Director Identification Number Reminder
If you are currently a company director, you must apply for your director ID number before 30 November 2022 to avoid severe penalties.
It is a criminal offence if you do not apply on time. ASIC is responsible for enforcing Director ID offences set out in the Corporations Act 2001.
In an important relaxing of requirements it has been recently announced that Directors who have resigned from their position prior to 1st December 2022 will be exempt from the Director ID requirement.
Previously if you were a director on or before 31 October 2022, you needed to apply for a Director ID number even if you had resigned and never planned to become a director again.
However, if these persons were to take up a directorship on or after 1st December 2022, they would be required to apply for a director ID number.
Application for a Director ID must be made personally by the Director preferably using MyGov or failing that by mail. Our office can help but cannot make the application on behalf of the director.
The Treasurer delivered the Federal Budget on Tuesday 25 October 2022
Please find below a summary of the key measures:
GOVERNANCE
Boards fail to formalise cybersecurity measures
A new study by the Australian Institute of Company Directors and the Australian Information Security Association has revealed that while most Australian directors see cybersecurity as a high priority boards lack formal oversight of the issue.
Gaps in implementing cyber-governance frameworks were found, only half (53 per cent) of directors saying that their organisation had a formal cyber-security strategy in place.
Other results indicated that there was still room for improvement in board oversight, included:
The report can be downloaded from www.aicd.com.au.
Guidance on Effective AGMs
As organisations across Australia head towards peak AGM season, the Governance Institute of Australia has issued a comprehensive guide to holding AGMs under laws that now allow hybrid and online options.
This year’s meeting season will be the first significant test of the recently updated Corporations Act, amended to allow organisations to meet in a hybrid or online format (as long as their company constitution allows it).
Effective AGMs is a complete guide to holding an AGM under the new laws. It also counsels on effective member engagement. It’s mandatory reading for directors, senior managers, and governance and risk-management professionals.
The report outlines:
The report also offers key tips for using technology to conduct meetings: ‘There are many logistical aspects that need to be worked through in advance of an AGM to ensure the use of technology during the meeting is seamless, particularly in relation to how questions will be conducted’.
The report may be downloaded from www.governanceinstitute.com.au.
Harassment toolbox launched
Concerned about slow action on workplace sexual harassment, Chief Executive Women (CEW) has launched a digital ‘toolkit’ designed to stamp out poor workplace behaviour.
Respect is Everyone’s Business includes:
With one in three people experiencing workplace sexual harassment, and, of those who witnessed it, only a third acting, swifter governance measures can’t come soon enough, says CEW’s president Sam Mostyn AO.
The resources can be downloaded at cew.org.au.
Procurement integrity
The Institute of Internal Auditors in Australia has released The 20 Critical Questions Series: What Directors should ask about Procurement Integrity (Probity). The biggest question is, How does management, the audit committee, and board of directors clearly know that there is sound and transparent integrity around procurements?
The 20 questions may be downloaded at www.iia.org.au.
ACNC ACTIVITIES
ACNC urges charities to consult website
The Australian Charities and Not-for-profits Commission is urging charities to consult its website for practical guidance and tips to simplify the filing of annual information statements.
The commission’s director of reporting, red-tape reduction, and corporate services Mel Yates said the hub was especially useful this year as charities needed to understand some recent changes.
Visit the hub at www.acnc.gov.au/for-charities/annual-information-statement/2022-annual-information-statement-hub.
COMPLIANCE
NFP directors need IDs
Director Identification Numbers are required
The fastest way to apply for a director ID is online. There is a step-by-step video that takes you through what you need to do. You will need a myGovID with at least a standard identity strength to complete the application.
The Australian Business Registry Services is focused on providing support and education to assist directors and is encouraging those appointed unexpectedly to apply for their IDs as soon as possible.
ABRS is contacting directors who haven’t applied before deadlines elapse. It’s a criminal offence to fail to apply and directors may be subject to penalties.
New Domain Registrations - ACTION REQUIRED
All Australian businesses will have until tomorrow at 9:59am 21 September to reserve their .au equivalent domain name, then it becomes available to the general public.
This new category of domain name allows users to register shorter, more memorable online names, however it also creates another avenue for cybercriminals to conduct fraudulent cyber activities. Opportunistic cybercriminals could register your .au domain name in an attempt to impersonate your business.
