Treasurer Josh Frydenberg has announced that a new agreement signed by state and territory treasurers will see charities granted relief from financial reporting requirements.
Details have yet to be released in full, but Mr Frydenberg said the Council on Federal Financial Relations (CFFR) will develop a framework by mid-2021 to lift the financial reporting thresholds for the charity sector.
The threshold change will see over 3,000 charities no longer being required to produce reviewed financial statements, with Mr Frydenberg claiming that it will help each charity save around $2,400 in accounting expenses annually.
Further, approximately 2,000 charities will no longer be required to produce audited financial statements, saving them around $3,000 annually.
The change comes after a 2018 independent review of Australian Charities and Not-for-profits Commission Legislation recommended that minimum reporting revenue threshold be lifted to 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.
At present, charities with annual revenue below $250,000 are classified as small and are not required to submit an annual financial report. Medium charities with a turnover of less than $1 million, and large charities with revenues of more than $1 million, are currently required to submit a financial report that is subject to an audit or review.
“Inconsistent and outdated regulations across jurisdictions create an estimated regulatory burden of $13.3 million a year for the charitable fundraising sector,” Mr Frydenberg said.
“The reforms will simplify financial reporting requirements and maintain transparency to ensure charities can dedicate more of their time and resources to assist vulnerable communities.”
The CFFR will also establish a cross-border recognition model that will provide a single registration point, reducing the costs and administrative burdens for charitable fundraisers that operate across multiple jurisdictions.
CPA Australia general manager of external affairs, Dr Jane Rennie, said the reforms were a right step in helping charities better support those in need.
“Existing cross-border regulations and financial reporting requirements increase the operating costs for not-for-profits including charities, meaning that less money reaches those in need,” Dr Rennie said.
“This year, through natural disasters and a pandemic, not-for-profits have battled unnecessary bureaucracy while helping hundreds of thousands of vulnerable Australians. It was time the government stepped in and took positive steps to support the sector.
“As well as helping hundreds of thousands of vulnerable people, Australia’s charities and not-for-profit sector is a major employer and economic contributor, and has been hard hit by the pandemic. These reforms will make it easier for the sector to survive and help those in need.”
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.