Proposals to increase reporting thresholds for charities

One of the recommendations from the independent review of the Australian Charities and Not-for-profits Commission (ACNC) in 2018 was to increase the revenue thresholds for determining which entities must lodge financial statements.

Increasing revenue thresholds means that fewer charities will need to file reviewed or audited financial statements with the ACNC.

In order to avoid unintended conflicts with various State-based legislation, e.g. for incorporated and unincorporated associations, the proposals were presented to the Council on Federal Financial Relations (CFFR) where the State Treasurers agreed that reform was needed. The CFFR requested that a framework for increasing the harmonised financial reporting thresholds across jurisdictions be announced by 30 June 2021 and the Thresholds Working Group has been tasked with developing this framework. To facilitate this process, a Consultation Paper has been published, Increasing financial reporting thresholds for ACNC-registered charities.

What are the proposed thresholds?

The table below compares the existing and proposed revenue thresholds for financial reporting:

Size of charity

Current annual revenue threshold

Proposed annual revenue threshold

ACNC reporting requirements

Small

Less than $250,000

Less than $500,000

ACNC Annual Information Statement

Medium

$250,000 or more but less than $1 million

$500,000 or more but less than $3 million

ACNC Annual Information Statement

Reviewed annual financial report

Large

$1 million or more

$3 million or more

ACNC Annual Information Statement

Audited annual financial report

Benefits of increasing the reporting thresholds

The major benefit outlined in the Consultation Paper is that professional services expenses will decrease for approximately 6,800 charities, including:

  • Approximately 3,300 charities moving from the ‘medium’ to the ‘small’ category, no longer having to produce reviewed financial reports, and saving approximately $2,400 in professional services fees annually
  • Approximately 3,500 charities moving from the ‘large’ to the ‘medium’ category, meaning an audit would no longer be required, and a reduction of around $3,000 in professional services expenses annually.

What about reduction in transparency with fewer charities producing financial reports?

Despite the proposals for fewer charities to produce financial reports, the Consultation Paper notes that this will not affect accountability and transparency. Small charities will still be required to submit an Annual Information Statement (AIS) to the ACNC, with improvements being made to the information collected on the AIS. The ACNC will also continue to make all AIS’s available on the ACNC Charity Register for public scrutiny.

Other consultation questions

In addition to increasing reporting thresholds, the Consultation Paper is also seeking feedback on four key challenges:

  • Timing of implementation – should the revenue thresholds be amended in the ACNC regulations before the States have had a chance to amend their legislation for incorporated associations? This temporary lack of harmonisation could see delays in benefits for some entities that may have to report according to lower revenue thresholds until State legislation aligns with the new thresholds.

  • Different reporting thresholds for ACNC-registered and non-ACNC-registered entities – Should incorporated associations that are not registered with the ACNC have similar reporting thresholds to ACNC registered entities? Is it equitable if they don’t, and if they do, does the reduction in information reported provide sufficient accountability and transparency?

  • Overlap with fundraising regulations – The proposals to increase revenue thresholds for reporting to the ACNC do not change any State-based legislation requiring financial reports for charities that undertake fundraising activities. States will need to continue accepting ACNC financial reports, otherwise there may be a duplicate reporting burden.

  • AASB NFP reporting framework – it appears unlikely that the timing of the AASB’s new NFP reporting framework will align with the timing for increased reporting thresholds.

Comment deadline

The comment deadline for the Consultation Paper is 21 March 2021. Please contact Aletta Boshoff if you would like to provide any feedback.

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