For example, if you have currently registered yourbusiness.com.au, a cybercriminal could register yourbusiness.au or yourbusinesscom.au and use these domains to conduct fraudulent cyber activities.
How to protect yourself
To help protect your business from opportunistic cybercriminals, the Australian Cyber Security Centre (ACSC) recommends that all Australian businesses with existing domain names register their .au equivalents before 9:59am 21 September 2022. If a business does not reserve their .au equivalent direct domain name, that name will become available to the public on a first come, first served basis.
You can reserve your .au domain name by visiting an auDA accredited registrar.
Further information on these changes and the registration process is available on this link https://www.auda.org.au/au-domain-names/au-domain-names/au-direct
Victorian Government Grants
The Small Business Specialist Advice Pathways Program provides $2,000 grants to employing small businesses to access professional advice and services to help them make informed business decisions and plan for the future.
The program supports businesses that have faced disruptive change, caused by the COVID-19 pandemic and other factors, by improving their capability and preparedness to plan for their future or adapt their business model.
To be eligible for a grant under the Small Business Specialist Advice Pathways Program, a business must meet the following requirements:
Applications close on 30th September 2022
Land Tax - Victoria
Land tax rates are a progressive scale applied to the Site Value of real estate property as shown on the Rates Notice for the property.
Site values have been steady increasing in recent years without any compensating adjustment to Land Tax rate scales.
A simple example of a humble holiday shack on the Mornington Peninsula
| Year | Site Value | % change | CPI | Land Tax | % change | CPI |
| $ | $ | |||||
| 2018 | 1,000,000 | 1.8% | 2,975.00 | 1.8% | ||
| 2019 | 1,080,000 | 8% | 1.8% | 3,615.00 | 22% | 1.8% |
| 2020 | 1,180,000 | 9% | 9.0% | 4,415.00 | 22% | 9.0% |
| 2021 | 1,200,000 | 2% | 3.5% | 4,575.00 | 4% | 3.5% |
| 2022 | 1,480,000 | 23% | 6.1% | 6,815.00 | 49% | 6.1% |
| 2023 | 2,440,000 | 65% | 19,295.00 | 2.83% | times | |
| OUCH! | ||||||
Rates Notices are currently being issued by relevant local Councils
Objections to the Site Value can be made using the appropriate form available on the relevant Council website. However, any objection must be lodged within 60days of the date of the Rates Notice.
This value is used at 31st December 2022 for the calculation of the 2023 Land tax assessment. It is not possible to object to the Site Value when the Land Tax Assessment arrives.
Exemptions to land tax include:
· Principal Place of Residence
· Certain Rural Lands
· Certain Not for Profit organisations
In addition, it is not widely known that a commercial tenancy to a not for profit entity exempts the landlord from Land Tax.
Land held in trusts attracts a surcharge following the unsuccessful attempt of Government some years ago to aggregate lands held in multiple trusts so as to attract a higher rate of tax up the progressive scale.
The rates of Victoria Land Tax are:
Value Land Tax
<$300,000 Nil
$300,000-$600,000 $375 plus 0.2% over $300,000
$600,000-$1,000,000 $975 plus 0.5% over $600,000
$1,000.000-$1.800.000 $2,975 plus 0.8% over$1,000,000
$1.800.000-$3,000.000 $9,375 plus 1.55% over$1,800,000
>$3,000,000 $27,975 plus 2.55% over $3,000,000
Land taxes are becoming a significant impost and worthy of your review with the support of our MVA Bennett Team.
There is a Victorian State election in November If revising the scales was an election pitch, there maybe a view that the trade off would be the Queensland approach outlined below.
Land Tax - Queensland
The Queensland government is seeking to aggregate all lands in Australia in order to apply the relevant tax scale. Aggregation is not new to State Revenue Offices as it already happens with Payroll Tax – that temporary tax brought in to finance the war effort (WW2).
From 30 June 2023, an owner’s liability for land tax will be determined based on the total value of Australia-wide landholdings including taxable land in Queensland and relevant interstate land.
Land tax applies for individuals when their rateable land value hits $600,000 or more, while assets in companies and trustees it is $350,000. The Queensland rates of land tax ramp up faster than any other capital city.
Major implications will exist for investors and tenants when the quantum of tax increases.
There maybe a cynical view that other States will follow the lead of Queensland in this regard.
