technology and innovation
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Income Tax Assessment Amendment (Digital Games Tax Offset) Bill 2021: Measure for Consultation
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    1. Home
    2. Insights
    3. Managing supply chain risks in the COVID-19 building boom

    Managing supply chain risks in the COVID-19 building boom

    We’ve seen first-hand the challenges facing builders, developers, financiers and key stakeholders in this unprecedented environment and the innovative ways they are managing the rising input prices and project delays.

    How has COVID-19 affected the property and construction industry?

    Forecasts for the property and construction sectors have swung wildly from the early days of the pandemic. Some banks initially forecasted declines of up to 30% in the residential sector, but we’ve since seen significant growth numbers for detached dwellings in most markets and renewed concerns for affordability.

    The market uncertainty in the early stages of the pandemic delayed commencement of many commercial projects, particularly in those states dealing with larger outbreaks – like Victoria and NSW, which also experienced industry shutdowns – and commercial builders have had to bear the cost of that. As market confidence improves, these commercial builders will also face the challenge of funding growth from a low base and delivering projects tendered at 2020 prices.

    Whilst the building boom was initially concentrated in detached dwellings and infrastructure, driven by Homebuilder and infrastructure investment by all levels of government, the surge in construction demand is very much a global phenomenon with many governments intent on building their way out of the crisis. The combination of surging levels of demand and lingering supply chain constraints have resulted in a global shortage of goods and materials. Intense competition for human resources on projects has further magnified execution risk.

    Read more on COVID’s impact on the building sector

    What is causing building supply chain delays?

    Anecdotal reports suggest supplier lead times have blown out across all manner of materials, including concrete slabs, concrete pipes and frames and trusses. Already facing pressure from bushfire damage from 2019-2020, locally produced structural pine has suffered delays and, although BlueScope Steel’s production volumes had already increased 15% in the year ended 30 June 2021, domestic steel producers have also struggled to satisfy the surge demand.

    Internationally, the freight and shipping situation has been dire with reports that a standard large container costs four times greater than it was a year ago. This comes off the back of cargo volumes increasing (in the first half of 2021, cargo volumes between Asia and North America were up 27%).

    In this period of high demand and restricted supplies, pressure is on the shipping industry to move more goods. When new ship builds to increase capacity require a 2-3 year wait, they have limited opportunity to respond quickly – hence the prices rise while demand remains high.

    It’s not only the vessels to run the routes, but the limited supply of containers that is causing the delays and both are contributing to the shortage of building material imports. The bulkier the goods, the greater the impact of higher shipping costs.

    Read more on COVID supply chain delays

    Read more on supply chain customs and duties reviews and global tariff optimisation

    What is the extent of cost escalation being experienced by builders and developers?

    The ABS figures for September 2021 quantify the extent of inflation in detached residential building costs – with inputs up by over 9% since commencement of the pandemic with further growth projected. That said, anecdotal reports from mid-market builders suggests that they are experiencing input cost inflation of at least twice this level. The outcome being that many pre-committed projects are now unprofitable – and this is before factoring in the extended delays they are facing in sourcing those inputs.

    There have been instances of large building companies collapsing, leaving many customers in limbo. Unfortunately, the capacity of developers to support non-residential builders through this period of cost increases and growing pains may be limited – particularly where the project is predominantly pre-sold and the realisation value is capped at yesterday’s prices.

    Read more on how builders are dealing with COVID

    How can builders, developers and key stakeholders minimise risk during the COVID-19 boom?

    Despite the challenges, the current shortage in building capacity has empowered contractors. Developers, well aware of this shift, are generally taking a more collaborative approach to managing completion of projects and allocating risk in new contracts.

    Grant Thornton Australia assists builders, developers, financiers or other key stakeholders identify risks early and navigate distress in various ways:

    • Quantifying the financial impact of these market factors on business cash flow;
    • Connecting data provided by quality surveyors to create dynamic cash flow forecasts, specified to contract terms and the pipeline of specific businesses;
    • Assisting in securing finance to improve working capital, via debtor financiers, alternate debt or extension of existing bank facilities;
    • Assisting in negotiations with key counterparties, such as the ATO, contract principals or sub-contractors; and
    • Managing regulatory compliance with bodies like the QBCC or State Government pre-qualifications.
    Read More Read Less
    Insights Going bust in a boom: the potential sting in the tail of the COVID building boom 15 Sep 2021
    The August 2021 figures have confirmed that we are in the midst of an unexpected real estate boom, with national house prices up 18.4% year on year according
    Insight Supply chain delays 11 Oct 2021
    We explore time delays caused by unprecedented convergence of surging demand and restricted supply chains during the Covid building boom. Time can be a killer
    Insight COVID building boom: who’s likely to be stung? 10 Nov 2021
    We explore the different market segments in the construction industry during the COVID building boom to better understand the profile of industry participants
    View All Articles

    Webinars available on-demand

    Past Event 18 Nov
    Webinar
    Supply chain risk management in the COVID building boom
    12:00

    Speak to our Real Estate & Construction specialists

    Partner & National Head of Real Estate & Construction Sian Sinclair

    Brisbane

    +61 7 3222 0330

    • Email address
    • https://au.linkedin.com/pub/sian-sinclair/14/9b0/9b5
    • Sian Sinclair VCard
    Partner Cameron Crichton

    Brisbane

    +61 7 3222 0331

    • Email address
    • https://www.linkedin.com/in/cameroncrichtongt/
    • Cameron Crichton VCard
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