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.
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.
Red tape relief
The new thresholds apply when charities submit their 2022 AIS. The majority of charities report to us on a financial year basis, so their 2022 AIS covers a period between 1 July 2021 and 30 June 2022, due for submission by 31 December this year. For those reporting on a calendar year basis, the change will cover 1 January–31 December 2022, to be submitted by 30 June 2023.
Charity directors should ensure key staff are aware of the reporting changes in preparation. The 2022 AIS form will be released later this year along with detailed instructions and guidance.
Importantly, the change strikes a delicate balance. It reduces the regulatory burden on charities, yet also maintains an appropriate level of transparency of their operations and finances, as the community rightly demands.
The latest ACNC official data shows strong community confidence in the sector, with $11.8b in donations as one strong indicator. Accountability and transparency are fundamental in building and maintaining the confidence on which the sector depends to attract donations, volunteers and funding to provide critical services.
Therefore, the ACNC welcomes the red tape relief these changes will bring for many charities — and the resulting benefits for the community. We continue to work with governments and regulators to harmonise and streamline reporting requirements across Australia.
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