Tax and Accounting
What’s on our mind as we start client reporting as of 30th June 2022?
Inflation
Our Client Newsletter of June last year posed the thought of inflation and the need to gain skills in adjusting selling prices to maintain margins. During the year inflation came and was fuelled beyond expectations by shortages of material, labour and international and local freight costs in particular.
We have been supporting clients implementing new strategies to maintain and hopefully enhance margins with strong analytics and counsel.
Interest Rates
Governments seem to be using interest rates as a somewhat lonely tool to lower inflation. How high will interest rates go?
The RBA lifted the cash rate to 1.85% in early August 2022. The increase comes a few weeks after Reserve Bank Governor Philip Lowe told the Australian Strategic Business Forum that “…we’re going through a process now of steadily increasing interest rates, and there’s more of that to come. We’ve got to move away from these very low levels of interest rates we had during the emergency.” He went on to say that we should expect interest rates of 2.5% - how quickly we get there really depends on inflation.
The RBA Governor has come under increasing pressure over comments made in October 2021 suggesting that interest rates would not rise until 2024. At the time however, Australia was coming out of the Delta outbreak, wage and pricing pressure was subdued, and inflation was low. That all changed and changed dramatically. Inflation is now forecast to reach 7.75% over 2022 before trending down. We’re not expected to reach the RBA’s target inflation rate range of 2% to 3% until the 2023-24 financial year.
In the UK, the situation is worse with the Bank of England predicting that inflation will reach around 13% over the next few months. The UK has been heavily impacted by the war in Ukraine with the price of gas doubling, compounding pressure from post pandemic supply chain issues and price increases.
With interest rates rising, what can we expect? Deputy RBA Governor Michele Bullock recently said that Australia’s household credit-to-income ratio is a relatively high 150%, increasing in an environment that enabled households to service higher levels of debt. But it is not all doom and gloom. “Strong growth in housing prices over 2021 and early 2022 has boosted asset values for many homeowners, with housing assets now comprising around half of household assets,” she said. The recent downturn in house prices has only marginally eroded the large increases over recent years. Plus, households have saved around $260m since the pandemic creating a buffer for rising interest rates. This, however, is a macro view of the economy at large and individual households and businesses will face different pressures depending on their individual circumstances.
For businesses, the rate increase has a twofold effect. It is not just the rate rise and the higher cost of funds in their borrowings. That by itself is significant but at this stage, if anything, it is the lesser issue. The more significant impact comes from negative consumer sentiment and the flow through effect on sales and cash flow.
Tax Compliance
The Tax Office data analysis is reaching new levels of sophistication leading to the reasonable expectation that, if your tax returns does not comply, the data matching will identify the non-compliance.
The focus on rental property expenses and Trust distribution compliance have been the subject of our past newsletter.
The liability to pay superannuation at 10.5% on contractor payments is still a controversial area. If you are generally paying contractors for time spent on a regular and systematic basis then we recommend a review for your potential liability to this superannuation guarantee charge (SGC).
Australian residency
Anecdotally many families have a non-resident or potential for a non-resident in the family. There are ramifications of changes in residency and again we recommend the discussion particularly giving rise to capital gains taxes, repayment of Higher Education debts and passing assets through generations under gift or Will. There may also be implications for trusts purchasing or holding land where non-residents qualify as a beneficiary.
Can I claim my crypto losses?
The ATO has released updated information on claiming cryptocurrency losses and gains in your tax return.
The first point to understand is that gains and losses from crypto are only reported in your tax return when you dispose of it – you sell it, convert it to fiat currency, exchange it for another type of asset (including other forms of crypto), buy something with it, etc. You cannot recognise market fluctuations or claim a loss because the value of your crypto assets changed until the loss is realised or crystallised.
Gains and losses from the disposal of cryptocurrency should be reported in your tax return in the year that the disposal occurred.
If you made a capital gain on crypto that was held as an investment and you held the crypto for more than 12 months then you may be able to access the 50% Capital Gains Tax (CGT) discount and halve the tax you would otherwise pay on revenue account.
If you made a loss on the cryptocurrency (capital loss) when you disposed of it, you can generally offset the loss against capital gains you might have (unless the crypto is a personal use asset). But, you can only offset capital losses against capital gains. You cannot offset these losses against other forms of income like salary and wages, unfortunately. If you don’t have any capital gains to offset, you can hold the losses and carry them forward for another future year when you can use them.
