The Australian Charities and Not-for-profits Commission is urging charity leaders and their accountants to ensure they have systems in place to comply with amended reporting regulations that come into effect from the 2022 Annual Information Statement (AIS) reporting period, and later.
Last month, amendments to regulations were passed affecting:
- charity size thresholds based on revenue
- disclosure of remuneration for key management personnel, and
- disclosure of related party transactions.
ACNC Director Reporting Mel Yates said it is important that charity leaders prepare for these changes as soon as they can.
“Charity leaders need to speak to their accountants right now. They need to ask them if they have the appropriate systems, processes and controls in place to capture transactions that these amendments require to be captured,” he said.
Charity size threshold changes
A charity’s ACNC financial reporting obligations depend on whether it is a small, medium or large charity, based on annual revenue. Medium and large charities must submit an annual financial report, while small charities are only required to submit an Annual Information Statement.
From the 2022 Annual Information Statement reporting period revenue thresholds will rise for all three categories as follows:
|Charity Size||Defined now as:||From 2022 Annual Information Statement reporting period, defined as:|
|Small charity||Revenue under $250,000||revenue under $500,000|
|Medium charity||Revenue of $250,000 or more, but under $1 million||revenue of $500,000 or more, but under $3 million|
|Large charity||Revenue of $1 million or more||revenue of $3 million or more|
“The changes aim to reduce the red tape burden for charities. A larger number of charities will fall into the small category, so they will have fewer reporting obligations than they would have as a medium charity,” Mr Yates said.
Large charities: Disclosure of key management personnel remuneration
The amendments will also mean new obligations for large charities to disclose remuneration of key management personnel in special purpose financial reports. Key management personnel are senior managers and charity leaders such as directors, CEOs, and board members. This applies from the 2022 AIS reporting period.
Medium and Large charities: Disclosure of Related Party transactions
For medium and large charities, there will be increased requirements to disclose related party transactions in special purpose financial statements. This change applies from the 2023 AIS reporting period.
First time disclosures of remuneration and related party transaction – no comparative data needed
However, the ACNC Commissioner has exercised discretion for charities preparing special purpose financial statements for the first time.
The Commissioner has decided that charities preparing special purpose financial statements for the first time under the amended regulations will not have to provide comparative information for the preceding period in applying the relevant Australian Accounting Standard. They will only need to provide the disclosures for the reporting period in the first year of adoption.
The ACNC is developing comprehensive guidance to help charities and advisers understand how to meet these new requirements.