Changes to ACNC charity size thresholds and reporting requirements

Key takeaways

Recent amendments to the Australian Charities and Not-for-profits Commission Regulation[i] will reduce financial reporting requirements for many charities but also add information disclosure requirements for some.

• Starting with reporting in the 2022 Annual Information Statement (AIS), charity size thresholds have increased so many more charities will not be required to prepare financial reports at all and others will no longer be required to have their financial reports audited [ii]
• Starting with reporting in the 2022 AIS, large charities that lodge a special purpose financial statement (SPFS) for their annual reporting to the ACNC and have two or more key management personnel will be required to report on an aggregated basis about remuneration and other compensation paid to key management personnel
• Starting with reporting in the 2023 AIS, large and medium charities that lodge a SPFS can opt to use the simplified disclosures accounting standard AASB 1060, instead of the prescribed standards. This change is expected to reduce compliance costs
• Starting with reporting in the 2023 AIS, charities that lodge a SPSF will be required to report on related party transactions

Changes to size thresholds

What are the size threshold changes?

A charity’s size for a particular financial year is determined by its revenue for that financial year. The current and new thresholds are as follows:

Charity size                                        Current revenue threshold for 2020 – 2021 financial year and earlierNew revenue threshold for 2021 – 2022 financial year and laterSmall                            Less than $250,000Less than $500,000Medium                        $250,000 to $999,999$500,000 to $2,999,999Large                          $1 million or more$3 million or more

• When do the size changes take effect?

The size changes apply to the charity’s 2021-2022 financial year and each later financial year. For a charity with the default and most common financial year of 1 July to 30 June, this means the change applies to the financial year that commenced on 1 July 2021 and ends on 30 June 2022 so the charity’s size as at 30 June 2022 will determine its reporting level for the purposes of the 2022 AIS which must be lodged by 31 December 2022.

For a charity with a financial year of 1 January to 31 December, the 2021 AIS for the year ending on 30 December 2021 is not due until 30 June 2022. The old size threshold applies to that year. The new size threshold will apply to and from the year that commenced on 1 January 2022 and will be reported on in the 2022 AIS which must be lodged by 30 June 2023.

• When is a charity’s size relevant?

A charity’s size determines:

• Whether a charity is required to prepare and lodge an annual financial report at all and if so, whether the report must be audited or reviewed[iii]
• The time period within which a charity must notify the ACNC of changes of name, address for service, responsible persons and governing rules and of a material error in an AIS or financial report – being within 60 days for a small charity and 28 days for other charities[iv]
• The amount of the administrative penalty for failing to give reports, statements, notices and other documents to the ACNC by the due date[v].

Changes to financial reporting standards

For the 2021-2022 financial year and onwards, charities that prepare and lodge a SPSF with the ACNC are permitted to apply accounting standard AASB 1060, General Purpose Financial Statements – Simplified Disclosures for For‑Profit and Not‑for‑Profit Tier 2 Entities (the simplified disclosures standard) in the preparation of the SPSF. If they do opt to apply the simplified disclosures standard, generally the prescribed standards are replaced completely, but there are exceptions.[vi]

The changes to financial reporting requirements, including those relating to reporting of related party transactions, do not apply to medium or large charities that are required to lodge a general purpose financial statement or opt to lodge a general purpose financial statement. Reporting requirements for those charities have not changed.

As is the situation currently, charities will need to consider the financial reporting requirements under other legislation applicable to them (such as if they are an incorporated association or registered under the States’ charitable fundraising laws) to determine how the changes in ACNC reporting requirements align with those other reporting requirements.

New reporting of related party transactions

The changes add a new prescribed accounting standard AASB 124, Related Party Disclosures. The simplified disclosures standard also requires disclosure of certain related party relationships and of transactions with related parties. Therefore, related party disclosure requirements apply to all charities that prepare and lodge a SPSF. These changes apply for the 2022-2023 financial year and onwards.

Under both the simplified disclosures standard and AASB 124, reporting on related party transactions includes disclosure of key management personnel compensation in total (not individually). However, large charities with only one individual who is key management personnel and all medium charities are exempt from this requirement. Large charities with two or more key management personnel must start disclosing remuneration for the 2021-2022 financial year and onwards, even though reporting of all other related party disclosures does not start until the following year.

“Key management personnel” are persons having authority and responsibility for planning, directing and controlling the activities of the charity, directly or indirectly, including any director. “Compensation” includes all forms of consideration paid, payable or provided by the entity, or on behalf of the entity (for example, by its parent or by a shareholder), in exchange for services rendered to the entity.

Allowance of voluntary real time updating of information on the charity register

The ACNC Commissioner is now required to include on the Charity Register any information that a charity voluntarily discloses for the purpose of being included on the Charity Register. This amendment is intended to increase transparency by allowing charities to update their program information on the ACNC Charity Register in real time.

The Charity Register contains a summary of a charity’s activities and, as a recently added feature, information about its programs. This information is currently only updated on the Charity Register after the charity lodges its AIS. Although the change allowing real time updates has already commenced, currently the AIS is the only way for a charity to update information about its activities and programs.

The ACNC has recently informed NFP Lawyers that a new program form is currently in development which will allow charities to log in to the Charity Portal and update information about activities and programs online during the year. This form will be available in the Charity Portal in the future. The ACNC may publicise the availability of this form through its monthly newsletter and social media channels.

Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.

[i] The amendments were made by the Australian Charities and Not-for-profits Commission Amendment (2021 Measures No. 3) Regulations 2021 on 11 November 2021 (Amending Regulation). A change to ACNC Governance Standard 3 proposed by the Amending Regulation never commenced.

[ii] According to the Explanatory Statement, approximately 2,500 charities will be reduced from medium to small and over 2,700 will be reduced from large to medium.

[iii] Small charities are not required to lodge a report, large charities must lodge an audited report and medium charities must lodge either an audited report or a reviewed report.

[iv] These are not all of the changes and circumstances that a charity must notify to the ACNC. There are others where the notification time periods are the same for all charity sizes.

[v] Small charities must pay the base penalty amount, medium charities must pay double that amount and large charities must pay 5 times that amount.

[vi] The prescribed standards are listed in regulation 60.30(2). Some requirements in AASB 1054, Australian Additional Disclosures still apply even if the charity opts for the simplified disclosures standard (see regulation 60.30(2A)(d)).