Commissioner's Policy Statement: Substituted Accounting Periods

This Commissioner’s Policy Statement is issued under the authority of the Commissioner and should be read together with the ACNC Policy Framework, which sets out the scope, context and definitions common to our policies.

Policy Statement

This Commissioner’s Policy Statement sets out when the Commissioner will approve the use of reporting periods ending on a day other than 30 June (also known as substituted accounting periods) for charities under section 60-85 of the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act).

A charity can apply for a substituted accounting period:

• at the time of applying for registration with the ACNC (or when re-applying for registration if the charity’s registration was previously revoked), or
• if already registered with the ACNC, at any time by submitting a request via the ACNC Charity Portal.

The ACNC Act gives the Commissioner discretion to approve substituted accounting periods. If a substituted accounting period is approved, the due date for submitting Annual Information Statements (AISs) and annual financial reports (if applicable) is six months after the end of the substituted accounting period (section 60-85).

Charities that have a substituted accounting period approved under the ACNC Act should be aware that the approval applies for the purposes of the ACNC Act only.

Principles

• Principle 1: Substituted accounting periods will be approved if there is a genuine need
• Principle 2: Substituted accounting periods will not be approved, or conditions may apply, if public trust and confidence is affected.

Power to allow substituted accounting periods

1. The Commissioner has a discretion to allow a charity to use a substituted accounting period (section 60-85) and may impose conditions on that approval (section 60-90). The charity must apply on the approved form.

Adoption of a substituted accounting period

2. If a substituted accounting period is approved, it will apply to the financial year that starts after the charity adopts the new substituted accounting period (subsection 60-85(2)).
3. The Commissioner may impose conditions on the approval of a substituted accounting period, either at the time of the application or at a later date and can revoke the decision if the imposed conditions are not met (section 60-90). The conditions may include transitional reporting obligations which allow for the immediate adoption of the substituted accounting period and ensure there are no gaps in charity reporting periods.
4. Approved substituted accounting periods always end later than the standard financial year-end 30 June (subsection 60-85(2)(a)). An approved substituted accounting period year-end will be a minimum of 1 day later than 30 June and no later than 29 June in the next standard financial year.
5. For example, the information in the 2021 AIS reporting period for a charity with an approved 31 March year-end substituted accounting period covers the period from 1 April 2021 to 31 March 2022.
6. The Commissioner will notify a charity of the approval of a substituted accounting period.

Principles

Principle 1: Substituted accounting periods will be approved if there is a genuine need

7. The Commissioner will approve a substituted accounting period where a registered entity can demonstrate a genuine need to adopt such a period.
8. Factors that the Commissioner will consider in determining whether a genuine need exists for a particular charity include:
   • the current arrangements that apply to the charity, for example reporting to other regulators or grant-making bodies,
   • a history of reporting under a substituted accounting period,
   • references to the substituted accounting period in the charity’s governing documents, legal or internal reporting requirements, and
   • the reporting period of related or associated charities.

Principle 2: Substituted accounting periods will not be approved, or conditions may apply, if public trust and confidence is affected

9. The Commissioner will not approve a substituted accounting period where this might affect transparency and negatively impact on public trust and confidence in the sector.
10. As noted above, the Commissioner may impose conditions on the approval of a substituted accounting period (section 60-90). To ensure a smooth transition from one reporting period to the next with no reporting gaps when a charity changes accounting periods, the Commissioner may require a charity to use a transitional reporting period of more or less than 12 months, depending on the specific change to the charity’s reporting period.
11. The transitional reporting period will start the day after the charity’s previous reporting period ends and will finish on the last day of the new substituted accounting period.
12. For example, a charity may change its financial year end from 30 June to 31 December, with the first substituted accounting period ending 31 December 2021. In this case, the ACNC would require the charity to submit the 2021 Annual Information Statement and (if applicable) annual financial report for an 18-month period from 1 July 2020 until 31 December 2021. Subsequent statements and reports would be required for a 12-month period (see the ACNC’s Annual Information Statement policy).
13. The transitional period imposed by the Commissioner will be consistent with the requirement that charities submit an AIS for each ACNC reporting period. Charities with approved substituted accounting periods cannot use a transitional reporting period that would skip an ACNC reporting period.
14. The Commissioner has the power to impose other conditions when approving a substituted accounting period, taking into account factors that could affect public trust and confidence in the sector.

Revocation of a substituted accounting period

15. If the Commissioner has evidence that a registered charity has not complied with the conditions for approval of a substituted accounting period, the Commissioner may revoke the approval of the substituted accounting period (subsection 60-90(3)). If this occurs, the default reporting period (financial year ending on 30 June) will apply to the registered charity.
16. A registered charity may also seek to return to the default reporting period (financial year ending 30 June) if the Commissioner has previously approved a substituted accounting period. The charity can apply via the ACNC Charity Portal, providing reasons for revoking their approved substituted accounting period and the proposed reporting arrangements for the future reporting periods. In assessing the application, the Commissioner will have regard to the principles referred to above.
17. In determining the reporting requirements that arise from returning to the default reporting period, the Commissioner may also impose conditions so that the ACNC reporting obligations will align with the charity’s reporting arrangements. The ACNC will ensure that there are no gaps in the time periods covered by reports submitted and to be submitted by the charity.
18. For example, a charity may change its existing approved substituted accounting period ending 31 December back to a standard financial year ending 30 June, with the first standard financial year ending 30 June 2021. In this case, the ACNC would require the charity to submit an Annual Information Statement and (if applicable) financial report for a 6-month period starting on 1 January 2021 and ending 30 June 2021. Subsequent statements and reports would be required for a 12-month period. Note that in this example, the charity could not use a transitional period of 18 months, such as 1 January 2019 to 30 June 2021, because this would result in the charity skipping the 2020 reporting period.

References

• Australian Charities and Not-for-profits Commission Act 2012 (Cth)
• CPS 2013/02 Commissioner’s Policy Statement: Annual Information Statement
• CPS 2012/03 Commissioner’s Policy Statement on Decision-making
• ACNC Policy Framework