Our ability to maintain public trust and confidence in the charity sector is shaped by our operating environment. Some factors (such as global issues faced by all organisations) are out of our control. A range of government inquiries, policies and reforms may also affect our ability to achieve our purpose.
Self-assessing income tax exemption reforms for the not-for-profit sector
As part of the self-assessing income tax exempt reforms being administered by the ATO, around 100,000 NFPs will be required to submit an annual return to the ATO to maintain income tax exemption. Some of these NFPs are charitable and instead will need to register with the ACNC as a charity if they want to maintain their income tax exempt status.
The number of organisations that require ACNC registration is unknown, as is the timing of their applications. As such, the ongoing implementation of this reform may affect our ability to register new charities in a timely manner.
Our 2023–24 annual report showed we received 6,286 registration applications – an increase of 751 (14%) compared to 2022–23 and the highest number received since our establishment in 2012. At least half of the applications received so far in 2024–25 relate to these reforms.
We expect to receive a higher number of applications than usual in 2025–26 as the ATO contacts NFPs that have yet to submit a self-review return. Additionally, we will continue to work with the ATO to identify and contact NFPs that:
- lodged the self-review return but should be registered with the ACNC as they have charitable purposes
- have indicated on their return that they are ‘unsure’ if they are eligible to be an ACNC-registered charity.
We are working with key charity and NFP stakeholders, including peak bodies, to help streamline the registration process. We will continue to promote and refine our guidance, such as our self-assessment tool, which helps NFPs to identify whether they are charitable. With support from the ATO, we have engaged some additional temporary staff.
These newly registered charities will need support to understand and comply with their obligations to the ACNC, including the requirement to submit an annual return to the ACNC (the Annual Information Statement). Data from the Annual Information Statement is used to update the Charity Register, ensuring it remains accurate.
The ACNC is committed to offering a range of support to help charities submit their Annual Information Statement. Our aim is to prevent them from being revoked as part of our ‘double defaulter’ process, where we revoke charity status from any charity that has not submitted 2 or more Annual Information Statements.
Potential reforms the ACNC may need to implement
We may need to implement reforms associated with:
- the Productivity Commission’s inquiry into philanthropy
- the Department of Social Services’ Blueprint Expert Reference Group.
The 2023–24 budget announced reforms to the ACNC’s Secrecy Provisions, parts of which required legislative change. The required legislative changes were not passed during the previous term of Parliament.
We will proactively share our data and insights to ensure the impacts of potential reforms are clearly understood. We will work with government (including Treasury) when implementing any reforms. We will support affected charities by providing guidance and sharing information, including with our consultation forums.
Emerging risks to public trust and confidence in Australia’s charities
Our annual Australian Charities ReportExternal Link showcases the significance and diversity of the charity sector.
The 11th edition shows that while the charity sector employs 1.54 million people, over half operate with no paid staff.
Around 30% of charities are extra small, generating revenue of less than $50,000 and representing just 0.1% of the charity sector’s total revenue. While extra-large charities (with revenue greater than $100 million) represent just 0.5% of charities, they generate 56% of the sector’s revenue.
Our data affirms that we need to be mindful of tailoring our regulatory approach to different parts of the diverse sector we regulate. Across our education, guidance, registration and reporting services, we need to consider existing and emerging risks to effective governance when charities operate in different contexts – such as when different regulators are involved.
The circumstances of the charities we regulate also vary widely. This can range from small volunteer-run charities that operate in high-risk settings through to large global charities with complex structures that include a mix of for-profit entities, and everything between.
There are also areas of risk that we place enduring focus on. These risks are relevant for charities of all types and sizes. They include conduct that harms people, misuse of charities to foster extremism, misuse of charities for terrorist purposes, financial mismanagement, and charities that have a disqualifying or non-charitable purpose.
We share our insights to support the sector to better understand the level of charity governance that we expect. We will investigate new opportunities to maximise the use of data we receive from other government agencies, to ensure the most efficient and effective use of resources. We will work with all levels of government to reduce any unnecessary regulatory burden.
Pressures faced by charities
Charity resources will continue to be stretched due to:
- increasing demand among people experiencing vulnerability, who turn to charities for help when impacted by cost-of-living pressures
- economic uncertainty driven by inflation, geopolitical tensions and rising operational costs (including insurance premium increases), energy pricing, cost pressures being felt throughout supply chains and higher employee expenses associated with a tight labour market
- the resources required to recruit, support and retain volunteers.
At the same time, charities need to manage increasingly complex risk landscapes, including privacy risks, the continuously evolving nature of cyber-threats and disinformation risks. Charities often hold the personal information of beneficiaries and donors, and it is important for charities to protect themselves from cyber risks and manage cybersecurity incidents.
We help the public and charities by promoting the Charity Register, which allows the public to easily find a registered charity. Charities can also use the Charity Register to find like-minded organisations to work with.
We will also continue to support the charity sector to manage risks through tailored and fit-for-purpose guidance. We are committed to refining our guidance based on any new findings, including from our 2024–25 compliance reviews into cybersecurity.
The cumulative impact and pace of regulatory reform and initiatives on charities
Charities continue to be impacted by a range of concurrent regulatory reforms across all levels of government.
The number and pace of these reforms have a significant impact on charities, half of which operate with no paid staff.
In the coming years, charities may be affected by several reforms, including:
- reforms associated with government inquiries and reports
- changes to privacy laws
- changes to the NFP financial reporting framework by the Australian Accounting Standards Board
- a range of state or territory government initiatives.
When regulatory changes are being developed by other agencies, we work with them to help minimise unnecessary red tape for charities. We will also share updates and guidance to help charities to understand new obligations.