Reforms a gift for nation’s charities

Josh Frydenberg has struck a deal with state and territory treasurers to roll out major reform across the charities sector.

Treasurer Josh Frydenberg. Picture: Gary Ramage

Josh Frydenberg has struck a deal with state and territory treasurers to roll out major reform across the charities sector, cutting red tape for thousands of not-for-profits and removing strict financial reporting rules for more than 5000 charities.

With more than 57,000 registered charities contributing 8 per cent of the nation’s GDP and employing 1.3 million workers, the shake-up comes as more organisations move to online fundraising and operate across state borders.

Under the changes ratified by the Council on Federal Financial Relations, considered the “most significant” reform in decades, charities will no longer be required to obtain fundraising authorisation across multiple jurisdictions.

Financial reporting requirements for organisations classified as large charities, with annual income of more than $1m, will also be overhauled by mid-2021, allowing eligible organisations to avoid producing time-consuming audited financial statements.

The national agreement follows the Royal Commission into National Natural Disaster Arrangements, which highlighted the “crucial role” of charities in disaster recovery efforts but warned of the complexities of operating across jurisdictions with “distinct regulatory schemes”.

The cross-border recognition model will harmonise charitable fundraising laws and provide a single registration point for national charities, aimed at reducing costs and administrative burdens that amount to $13.3m per year.

Under the existing model, charities that have moved to online-only fundraising during COVID-19 must obtain authorisation from any state or territory where donations are sourced.

Mr Frydenberg said “inconsistent and outdated” cross-border regulations and “burden-some” financial reporting requirements had put pressure on charities, which had been hit hard during the pandemic.

He said the changes, recommended by an independent review of the Australian Charities and Not-for-profits Commission legislation, would retain the “transparency required to maintain public trust and confidence”.

“At a minimum, all charities registered with the ACNC must produce an annual information statement which contains financial information as well as information covering their governance and activities,” 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.”

Assistant Minister for Finance and Charities Zed Seselja, who pledged in March to work with the states and territories to harmonise cross-jurisdictional reporting and regulatory requirements, described the reforms as “the most significant and far-reaching in recent years”.

“By cutting unnecessary red tape and reducing the administrative burden, our charities are able to get on with the job of supporting vulnerable Australians,” Senator Seselja said. He said the reforms came ahead of the “busiest time of the year” for charities, giving them greater certainty into the new year.

Lifting the financial reporting thresholds will benefit more than 5000 small and medium charities, allowing them to free up resources across the country and save between $2400 and $3000 a year on accounting expenses. States and territories will announce new financial reporting thresholds by June 30, with an aim to legislate by the end of next year.

Mr Frydenberg and Senator Seselja said the government would continue working with the states and territories on reducing “the administrative and financial burdens on charities” over the next 12-months.

Fundraising Institute Australia chief executive Katherine Raskob said charities had been pushing hard for a cross-border recognition model to streamline fundraising laws across the nation. “The adoption of this model will reduce the administrative and financial burden for charities and help strengthen the fundraising sector for the future,” Ms Raskob said.