We take the definition of ‘key management personnel’ from Australian Accounting Standards AASB 124 (paragraph 9) and AASB 1060 (paragraph 193):
'Key management personnel are the people with authority and responsibility for planning, directing and controlling the activities of an entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.'
They are the senior decision makers in a charity and do not include team leaders or operational managers.
Examples of key management personnel are:
- Responsible People (for example, board, committee members, trustees)
- senior staff (for example, the CEO, chief financial officer, chief operating officer).
Key management personnel may be employed by a charity or may be provided to a charity by a separate ‘management entity’.
Remuneration
Remuneration includes all forms of consideration paid, payable or provided by the charity, or on behalf of the charity, in exchange for services rendered to the charity.
This includes:
- wages, salaries and employer superannuation contributions, paid annual leave and paid sick leave and bonuses
- non-monetary or fringe benefits such as medical care, housing, cars and free or subsidised goods or services
- post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care
- long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits
- termination benefits.
Separate management entity
Some charities may have key management personnel who are not employees of the charity but are provided to the charity by a separate management entity. For example, an accounting firm may provide a charity with a chief financial officer or company secretary in return for a fee.
If the separate management entity also provides other services, such as bookkeeping or IT support, and they are covered by a single fee, the charity can use a reasonable method to calculate the cost of the key management personnel (or simply disclose the total fee if that is not practicable).
For example, it can calculate it as an amount by the hour or as a percentage of the single fee.
Which charities report key management personnel remuneration
Only certain charities need to report key management personnel remuneration.
- Small charity: no requirement to submit an annual financial report, so there is no requirement to report key management personnel remuneration.
- Medium charity: If it prepares:
- General Purpose Financial Statements: must report key management personnel remuneration.
- Special Purpose Financial Statements: reporting key management personnel remuneration is optional.
- Large charity: must report key management personnel remuneration (unless an exemption applies).
Charity size is based on annual revenue.
A Basic Religious Charity, regardless of size, does not have to report key management personnel remuneration. However, if it chooses to submit a financial report, it must follow this guidance.
Specific requirements for annual financial reports
Reporting key management personnel remuneration in the annual financial report is only required for large charities (and medium charities that prepare General Purpose Financial Statements).
The requirements differ depending on whether the charity:
- prepares general purpose financial statements (GPFS) or special purpose financial statements (SPFS)
- has more than one remunerated key management personnel
- has key management personnel provided by a separate management entity.
General purpose financial statements (GPFS)
Charities that are reporting entities and prepare GPFS must report key management personnel remuneration in their financial reports in accordance with Australian Accounting Standards AASB 124.
For charities that prepare General Purpose Financial Statements – Simplified Disclosures (GPFS-SD), reporting must be in accordance with Australian Accounting Standards AASB 1060.
This includes amounts incurred for key management personnel services that are provided by a separate ‘management entity’. These amounts are shown in a separate disclosure note in the financial report.
Where the charity has no remunerated key management personnel, we recommend including a disclosure note in the financial report about this, for example ‘The charity had no remunerated key management personnel’.
Special purpose financial statements (SPFS)
Large charities that prepare SPFS generally have to report key management personnel remuneration in accordance with either AASB 124 or AASB 1060 (paragraphs 193-196).
This includes amounts incurred for key management personnel services that are provided by a separate ‘management entity’. These amounts are shown in a separate disclosure note in the financial report.
However, there are exceptions:
- If a charity has only one key management person who is remunerated and does not have key management personnel services provided by a ‘separate management entity’, it is not required to declare the person’s remuneration in the annual financial report.
- Ordinarily, paragraph 17(a)–(e) of AASB 124 requires disclosure of following remuneration sub-categories:
- short-term employee benefits
- post-employment benefits
- other long-term benefits
- termination benefits
- share-based payment.
However, the ACNC Commissioner exercised discretion that allows charities that prepare SPFS and apply AASB 124 to only disclose the total amount of key management personnel remuneration. A charity can choose to voluntarily apply AASB 124 in full if it wants to.
