Size matters

Australian charities will soon benefit from major red tape cuts, writes Australian Charities and Not-for-profits Commissioner Dr Gary Johns.

Charity directors will be delighted to learn there is a major event on the horizon that will reduce the reporting burden for thousands of Australian charities. The thresholds for determining a charity’s size are changing, and when it comes to meeting reporting obligations, size matters. This is great news for those charities that will see their sizes shift downward to small and medium — and consequently have reporting obligations to the ACNC reduced. Valuable time and resources will be freed up that can be redirected towards vital charitable work.

Reducing red tape for the sector is a crucial part of our work at the ACNC — set out in our objectives as: “to promote the reduction of unnecessary regulatory obligations on the sector”. We want charities to focus their efforts and funds on providing services rather than being bogged down in unnecessary administration tasks. Further, we strive to support a vibrant, robust and innovative sector. The coming threshold size change represents significant progress on each of these objectives.

Reporting requirements

To retain registration, charities are obligated to report to the ACNC every year. Annual requirements differ, depending on whether a charity is deemed small, medium or large — based on its annual revenue. Regardless of size, all must submit an annual information statement (AIS) that captures some financial data. Medium and large charities must also submit a separate financial report. The financial report of a large charity must be audited; that of a medium charity can be either reviewed or audited.

It’s appropriate that large and medium charities have more substantial financial reporting obligations than small ones. Many small charities have minimal revenue and are entirely run by volunteers. Indeed, 51 per cent of all charities operate without any paid staff. Our latest Australian Charities Report showed small charities comprise 65 per cent of the sector; medium charities 16 per cent; and large charities 19 per cent. The altering of charity size thresholds (see table, right) will see about 2500 charities no longer required to produce a financial report each year as they shift into the small category. They will only be required to submit financial data in their AIS. Further, around 2700 charities will shift to the medium category — allowed to submit a reviewed financial report rather than an audited financial report.