If you earned income from crypto such as airdrops or staking rewards, then these also need to be reported in your tax return.
And remember, keep records of your crypto transactions. The ATO has sophisticated data matching programs in place and cryptocurrency reporting is a major area of focus.
Land Tax
State Governments are keen to recoup deficits with whatever taxes they have at their disposal. State Land tax rates are a progressive scale and the scale has not been indexed or otherwise adjusted for over a decade. In simple terms land values doubling have an exponential effect on land taxes. For example, in Victoria, the single holding land tax on land at $1m is $2,975 but at $2m it is $12,475
Lands held in trusts are subject to a surcharge.
Landlords generally cannot pass on the land tax cost to tenants, unless the lease is a specific type of commercial lease. However, land tax is not payable if the property is leased to a tax-exempt entity eg a charity. If you think you may qualify for this exemption, please contact us to assist.
In addition, there is Vacant Property Residential Land Tax which is not really a land tax because it is levied at 1.0% of the capital value of the land and buildings. This tax was suspended during Covid but is now back and needs to be anticipated and hopefully not applied.
Governance
Guidance on risk released
A new guide has been released by the Governance Institute of Australia outlining the importance of an integrated approach to risk management. It is designed to be a practical resource to assist Australian directors in any sector.
Risk management for directors: A guide revises its 2016 risk publication, addressing the challenges boards and directors can expect in coming years and how to address best some of the current ones.
It examines risks associated with digital technology, environmental, social and governance considerations, issues uncovered by the aged-care royal commission, and recovery from the pandemic.
It is intended to help boards to integrate their surveillance of governance and risk-management. This should assist organisations to achieve strategic foci by providing boards with the information they need and ensuring risk ownership by employees.
The guide covers:
The guide may be accessed at the institute’s website.
Audit committees need plans
The Institute of Internal Auditors in Australia has issued a timely Factsheet: Audit Committee Work Plan.
Work plans amount to what audit committees do over a period – usually a year.
Without one, an audit committee:
The guide can be accessed at the institute’s web site.
ACNC
Adhering to governance standards
The Australian Charities and Not-for-profits Commission governance standards is a set of core principles dealing with how a charity should be run.
Charities must meet the standards to be registered and remain registered with the ACNC. The principles do not apply to basic religious charities.
They require charities to remain charitable, operate lawfully, and be run in an accountable and responsible way. They help to maintain public trust in charities.
The principles are high-level, not precise rules, and charities must determine what they need to do to comply with them.
| Standard | Explanation |
| 1 Purposes and not-for-profit nature | A charity must be not-for-profit and work towards its charitable purpose.
It must be able to demonstrate this and provide information about its purposes to the public. |
| 2 Accountability to members | A charity that has members must take reasonable steps to be accountable to its members and provide them with adequate opportunity to raise concerns about how the charity is governed. |
| 3 Compliance with Australian laws | A charity must not commit a serious offence (such as fraud) under any Australian law or breach a law that may result in a penalty of 60 penalty units or more. The current value of a Commonwealth penalty unit is $222. |
| 4 Suitability of responsible people | A charity must take reasonable steps to:
|
| 5 Duties of responsible people | A charity must take reasonable steps to make sure that its responsible people are subject to, understand, and carry out the duties set out in standard 5. |
| 6 Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector | A charity must take reasonable steps to become a participating non-government institution if the charity is, or is likely to be, identified as being involved in the abuse of a person either:
|
The ACNC’s self-evaluation tool aims to help charities assess if they are meeting their obligations. It also helps to identify issues that might prevent them from doing so.
It poses questions and prompts charities to describe both the practical steps they are taking to meet their obligations, and to list the relevant policies or procedures.
A charity that conducts activities overseas – including sending funds overseas from Australia – must also comply with external-conduct and governance standards.
Four external-conduct standards cover certain aspects of a charity’s overseas operations.
| Standard | Explanation |
| 1 Activities and control of resources (including funds) | The way a charity manages its activities overseas and how it is required to control the finances and other resources it uses overseas. |
| 2 Annual review of overseas activities and record-keeping | The requirements for a charity to obtain and keep sufficient records for its overseas activities. |
| 3 Anti-fraud and anti-corruption | The requirements for a charity to have processes and procedures that work to combat fraud and corruption in its overseas operations. |
| 4 Protection of vulnerable individuals | The requirement for a charity to protect the vulnerable people that it works with when conducting its overseas operations. |
An ACNC self-evaluation tool for charities operating overseas aims to help charities assess if they are meeting their obligations and identify issues that might prevent them from doing so.
