Changes to the Reporting Obligations of Charities. Do they Affect Your Charity?
Charities are required to file their Annual Information Statements (AIS) with the Australian Charities and Not-for-profits Commission (ACNC) each year. We have summarised the recent changes to Charities’ reporting obligations that you should be aware of.
Lifting Financial Reporting Thresholds for Small and Medium Charities
At the moment, small charities are classed as those with an annual revenue under $250,000 and are not required to submit financial statements to the ACNC, and medium charities have annual revenue of between $250,000 and $1 million and are only required to submit reviewed or audited financial statements to the ACNC.
These financial reporting thresholds are set to be lifted in a move the federal government says will cut red tape for thousands of charities.
From 1 July 2022, the new financial reporting threshold for small charities will increase to under $500,000 annual revenue. This will mean nearly 2,500 charities will no longer be required to produce reviewed financial statements, saving each charity around $2,400 in accounting expenses annually.
The new financial reporting threshold for medium‑sized charities will increase to under $3 million annual revenue, meaning over 2,700 charities will no longer be required to produce audited financial statements, saving around $3,000 in accounting expenses annually.
The new thresholds will take effect for the 2021‑22 financial year onwards in the AIS for 2022 and later years.
Additional Reporting Obligations for Large Charities
From 1 July 2022, large charities that have an annual revenue over $3 million and two or more key management personnel will be required to report remuneration paid to responsible persons (e.g. directors) and senior executives on an aggregated basis in their AIS for 2022 and later years.
In addition, from 1 July 2023, all charities will be required to report related party transactions in their AIS. This will increase transparency of transactions with related people or organisations that pose a higher risk of conflicts of interest. The impact of this in terms of record keeping, administration and compliance could be particularly significant for our Church based clients.
The ACNC is in the process of developing appropriate guidance and education resources to help charities to understand and meet the new requirements.
Reducing the red tape burden for charities fundraising in New South Wales
From 1 July 2021, charities registered with the ACNC can access a simpler application process when applying to NSW Fair Trading to receive or renew an authority to fundraise in NSW. Registered charities that are fundraising authority holders will not need to submit a separate annual return to NSW Fair Trading - they will only need to report to the ACNC.
This reporting arrangement applies from the 2021 AIS.
If you have any queries or request specific advice in relation to your charity’s reporting obligations after the reform, please do not hesitate to contact us.