Reminder: Charities to disclose related party information in special purpose financial statements

We remind medium and large charities registered with the Australian Charities and Not-for-profits Commission (ACNC) to disclose information about related party transactions and balances in their financial statements for the year ending 30 June 2024 if they continue to prepare special purpose financial statements (SPFS). Large charities must also disclose aggregate key management personnel (KMP) compensation if they have more than one KMP during the year. Comparative information is required for these disclosures.

These disclosures would automatically be required if preparing general purpose financial statements.

Size thresholds

The table below shows the size thresholds for small, medium and large charities, as well as the financial reporting and audit obligations.

Size of charity

Revenue threshold

Audit/review requirement

Small

Less than $500,000

None

Medium

$500,000 to $3 million

Review or audit

Large

Greater than $3 million

Audit

Who is a KMP?

ACNC KMP remuneration guidance refers to the definition of a KMP in AASB 124 Related Party Disclosures as the people with the authority and responsibility for directly or indirectly planning, directing or controlling the activities of the entity. This includes both executive and non-executive directors.

In the context of a charity, KMPs include responsible people such as board directors, committee members and trustees. They also include senior staff such as the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Operating Officer.

How many KMPs?

Large charities preparing SPFS must disclose KMP compensation if they have more than one KMP during the reporting period. If the charity has one KMP position that more than one individual occupies during the period, KMP compensation must be disclosed. The same applies if the charity has two KMPs at some point during the reporting period, but only one KMP at the end of the period. Our article provides examples to illustrate when a charity has more than one KMP.

What is KMP compensation?

The ACNC KMP remuneration guidance explains that 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 short-term employee benefits such as wages, salaries, employer superannuation contributions, paid annual leave, paid sick leave, bonuses, non-monetary benefits, long service leave, post-employment benefits and termination benefits.

The Australian Charities and Not-for-profits Commission Regulations 2022 (Regulation 60.30(2)) requires large charities preparing special purpose financial statements to comply with AASB 124 in full. This would mean disclosure of the aggregate KMP compensation, and the total for each sub-category, such as short-term employee benefits, post-employment benefits, long-term employee benefits and termination benefits. The ACNC Commissioner has exercised discretion to allow these charities to disclose only the aggregate remuneration/compensation, and not all the sub-categories.

Related party transactions and balances

Medium and large charities preparing SPFS must also provide all related party disclosures required by AASB 124. The ACNC related party guidance notes that a related party for a medium or large charity would include:

  • A person that is connected to the charity, such as a Responsible Person or a close member of their family, that has control or joint control of the charity
  • An organisation that is connected to the charity and has control or significant influence over the charity, such as a parent entity of the charity
  • An organisation that the charity has control or significant influence over, such as a subsidiary entity
  • Any organisation and the charity that are members of the same group (for example, fellow subsidiaries)
  • A member of the charity’s key management personnel (people with authority and responsibility for planning, directing and controlling the activities of the charity directly or indirectly) or a close member of their family
  • An associate (an entity over which the charity has significant influence) or joint venturer (an entity that shares control of an arrangement with the charity and has rights to the net assets of the arrangement)
  • Another organisation where a related party controls the organisation, a related party has significant influence over that organisation, or a related party is a member of the key management personnel of that organisation.

Source: ACNC guidance – What is a related party? – Medium and large charities

Determining who are related parties and then identifying all related party transactions and balances can be a difficult and time-consuming task. We recommend that medium and large charities track their related party transactions.

More information

You can find more information about KMP compensation and related party transactions on the ACNC’s website. You can also watch the ACNC’s webinar, which explains these topics in more detail.