The tool poses questions and prompts charities to describe both the practical steps they are taking to meet their obligations.
Financial reporting insights
SD replaces RDR
The Australian Accounting Standards Board has developed a new simplified-disclosure standard to replace reduced-disclosure requirements.
AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities, a new simplified disclosure standard based on IFRS for Small and Medium-sized Entities, to replace the RDR. These simplified disclosure requirements are now collated in a single disclosure standard.
The 98-page AASB 1060 applies to reporting periods ending 30 June for the first time.
The standard sets out a separate disclosure standard to be applied by entities reporting under Tier 2 of the differential reporting framework in AASB 1053 Application of Tiers of Australian Accounting Standards.
Importantly, AASB 1060 does not change which entities are permitted to apply Tier 2 reporting requirements. Recognition and measurement requirements for Tier 2 are the same as for Tier 1.
Disclosures relevant to Tier 2 entities are set out in AASB 1060. Disclosure requirements in the body or appendix of other standards will no longer be shaded or unshaded in relation to Tier 2 requirements.
While entities that comply with this standard need to apply recognition and measurement requirements of other standards, they are exempt from disclosure requirements in specified paragraphs of other standards.
Tier 2 entities are also not required to comply with other standards that deal only with presentation and disclosure.
Charity thresholds change
Reporting and assurance thresholds will change in 2022 annual charity statements. For many charities, this will apply to the reporting period between 1 July last year and 30 June.
The table below compares old and new revenue thresholds for small, medium, and large charities.
| Size of charity | Current revenue thresholds for the 2021 AIS | Revenue thresholds from 1 July 2022 | Audit/review requirement |
| Small | Less than $250,000 | Less than $500,000 | Must complete only an AIS online |
| Medium | $250,000 - $999,999 | $500,000 - $2,999,999 | Financial report can be either reviewed or audited |
| Large | $1 million or more | $3 million or more | Financial report must be audited |
While thresholds have changed, the following should also be considered:
What is revenue?
Revenue determines reporting thresholds, and the ACNC has provided the following definition.
‘Revenue is a component of total income. A simple formula to help charities understand this is: Revenue + Other Income = Total Income.’
Revenue is realised from the sale of goods and services or through the use of capital and assets. Revenue can also arise from the contribution of an asset to a charity when certain conditions have been met during the charity’s ordinary activities.
Revenue is usually shown as the top line item in an income (profit and loss) statement.
Common examples for charities include:
New rules for meetings and documents give flexibility
Thousands of Australia’s registered charities will enjoy greater flexibility when staging meetings – as well as signing and executing documents – through recent amendments to federal legislation.
The changes are included in the Corporations Amendment (Meetings and Documents) Act, and cover charities that are registered under the Corporations Act.
The amendments make permanent temporary laws first introduced in response to the COVID-19 pandemic, allowing companies to execute and send documents electronically and hold virtual meetings.
The changes mean that:
Changes relating to signing and executing documents came into effect on 23 February. Changes about meetings come into effect on 1 April.
While the amendments provide a minimum standard, charities’ governing documents may require more. Charities must continue to comply with them, and those that are corporations could consider reviewing governing documents and seeking legal advice.
Changes to NFP tax exemption
While charities represent about a third of all not-for-profits, most NFPs don’t have a charitable purpose but may still self-assess as tax exempt and may include organisations formed to serve a specific aim, many meeting the requirements for special tax treatment.
Non-charitable organisations that can self- assess their exemption from income tax fall into eight categories: community service, cultural, educational, health, employment, resource development, scientific, and sporting.
NFPs that self-assess their own eligibility for income-tax exemption are not required to report their eligibility to the ATO.
Following reforms in last year’s federal budget, however, from 1 July, self- assessing NFPs with an active ABN will be required to lodge an annual self-review return with the information they ordinarily use to decide their eligibility for income-tax exemption.
The ATO has begun talks with the NFP sector to discover the types of guidance and support needed for NFPs to transition smoothly to the new requirements.
