Since the early days of the Australian Charities and Not-for-profits Commission (ACNC), there has been a register of all Australian charities (including churches) kept online and publicly available. One aspect of this register has been that charities have been classified according to turnover as “small”, “medium” and “large” charities. While these classifications are going to be retained, the ACNC has now announced that the boundaries between these categories are going to be adjusted.
A “small charity” (or church) will now be one where the annual turnover is less than $500,000. This is double the historical limit of $250,000.
A “medium charity” will now be one where the annual turnover is greater than $500,000 but less than $3 million, which is triple the previous limit of $1,000,000.
A “large charity” therefore is now one where the annual turnover is greater than $3 million.
As a consequence, if your turnover was around $400,000, you were previously classified as “medium” but are now “small”. Similarly, if your turnover was around $2 million, you were previously classified as “large” but are now classified as “medium”.
The increases are significantly more than a CPI-related adjustment, which would probably only lead to increases of around 20-30% over the eight years since the size classifications were introduced. So, what might be the motivation behind this change?
To answer this, it is worth considering what the size classification actually means. While the size labels are headlined on the ACNC portal page for each charity, their actual affect is very minor in our case. The biggest impact is in relation to the level of review required for your financial reporting to ACNC. Small charities do not need to have their figures audited externally, while medium charities are required to submit their financial results to a review, and large charities are supposed to undertake a full audit of their financials by a registered auditor. Not unreasonably, the change most likely reflects the fact that a full audit is a significant undertaking for a charitable organisation with a turnover of just over $1 million. But for a charity of $3 million or more, it is probably wise to do so – hence the ACNC requirement makes sense.
In theory then, this change means your reporting to ACNC is going to be easier. However, there is one more factor that is very important for most of us. If your church is registered with ACNC as a “Basic Religious Charity”, undertaking reporting of your financial position is optional. And if you have therefore decided to not report, then the change actually means nothing to you at all.
You do have to jump through a few hoops to be a Basic Religious Charity (as we have outlined on a few occasions previously), but for most churches it is quite possible. Each year when you complete your Annual Information Statement, you need to reconfirm your eligibility to be a Basic Religious Charity. It is also notable that when you complete your Annual Information Statement, it gives you the option of voluntarily providing financial records even if you are a Basic Religious Charity. We have generally advised you not to provide these records voluntarily, because once you do you are obliged to comply with all the other financial requirements of ACNC.
So – the size classifications have changed, but in practice this probably won’t affect anything for most of our churches, even if you have been reclassified.