Superannuation Rule Change
Downsizer Contributions
From 1 January 2023, individuals over 55 years of age and over can make a ‘downsizer’ contribution to superannuation.
Downsizer contributions are an excellent way to get money into superannuation quickly. And now that the age limit has reduced to 55 from 60, more people have an opportunity to use this strategy if it suits their needs.
A downsizer contribution opportunity occurs if you are aged 55 years or older. You can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund.
Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap).
For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).
Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.
The eligibility criteria include:
· You are 55 years or older (from 1 January 2023) at the time of making the contribution.
· The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.
· The home is in Australia and is not a caravan, houseboat, or other mobile home.
· The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.
· You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.
· The downsizer contribution is made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
· You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.
The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one.
Family Trusts
There is has been a great amount of activity from the Tax Office looking at establishing new rules about the taxation of income distributed from Family Trusts. The ATO has now released its final position on how it will apply some integrity rules dealing with trust distributions - changing the goal posts for trusts distributing to adult children, corporate beneficiaries, and entities with losses. As a result, many family groups will pay higher taxes because of the ATO’s more aggressive approach.
The relevant legislation is referred to as 100A.
The tax legislation contains an integrity rule, section 100A, which is aimed at situations where income of a trust is appointed in favour of a beneficiary, but the economic benefit of the distribution is provided to another individual or entity. For section 100A to apply, there needs to be a 'reimbursement agreement’ in place at or before the time the income is appointed to the beneficiary. Distributions to minor beneficiaries and other beneficiaries who are under a legal disability are not impacted by these rules.
If trust distributions are caught by section 100A, this generally results in the trustee being taxed on the income at penalty rates rather than the beneficiary being taxed at their own marginal tax rates.
While section 100A has been around since 1979, until recently there has been relatively little guidance on how the ATO approaches section 100A. This is no longer the case and the ATO’s recent guidance indicates that a number of scenarios involving trust distributions could be at risk.
For section 100A to apply:
· The present entitlement (a person or an entity is or becomes entitled to income from the trust) must relate to a reimbursement agreement;
· The agreement must provide for a benefit to be provided to a person other than the beneficiary who is presently entitled to the trust income; and
· A purpose of one or more of the parties to the agreement must be that a person would be liable to pay less income tax for a year of income.
Until recently many people have relied on the exclusions to section 100A which prevent the rules applying when the distribution is to a beneficiary who is under a legal disability (e.g., a minor) or where the arrangement is part of an ordinary family or commercial dealing (the ‘ordinary dealing’ exception). It is the ordinary dealing exception that is currently in the spotlight.
For example, let’s assume that a university student who is over 18 and has no other sources of income is made presently entitled to $100,000 of trust income. The student agrees to pay the funds (less tax they need to pay to the ATO) to their parents to reimburse them for costs that were incurred when the student was a minor. This situation is likely to be considered high risk if the student is on a lower marginal tax rate than the parents because the parents are receiving the real benefit of the income.
The ATO is also concerned with scenarios involving circular distributions. For example, this could occur when a trust distributes income to a company that is owned by the trust. The company then pays dividends back to the trust, which distributes some or all of the dividends back to the company. And so on. The ATO views these arrangements as high risk from a section 100A perspective.
Common scenarios identified as high risk by the ATO include:
· The beneficiary is a company or trust with losses and the beneficiary is not part of the same family group as the trust making the distribution.
· A company or trust which is entitled to distributions from the trust returns the funds to the trustee (i.e., circular arrangements).
· The beneficiary is issued units by the trustee of the trust (or a related trust) with the amount owed for the units being set-off against the entitlement and where the market value of the units is less than the subscription price or the trustee is able to do this without the consent of the beneficiary.
· Adult children are made presently entitled to income, but the funds are paid to a parent in relation to expenses incurred before the beneficiary turned 18.
The effect of these changes include:
· Review distributions in the light of the changes
· Clear accounting for all relevant expenditure made on behalf of an income beneficiary
· Ensuring agreements to reimburse beneficiaries are prepared properly and timely and are being used or applied for the benefit of the beneficiaries
The ATO’s new approach applies to entitlements before and after the publication of the new guidance but for entitlements arising before 1 July 2022, the ATO has advised that they will not generally pursue these if they are either low risk under the new guidance, or if they comply with the ATO’s previous guidance on trust reimbursement agreements.
Tax and Superannuation
The 2023 New Year
Now into February we seem to be working our wary back to a post Covid normal.
The environment has brought new challenges including inflation, higher interest rates and little relief from government imposts of regulation and taxes.
In this Newsletter we touch on a few of the matters that we are exercising our support of clients as the year gets underway.
Interest Rates
Many borrowers took the opportunity to lock in low interest rates on fixed terms which are expected to expire in 2023.
Some banks are difficult to engage with and we find ourselves helping clients with the favourable re arrangements of their finance facilitates. We are licensed to assist with the process.
Received a business support grant?
You may have received a business support grant recently to help your business through tough times.
Remember, when it comes to tax time, it's important to check if you need to include the payment in your assessable income.
Grants are generally treated as assessable income.
However, some grants are formally declared non-assessable non-exempt (NANE) income. This means you don’t need to include these in your tax return if you meet certain eligibility requirements.
If you did include a grant that's considered NANE in your 2020–21 tax return, you can amend your return.
Remember, you can only claim deductions for expenses associated with NANE grants if they relate directly to earning assessable income. Assessable income includes things like wages, rent and utilities. You can’t claim expenses related to obtaining the grant, such as accountant fees.
Do you know how to classify a worker?
Do you know if your new worker is an employee or a contractor? When you employ a worker, it's important to correctly classify them because it affects:
Correctly working out whether a worker is an employee or contractor is important because significant penalties apply for non-payment of entitlements particularly for Supernation Guarantee Charges.
Electric Vehicles
As an employer, you previously needed to pay Fringe Benefits Tax (FBT) on cars provided to employees. From 1 July 2022, the provision of electric cars will now be exempt from paying FBT on benefits provided for electric cars that meet all the following criteria:
The exemption is only for three years.
Registration, insurance, repairs, maintenance and fuel expenses provided for eligible electric cars are also exempt from FBT.
Note that despite the exemption, determination of the taxable value of the benefits provided is still required and its inclusion in the employee's reportable fringe benefits amount (RFBA).
You need to report the RFBA on the employee’s income statement or payment summary.
Remember, registered tax agents and BAS agents can help you with your tax.
Superannuation
The general Transfer Balance Cap (TBC) is the cap that determines how much an individual can transfer into retirement phase and is scheduled to increase from the current $1.7m to $1.9m on 1 July 2023. This is the second time that the general TBC would have been lifted.
This is an announcement only and its application would be impacted by legislative change.
The time is fast approaching for us to call it a wrap for 2022 and head off for a short break over the holiday season.
Please note our office will be closed from Thursday 22nd December and will reopen on Monday 9th January 2023.
Thank you for your continued business, we greatly appreciate your ongoing support.
We wish you and your families a safe and enjoyable festive season and we can't wait to see you again in 2023!
From all of us at MVA Bennett
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: