Charity sector threshold reforms open for consultation

New legislation proposes to raise the revenue thresholds defining small, medium and large charities.

by | 22 Sep, 2021

The Australian Treasury has opened the consultation process on exposure draft legislation to reduce red tape within the charity sector.

The primary change of the proposed legislation would increase the revenue thresholds for charitable not-for-profit entities, with small charities to be defined as those with an annual revenue below $500,000, up from the current threshold of $250,000.

Medium-sized charities, meanwhile, would now be defined as those operating with annual revenue between $500,000 and $3 million.

The new legislation would also require all registered charities to disclose related party transactions, with small registered charities to make a simplified disclosure involving a brief description of related party transactions.

An exemption from the requirement to disclose related party transactions would be provided to some charities in relation to aggregate remuneration paid to responsible persons and senior executives. This would apply in the instance where the charity has only one remunerated key management person, to protect privacy interests.

The reforms arise from the government’s agreement to recommendations following the Australian Charities and Not-for-profits Commission Legislation Review of 2018.

Raising the annual revenue thresholds for small and medium entities would have a direct impact on a charity’s annual reporting obligations. Under the changes, roughly 2,500 small charities would no longer be required to produce annual financial reports. The explanatory statement accompanying the proposed legislation estimates this will save these charities around $2,400 in annual accounting fees.

Moreover, at least 2,700 registered entities will be permitted to have their financial statements reviewed rather than audited, saving around $3,000 in accounting expenses annually.

The government also hopes that the new measures will bring greater transparency to the sector, increasing public confidence in the accountability of registered entities with greater disclosure requirements for related party transactions.

Interested parties can provide feedback to the draft legislation through 8 October.

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