Consultations are expected to be concluded in June.
It is good governance practice to diarise an annual review of exempt status into your Board calendar.
You might need a director ID
A director ID is a unique 15-digit identifier that someone keeps forever. You may apply for one online at myGovID opting for ‘standard or strong’ identity strength.
Directors must apply personally so that identities can be verified. No one can apply on their behalf.
When you need to apply for the ID depends on when you became a director for the first time, and under which act you were appointed.
If appointed under the Corporations Act:
Aboriginal or Torres Strait Islander corporation directors have longer to apply.
For more information about who needs to apply and when, including a full list of key dates, visit the Australian Business Registry Services website.
Guidance for board secretaries
With the support of the Commonwealth Bank, the Institute of Community Directors has produced the free 48-page guide Damn Good Advice for Board Secretaries – Twenty-five questions every not-for-profit secretary needs to ask.
A good secretary is a good leader and a fount of knowledge about an organisation. She and he can keep your NFP on top of its governance obligations.
The new guide and its companions, Damn Good Advice for Board Members, Damn Good Advice for Treasurers and Damn Good Advice for Chairs, can help improve your understanding of governance roles within organisations.
To download the guide, go to https://communitydirectors.com.au/tools- resources/home.
Report examines how NFPs use financials
CPA Australia has released Annual Reports of Australian Not-For-Profit Organisations: Insights from Internal and External Stakeholders.
The report examines how:
NFPs are highly diverse, having varied legal structures, sizes, tax concessions, missions, activities and results.
CPA Australia wanted to discover who used NFP annual reports, what they wanted to know, whether their questions were answered, and whether report preparers knew what they needed to do.
Were there red-tape challenges, and what are the costs of NFP annual reporting?
As diverse as the participants, the findings were categorised under rubrics such as annual reporting, accountability, accounting standards, measuring outcomes, and risks.
Observations included:
compared with other NFPs and anomalies that this created
Updating charities’ work
Charities may now update on their Australian Charities and Not-for-profits Commission portals at any time details about their programs.
Previously, the inclusion of new information had been done annually through the annual information statement.
If charities developed a new program, a change of strategy, or had a crisis or disaster to respond to, they may now add changes in real time on the ACNC register.
Donors, volunteers, and philanthropists have endorsed the register, and visitor numbers continue to climb. The register helps charities showcase their work and reach out to key groups, including funders and grant-makers.
Governments and other funders often identify charities providing specific services to particular groups, and up-to-date information is now available.
Charities wanting to update information should select ‘Manage other charity details’ and an icon for ‘Changing your charity’s program’ on their portal.
For the first time, new charity register search features allow you to look up the kind of charity program you would like to support, in your local area or your preferred location anywhere in Australia. Donors, philanthropists, grant-makers and volunteers may use the register to find a cause close to their heart, while charities can use it to connect with each other.
Health check aims to improve boards
A new online health check aims to improve the boards of charitable organisations.
Developed and launched by Tanarra Philanthropic Advisors, The Board Health Check aims to help boards improve their effectiveness, boost performance, and focus better on their core purposes.
Believed to be the first resource of its kind in Australia, the ‘check’ contains information specific to charity boards.
Tanarra Philanthropic Advisors is a pro bono enterprise of the Tanarra alternative- asset investment group.
The ‘check’ may be used by Australian charities and not-for-profits, takes around 15 minutes to complete, and will help organisations uncover their key strengths, deficiencies, and potential issues.
The Governance Institute’s general manager of membership and engagement Leon Cox said the tool would allow charities to focus better on their core purposes.
‘To have a complimentary tool available to help charities govern their own entities means more time and resources can be directed into their own purpose and by extension better outcomes for society,’ Mr Cox said.
To find out more go to https://www.boardhealthcheck.org.
Know how to campaign and lobby legally
Advocacy and campaigning are important to the work of many of Australia’s registered charities.
Not only are they legitimate and effective ways of furthering charitable purposes, but charities’ ability to advocate and campaign remains an important part of Australian democracy.
With a federal election looming, it is important that charities and their responsible people ensure that any advocacy or campaigning complies with ACNC guidelines and does not threaten the charity’s registration.
The ACNC has written to at least one charity over material it was distributing that was likely to be construed as opposing a political candidate and party.
