Commissioner's Policy Statement: Applying to keep charity size

This Commissioner’s Policy Statement is issued under the authority of the Commissioner and should be read together with the ACNC Policy Framework, which sets out the scope, context and definitions common to our policies.

Policy statement

This Commissioner’s Policy Statement sets out the ACNC’s policy for handling applications by charities under section 205-25 of the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act) to continue to be classified as a certain size if a one-off increase in revenue moves the charity into a higher reporting tier for just one reporting period.

Principles

• Principle 1: Balancing our objectives to promote public trust and confidence in charities and to reduce unnecessary regulatory burdens for charities.

Context

1. Division 60 of the ACNC Act bases charities' reporting obligations on charity size. Charity size is determined by total annual revenue. All charities are required to submit an Annual Information Statement, however, Basic Religious Charities (as defined in section 205–35 of the ACNC Act) are not required to provide financial information in Annual Information Statements.
2. Division 60 of the ACNC Act also sets out different requirements for financial reporting, depending on the size of the charity. Charity size is determined in accordance with the revenue thresholds set out in section 205-25 of the ACNC Act.
3. Division 205 of the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth) (ACNC Regulations) sets out new charity size revenue thresholds for the 2022 and later reporting periods.
4. From the 2022 reporting period, financial reporting requirements that apply to charities are:
   • for small charities (with annual revenue of less than $500,000) and Basic Religious Charities — no financial reports are required
   • for medium charities (with annual revenue of $500,000 or more but less than $3 million) — financial reports that are either reviewed or audited
   • for large charities (with annual revenue of $3 million or more) — audited financial reports.
5. Prior to the 2022 reporting period, different thresholds applied:
   • for small charities (with annual revenue of less than $250,000) and basic religious charities — no financial reports are required
   • for medium charities (with annual revenue of $250,000 or more but less than $1 million) — financial reports that are either reviewed or audited
   • for large charities (with annual revenue of $1 million or more) — audited financial reports.
6. Charity size also affects the amount of time a charity has in which to notify the ACNC of certain changes — including changes to the charity’s legal name, Address For Service, Responsible People and governing rules — and to correct a material error in an Annual Information Statement or financial report (sections 65-5 and 60-65).
7. Under Subdivision 175-C of the ACNC Act, charities can incur administrative penalties if they fail to lodge required documents on time. The amount of the penalty depends, in part, on the size of the charity.
8. Section 205–25(5) of the ACNC Act permits the Commissioner to continue to treat a registered charity as either a small or medium charity for a reporting period, even if their revenue for the period suggests they should be categorised differently, if the Commissioner is of the opinion that:
   1. the charity was of that size for the previous reporting period, and
   2. the charity, while not being of that size for the current reporting period, is likely to return to that size during the next reporting period.
9. The Commissioner does not have the discretion to continue to treat a charity as a smaller size if both of the conditions listed above are not met.
10. A charity can apply to be treated as a small or medium charity using approved Form 4D: Apply to keep charity size.
11. The ACNC will generally approve a charity's request to continue to be classified as a certain size, as long as the charity provides information satisfying the Commissioner that:
    • there has been an event or events that are unlikely to be repeated in the future, but that have resulted in the charity moving into a higher tier for the purposes of reporting to the ACNC during that reporting period, and
    • the charity is likely to return to its previous size in the next reporting period.
12. For example, in the 2021 reporting period, Charity A was a medium charity with revenue of $750,000. In the 2022 reporting period, Charity A remained a medium charity, with revenue of $800,000. However, Charity A’s projected revenue for the 2023 reporting period is $300,000, a figure which would see it classed as a small charity in this period. In this case, the Commissioner does not have the discretion to continue to treat the charity as a small charity for the 2022 reporting period because it was not a small charity in the 2021 reporting period, as required by Condition 1 above.
13. However, in the 2021 reporting period, Charity B was a small charity with revenue of $150,000. In the 2022 reporting period, it received a bequest of $500,000 in addition to other revenue totalling $160,000. This increase to $660,000 in total revenue pushed it into the category of a medium charity for that reporting period. Charity B is not expecting any further bequests, and its projected revenue for the 2023 reporting period is $170,000. This decrease would see it return to the small charity category for that reporting period. In this case, the Commissioner does have the discretion to continue to treat the charity as a small charity for the 2022 reporting period if it makes a request using approved Form 4D.
14. In the case of the reporting period during which a charity is first established, the Commissioner does not have the discretion to treat a newly established charity as a smaller size than that determined by its revenue for that period. This is because the charity was not of a smaller size for the previous reporting period as it did not exist. Because of this, Condition 1 above is not satisfied.
15. The previous reporting period can include a reporting period prior to the date a charity is actually registered by the ACNC if the charity was operating in that previous reporting period prior to its registration with the ACNC and the ACNC approved backdating of registration to that previous reporting period.
16. In considering a charity’s request under section 205-25(5), the Commissioner will have regard to the Commissioner’s Policy Statement on Decision-making (CPS2012/03).

Principles

Principle 1: Balancing our objectives to promote public trust and confidence in charities and to reduce unnecessary regulatory burdens for charities.

17. In performing their functions and exercising powers, the Commissioner must have regard to the need for charities to be transparent and accountable to the public (including donors, members and volunteers) by ensuring the public has access to information about charities (subsection 15-10(b)) and the benefits gained from providing information to the public (subsection 15-10(c)). It is expected that greater transparency and accountability will lead to increased public trust and confidence in the sector.
18. The Commissioner will balance the need for public trust and confidence in the sector against the ACNC’s object of promoting the reduction of unnecessary regulatory obligations (section 15-5). Section 205–25(5) strikes this balance by enabling the Commissioner to continue to treat a charity as a certain size when there are unusual variations in a charity’s annual revenue.

References

• Australian Charities and Not-for-profits Commission Act 2012 (Cth) Division 60, Subdivision 175-C, sections 205-25, 205-35
• Australian Charities and Not-for-profits Commission Regulation 2013 (Cth) Division 205
• Form 4D: Apply to keep charity size
• Commissioner’s Policy Statement: Duty to notify
• Commissioner’s Policy Statement: Decision-making