- The ACNC Commissioner exercised discretion that allows charities that prepare SPFS for the 2022 reporting period to not provide a comparative figure of key management personnel remuneration from the 2021 reporting period.
Where the charity has no remunerated key management personnel, we recommend including a disclosure note in the financial report about this, for example ‘The charity had no remunerated key management personnel’.
Where a charity with only one remunerated key management personnel member (not provided by a separate management entity) prepares SPFS and chooses not to disclose total key management personnel remuneration, we recommend including a disclosure note about this, for example ‘Total key management personnel remuneration is not disclosed because the charity only had one remunerated key management personnel member’.
Example case study
A charity had annual revenue of $4 million in its 2022 reporting period.
None of its Responsible People (its board members) are paid. It has a senior management team comprising one executive director and one financial controller. The senior management team received the following remuneration in the 2022 reporting period:
- salary of $99,000 each, including employer superannuation contributions
- the executive director was provided with a car, for which the costs, including fringe benefits tax, totalled $11,000
- the financial controller was paid $1,000 allowance for professional development.
The charity calculates the amount of key management remuneration was $210,000 ($99,000 x 2 + $11,000 + $1,000).
Scenario 1
The charity determined that it is a reporting entity and prepared GPFS–SDR in accordance with AASB 1060.
Note 16: Key management personnel remuneration
| 2022 | 2021 | |
|---|---|---|
| Total key management personnel remuneration | $210,000 | $208,000 |
Scenario 2
The charity determined that it was not a reporting entity and prepared SPFS in accordance with AASB 124 or AASB 1060.
The charity did not provide a comparative figure of key management personnel remuneration from the 2021 reporting period because the ACNC Commissioner exercised discretion that allows charities that prepare SPFS to not provide one for the 2022 reporting period.
Note 16: Key management personnel remuneration
The remuneration paid to key management personnel during the year was $210,000.
Because the ACNC Commissioner exercised discretion to allow a charity not to comply with disclosures set out in paragraph 17(a)-(e) of AASB 124, the charity only provided its total key management personnel remuneration.
See more information about how charities that prepare SPFS can apply AASB1060.
An example for the basis of preparation when a charity chooses to apply AASB 1060 in SPFS:
‘This financial report is a Special Purpose Financial Report prepared in accordance with the disclosure requirements of AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities to the extent applicable as required by the ACNC Regulations 2022.’
Scenario 3
In addition to the two executives, the charity also engaged an external entity, ABC Ltd, to provide key management services. The charity paid ABC Ltd $250,000 for this.
Note 16: Key management personnel remuneration
| 2022 | 2021 | |
|---|---|---|
| Total key management personnel remuneration | $210,000 | $208,000 |
| Key management personnel services provided by ABC Ltd | $250,000 | $0 |
| Total key management personnel remuneration | $460,000 | $208,000 |
In this scenario, the charity prepared GPFS for the 2022 reporting period and reported total key management personnel remuneration of $460,000. It was also required to provide a comparative figure with the 2021 reporting period.
If the charity prepared SPFS, it would report total key management personnel remuneration of $460,000 but the comparative figure for the 2021 reporting period would not be required. If the charity had the comparative figure, it would be encouraged to report it.
Scenario 4
The financial controller left the charity during the 2022 reporting period. The executive director became the charity’s sole remunerated key management person. The charity determined that it was not a reporting entity and prepared SPFS.
Because the charity had two remunerated key management personnel during the 2022 financial year, it was required to disclose its aggregated key management personnel remuneration in its annual financial report.
The disclosure exemption does not apply if, despite having no more than one remunerated KMP at any given moment during the reporting period, there is more than one individual remunerated KMP at different times within that period.
In this scenario, if the executive director continued to be the sole remunerated individual for the entire 2023 financial year, the charity would not be required to disclose its key management personnel remuneration in its 2023 annual financial report.