The government has released its response to the Australian Charities and Not-for-profits Commission (ACNC) legislation review, vowing to reduce the compliance burden for the sector.
It has supported a recommendation for registered entities to be required to report based on size, in a bid to reduce the number of charities required to provide financial reports.
The ACNC’s recommendation called for the adjustment of revenue thresholds for minimum reporting requirements, proposing thresholds of less than $1 million for a small entity, from $1 million to less than $5 million for a medium entity, and $5 million or more for a large entity.
The government has also agreed in principle to ease the minimum reporting requirements for small charities by permitting them to provide reports consistent with their accounting choice.
It is expected to benefit over 18,000 charities which currently use cash accounting.
The government has noted the ACNC’s recommendation to develop a single, national scheme for charities and not-for-profits, noting that it will consult with states and territories on the development of a common statutory definition of charity across jurisdictions to replace 45 existing definitions.
“This will reduce complexity and regulatory burden for charities when seeking tax concessions,” the government said in its response.
However, the government has rejected the recommendation for the ACNC to be given oversight of not-for-profits with annual revenue of $5 million or more in order to access tax concessions, noting that the ATO should continue to regulate eligibility for income tax exemptions and other tax concessions.
Speaking to Accountants Daily, CPA Australia general manager of external policy Paul Drum said the government’s response was encouraging, but he noted that there was still “much work” to be done before changes were implemented.
“For accounting professionals working in or with the 57,000-plus not-for-profits and charities in Australia, they should note that while some of the responses signal changes to the financial reporting obligations, this will require further consultation and negotiation with states and territories to ensure alignment,” Mr Drum said.
“The proposal to raise reporting thresholds and balancing red tape and transparency considerations is one that CPA Australia sees as very positive, but again will also require consultation with stakeholders and working closely with federal, states and territories to improve harmony and avoid unintended consequences.
“We recognise that getting these changes through will take time, but it is more important to get it right.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.