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Equity Trustees ensuring your sub-fund or perpetual charitable trust is compliant

Part of our role at Equity Trustees is to ensure that your sub-fund or perpetual charitable trust is compliant with all the relevant laws and regulations and to stay up-to-date with regulatory changes. the following have taken place in recent months.

1. Increased reporting thresholds for the FY22 year

The charitable sector regulator, the Australian Charities and Not-For-Profit Commission (ACNC), requires each charitable trust and charity to complete annual financial reporting. 

From a giving perspective, this provides comfort that the charities you donate to are operating prudently; from a charitable trust perspective it ensures that trusts are compliant with regulatory requirements.

The level of detail needed by the ACNC depends on whether a charitable trust’s revenue is small, medium or large. From this financial year, revenue thresholds will increase.  This intention is to reduce the red tape burden for smaller charities by reducing reporting obligations, while still maintaining oversight of the sector.

For example, small charities (and charitable trusts) were previously defined as annual revenue under $250,000.  From 2022, the threshold will be $500,000, which means that charitable trusts with revenue under $500,000 will only need to submit an Annual Information Statement (a short form questionnaire requiring basic information).  However, ‘small’ public or private ancillary funds, must still complete an audited financial report.   

The definition for ‘medium’ is now trusts with revenue between $500,001 and $3m.  ‘Large’ is now defined as trusts with revenue of $3m+.  Medium and Large charitable trusts must submit an audited annual financial report in addition to the Information Statement. 

The Equity Trustees Charitable Foundation (ECF) which has around 180 sub-funds, is currently over $200m and is therefore considered a ‘large’ trust.

2. Related Party Transactions

Amendments to the ACNC regulations have come into force around the reporting of related party transactions.  

Related Party Transactions are defined as ‘a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged’.   

The changes aim to provide greater accountability to donors, beneficiaries and the public. Related party transactions are of interest to the ACNC because they may impact a responsible person’s ability to act in the best interests of the charity (or charitable trusts).  

The new reporting requirements will commence from 1 July 2023 (reporting against the FY22 financial year), and only required for medium and large entities (per the new definitions ). We are still awaiting further guidance from the ACNC around reporting and disclosure requirements. 

3. Director Identification Numbers 

As part of the Modernising Business Registers program, directors of charities that are a company, a registered Australian body, or an Aboriginal and Torres Strait Islander corporation will need to apply for a Director Identification Number (Director ID).

Director IDs are required for directors of a company under the Corporations Act 2001.  Existing directors must apply for their ID by November 2022.  Newly appointed directors between November 2021 and April 2022 must apply within 28 days of appointment.  New directors from 5 April 2022 must apply for their ID before appointment. 

This change will not affect most of our charitable trusts.  Your Relationship Manager will be in touch if this rule applies to your giving vehicle. 

4. Charity fundraising reform

The Equity Trustees Charitable Foundation (ECF) and a select number of other trusts managed by Equity Trustees, is a public ancillary fund, and like a charity, can collect donations from members of the public.  

Currently, there are different fundraising regulations across each state and territory in Australia.  To date, public ancillary funds, as well as charities, have been required to apply for a separate fundraising licence in each location where they fundraise.  This imposes costs in terms of time and resources on the fundraising entity.  

The Morrison Government has agreed with all states and territories to develop a national fundraising framework which will reduce red tape while retaining safeguards to maintain public confidence.  

Other changes specific to charities 

There are some changes specific to for-purpose organisations, for example some charities must now have a whistle-blower policy from 1 January 2022.

In September 2021 a decision by the ACNC to deny a global anti-poverty charity access to public benevolent (PBI) status because its activities include advocacy, was rejected by the Administrative Appeals Tribunal. This decision may have implications on ACNC guidance policies in the future.

In December 2021, the Electoral Legislation Amendment (Political Campaigners) Bill 2021 was passed in the Upper House, which lowers the threshold for entities such as charities to disclose political spending and will force charities to reveal their donors with retrospective effect.