Charities are allowed to engage in advocacy or campaigning if these efforts:
Any advocacy or campaigning charities conduct must not:
Charities that make these errors risk losing their ACNC registration.
A charity may advocate for or against a change to a law, make a submission to a public consultation or inquiry, and produce material comparing the policies of political parties.
But in doing any of these things, charities must ensure that they are furthering their charitable purposes. Any advocacy must be permitted under a charity’s governing document and should not risk behaviour that constitutes a disqualifying political purpose.
Charities should also be conscious of how campaigning might affect their reputations. This is especially true in an election year, where there is an increased risk that the public could see it as promoting or opposing a particular political party or candidate.
Charities need to be aware of their responsibilities to all regulators whenever they undertake advocacy and campaigning – especially political campaigning.
AEC rules on charities’ campaigning
In addition to ACNC rules, charities and their responsible people should be familiar with obligations they might have to the Australian Electoral Commission if they spend money on campaigning or undertaking political advocacy.
Organisations, including charities, that spend money on campaigning or advocating on what are known as ‘electoral matters’ – communicating on issues with the dominant purpose of influencing how people might vote at the next election – might incur ‘electoral expenditure’.
Depending on the level of electoral expenditure, an organisation will be classed as either:
The expenditure threshold to be classed as a third party in 2021-22 is $14,000.
The threshold for a significant third party recently changed to $250,000 over a single financial year. The need to register as a significant third party also applies if an organisation’s electoral expenditure exceeds $250,000 in any of the previous three financial years.
Since July, registered charities that have reported political donations and electoral expenditure to the AEC have seen their ACNC charity-register listing updated to include links to the AEC’s transparency register.
Charities that comply with ACNC rules on advocacy and campaigning might still need to meet other regulators’ requirements.
Both the AEC and ACNC have useful guidance to help charities understand their advocacy obligations.
The tribunal found that Angel Loop’s purpose was to bring about a commercial deal between the investor and inventor. While ‘worthy’, the purpose was not incidental or ancillary to a charitable one, meaning Angel Loop was unable to be registered as a charity.
ACNC commissioner Dr Gary Johns said: ‘The Tribunal’s comments about purposes that are incidental or ancillary to a charity’s main purpose will continue to guide our assessments of charities’ ongoing entitlement to registration, including compliance with ACNC governance standards.’
So you want to become a charity
Each year thousands of new charities are established but more than half of applicants fail official registration.
Last financial year, the ACNC processed 5886 registration applications, registering 2659 new charities. Almost 2000 applications were incomplete, 862 were withdrawn, and 151 were refused as ineligible.
Before starting a charity, many things should be considered. Demonstrating what your organisation aims to achieve, its charitable purpose, is critical.
Your organisation’s purpose is what it has been set up to achieve – its mission. To be eligible to be registered as a charity it must have a charitable purpose that benefits the public.
The ACNC registers thousands of new charities every year, but applicants make common errors. Some tips follow to help your organisation demonstrate its mission.
Make sure your organisation:
If also applying to be registered as a charity sub-type (such as promoting human rights or advancing the natural environment) make sure your organisation’s governing document names the sub-type.
If applying for the sub-types Public Benevolent Institution and Health Promotion Charity and your organisation was only recently established, develop a strategic plan that sets out its activities for 12 months.
Governance standard 3 unaltered
Federal senators have blocked proposed laws aimed at cracking down on activist groups. The proposals would have given the ACNC the power to deregister charities for minor offences, even when it believed they were merely likely to occur.
Governance standard 3 remains unchanged and still applies. It requires charities not to act in a way that, under commonwealth, state and territory laws, could be an indictable offence (a serious crime that is generally tried by a judge and a jury), or a breach of law that has a civil penalty of 60 units ($12,600) or more.
The ACNC has identified some simple steps to reduce the risk of a charity’s breaching the standard. In most cases, common sense and good practice will reduce risk.
Charities should:
Charity thresholds change
Thresholds for determining a charity’s size are changing, and thousands of charities will see their reporting obligations reduced.
About 2500 charities will no longer be required to produce financial reports; only an annual information statement will be needed. About 2700 charities will be allowed to have their financial report reviewed instead of audited.
When charities complete their 2022 annual statements – which, for many, will cover a reporting period between 1 July 2021 and 30 June– the thresholds will change.
