Unpacking recent ACNC guidance on complex structures for charities

Last month, the charities regulator, Australian Charities and Not-for-Profits Commission (ACNC) released guidance on good governance for complex charity structures. In this article, we outline key takeaways for charities and provide other NFP updates.

What are complex structures?

Charities often establish separate entities within a group to manage different risks, different services across different locations, tax reasons and separating charitable assets from other trading activities. For example, a religious-based charity may have established a separate entity to run an opportunity shop, or a community housing provider charity may have established a special purpose vehicle to build and operate a social and affordable housing project.   

ACNC Commissioner Sue Woodward AM said, “While operating within a complex structure is not in itself a problem – and the ACNC recognises there are often good and legitimate reasons for charities to do so – it is important that any charity operating within such a structure takes extra care.”

At the group level, this may result in complexity and confusion about the delineation of roles and responsibilities.

Whilst not defined in the ACNC Act or Regulations, the ACNC describes complex structures as when when multiple entities operate within a ‘group’ and feature one or more of the following characteristics:

Organisation

• Mixture of entity types, including trusts, incorporated associations, unincorporated bodies and companies limited by guarantee.
• Mixture of charitable and non-charitable entities, including for-profits.
• Mixture of entity sizes, indicating different governance needs.

Oversight

• Use of common directors, boards or committees across multiple entities.
• Uncertainty or a lack of transparency about who controls an entity.
• Significant or frequent related party transactions.

Operations

• Some entities are subject to greater regulatory oversight and obligations.
• Entities work across multiple jurisdictions, including overseas.
• Entities share assets, resources, including employees and volunteers.

ACNC governance practices for complex structures

The ACNC highlights the following seven areas of governance where charities with a complex structure need to pay closer attention.

1. Policies and procedures

Each charity in a complex structure should consider if it is appropriate to adopt or develop common or bespoke policies and procedures to ensure they are fit for each charity’s purpose. Ensuring staff and volunteers follow the policies and procedures (which should be regularly reviewed and updated), is critical to demonstrate compliance with ACNC Governance Standards and External Conduct Standards.

2. Record-keeping

Each charity in a complex structure should keep accurate, explanatory and contemporaneous records about its own finances and operations. This is particularly critical when decisions and records involve multiple entities in the structure. Record-keeping is also one of the ACNC’s 2025-2026 regulatory priority areas, which also includes protecting charities from terrorism financing risks.

3. Common boards and directorships

If individuals hold common directorships, they should understand which entity they are acting for at a particular point in time so they can discharge their obligations. This includes the duty to act in the charity’s best interests, especially when decisions and transactions impact multiple entities in the structure. Charities should promote a culture of disclosure and good conflict of interest (and conflicts of duty) management practices.

The use of common boards and common directorships may also result in the potential for board over commitment. It is important for charities to support their board directors with sufficient resources so they can properly discharge their duties.

4. Board meetings

Each entity in a complex structure should hold separate board meetings. Directors must understand the impact of their decisions on each and every charity within the complex structure, especially those considering finances and planning operations. 

Meetings do not have to be held in separate places or on different days. A more practical alternative may be to simply hold meetings one after the other and ensure meeting agendas and minutes document key details such as time, place and attendees.

5. Roles within complex structures

Charities should maintain an accurate organisational chart outlining their place in the complex structure and their relationship with other entities in the structure. This can also help ensure volunteers, staff and board directors understand responsibilities around governance and decision-making, as well as clarifying individual roles, responsibilities, and reporting lines. This is crucial when certain work is conducted across multiple entities. For directors, this also means clarity on which charity they are representing or making a decision on behalf of, within the complex structure.

6. Conflicts of interest

Each charity in a complex structure should have appropriate processes to ensure that conflicts of interest are disclosed, whether perceived or actual (i.e. personal or familial relationships that exist across entities). Charities should ensure there are adequate disclosure measures in place to make it easy for anyone to declare a conflict of interest, including as a standing agenda item in meetings.

7. Related party transactions

Charities in a complex structure should ensure that any related party transactions are identified and managed to ensure the charity remains focused on its purposes. The ACNC recommends all charities in a complex structure regularly maintain a register of related party transactions. Charities must ensure that related party transactions further the charity’s purposes for the public benefit. This includes ensuring the related party transaction is made either on arm’s length terms or on terms more favourable to the charity.

Other NFP updates

• ATO NFP self-review return – The ATO has recently produced a webinar for step-by-step guidance that shows non-charitable NFPs how to set up digital access and lodge their 2024–25 self-review return by the 31 October deadline. If an NFP isn’t a registered charity or doesn’t meet one of the eight categories (i.e. community service, cultural, sporting etc), the organisation might be taxable.
• Productivity Commission inquiry on the five pillars of productivity – Last week, the AICD lodged its submission to the Productivity Commission interim reports on productivity. The AICD strongly supported greater alignment in quality and safety regulation across the care economy. Streamlining regulation will improve efficiency and deliver better outcomes for care users. Treasury is also currently consulting on a national approach to worker screening in the care economy.
• Regulatory reform to reduce red tape and ease burden on charities – In their recent letter to the Treasurer, the ACNC highlighted it would soon update its Commissioner’s Interpretation Statement on the provision of housing to support investment in social and affordable housing models, specifically to cover key worker housing and the Housing Australia Future Fund. The ACNC is also working with ASIC to ensure exemptions from ASIC fees for charities are more accessible and better understood.
• Australia's first National Climate Risk Assessment (NCRA) – Last week, the Australian Climate Service highlighted that climate change is impacting on the capacity of NFPs to deliver services. These include “harms to staff, damaged infrastructure, diversion of resources into disaster response and recovery, increased financial costs, lost income, legal liabilities.”
• After the merger: insights from not-for-profit leaders – A recent Social Ventures Australia article shared learnings from leaders across the disability, aged care, community services, and justice and legal sectors on what worked in their mergers. This included appointing the board and leadership early and acknowledging the pace of implementation can take longer in the NFP sector.