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Close to 7,000 charities are set to see a reduction in accounting fees as the government looks to revise current financial reporting thresholds.
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Treasury floats increase to charities’ financial reporting threshold
23 February 2021
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A consultation paper released by the Treasury now proposes to raise the annual revenue financial reporting thresholds for Australian Charities and Not-for-profits Commission–registered charities to less than $500,000 for a small entity, from $500,000 to less than $3 million for a medium entity, and $3 million or more for a large entity.
The increase is expected to see more than 10 per cent of the sector benefit from a decrease in professional service expenses by reducing their reporting requirements.
According to the Treasury, the increase from the current small entity threshold of less than $250,000 to $500,000 will see roughly 3,300 charities move from medium entities to small entities, and therefore no longer required to produce reviewed financial reports.
These charities are expected to save around $2,400 in accounting expenses annually.
Likewise, the increase of the large entity threshold of more than $1 million to more than $3 million will see nearly 3,500 charities reclassified as a medium entity, saving them from being required to produce audited financial reports.
The Treasury estimates that these charities will save around $3,000 in professional service expenses each year.
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“This will allow these charities to redirect their resources to fulfilling their charitable purpose, including helping vulnerable Australians,” the Treasury said.
“This will support the charity sector at a time when, for many charities, donations have plummeted, access to volunteers is constrained and demand for services has increased.”
Despite the proposed increase, they remain lower than those recommended by the ACNC’s 2018 review. It had called for the thresholds to be increased 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.
CPA Australia general manager of external affairs Dr Jane Rennie said that while the proposed threshold increase for registered charities was a step in the right direction, an extension to the broader not-for-profit sector would have been preferable.
“The not-for-profit sector is one of Australia’s largest employers and a major consumer of accounting services. In some cases, these services are provided at no cost by members of the profession,” Dr Rennie said.
“We’ve got members whose not-for-profit clients need up to seven different licences to provide the same services across Australia due to cross-border regulations. They’re basically fighting for vulnerable Australians with one hand tied behind their back.
“If these proposals are legislated, accountants who support smaller charities will notice a significant reduction in regulatory administration and financial reporting.”
View the Treasury’s consultation paper here.
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