The table below compares old and new revenue thresholds for small, medium, and large charities.
|
Size of charity |
Current revenue thresholds
for the 2021 AIS |
Revenue thresholds from 1 July
2022 |
Audit/review requirement |
|
Small |
Less than
$250,000 |
Less than
$500,000 |
Must complete only an AIS
online |
|
Medium |
$250,000 - $999,999 |
$500,000 - $2,999,999 |
Financial report can be either
reviewed or audited |
| Large | $1 million or more | $3 million or more | Financial report must be audited |
While thresholds have changed, the following should also be considered:
Proposed amendments to NFP revenue standards
The Australian Accounting Standards Board’s exposure draft 318 is proposing amendments to illustrative examples for income of not-for-profit entities in AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-for-Profit Entities.
It proposes amendments to:
The amendments are proposed to apply to annual periods beginning on or after 1 July.
A basis for conclusions documents the AASB’s proposed intention to retain the accounting policy choice in AASB 16 Leases for not-for-profit private-sector lessees to elect to measure initially a class of concessionary right-of-use assets at cost or fair-value.
Inflation
MVA Bennett like many other businesses, including yours, is experiencing unprecedented cost pressures and this newsletter is to advise our valued clients that whilst we understand no-one wants to experience increased prices, we as a business, need to pass on some of these increases through fee increases of our own.
The Reserve Bank of Australia (RBA) has recently flagged inflation to peak around 7% in the second half of this year. Their target range is 2-3% so interest rates are on the increase as we already know. A normally low-key Phillip Lowe appeared on ABC TV to confirm this and the RBA’s determination to bring down inflation through increased interest rates.
The Fair Work Commission on 15 June, handed down a 5.2% or $40 wage increase to those on the National Minimum Wage.
We are seeing inflationary pressures throughout the world with the UK currently at 9% and USA at 8.6%. Australia is not living in isolation to these impacts.
Practically, we are all aware of the increased costs throughout the building sector regarding materials and labor due to supply and other factors outside our control. On the home front, floods have impacted the cost of living which has caused significant increases notably told in the media in respect to the cost of the humble lettuce.
No industry is immune to this which means that if they are to survive and continue to provide the services or products that their customers rightly expect, they need to look hard at their pricing. As our valued clients, we would expect you to also consider, very seriously, the movement in the costs of inputs to your business. Are these increases sustainable and is it now reasonable to pass some or all these increase onto your customers via price increases to your products or services?
At MVA Bennett, whilst we are not sourcing widgets for inputs into products. Our key input is labor and due to both a scarcity of resources as well as the wages increase within our industry, it is becoming increasingly difficult to reasonably absorb these increases. Increased fees whilst difficult to discuss, will ensure we can continue to support our valued clients and provide the advice they need and expect so they too, can navigate this time of change and uncertainty with us at their side.
We take this opportunity to thank you, as our valued client, for your continued support and good relations and to also offer our services to assist you in reviewing your own costing models to ensure your business is appropriately dealing with your inputs and any potential price increases that may be appropriate.
Director Identification Numbers
Australian directors have to apply for their unique director identification numbers before fines of more than $1.1 million kick in.
Company directors must apply for a DIN by 30 November this year, and directors of Indigenous corporations that are governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 must apply for the unique identifier by 30 November 2023.
DIN applications are free. Applications must be made by each director (not their accountant) and are best done online through MyGov. We can assist as necessary.
More information can be found at https://www.abrs.gov.au/director-identification-number
Income tax 2022
The Australian Taxation Office has announced four key focus areas for Tax Time 2022:
The tax office is prioritising these areas to ensure there is an appropriate level of scrutiny on correct reporting of deductions and income.
Super changes starting 1 July 2022 - Employer communications
From 23 May to 2 June 2022, the Tax Office will be progressively sending a range of SMS, emails and letters to all employers letting them know about two important changes to super guarantee (SG). Most will receive this information by email.
The changes are:
Family and Discretionary Trusts
The Tax Office has announced comprehensive new scrutiny over trusts being used as vehicles to lower average tax rates particularly where the beneficiary does not actually receive the income that maybe attributed to them.
Our previous newsletters have covered this issue but as trust resolutions on income distributions are generally documented in these weeks leading up to 30th June ,this is a timely reminder that there are many considerations.
As always your MVAB team person is available to discuss all the matters contained in this newsletter as to their application to your particular circumstances.