The Australian Charities and Not-For-Profit Commission (ACNC) conducted a review on how charities will report third party related transactions. From the review, as of 2023 Charities (except for Basic Religious Charities) will be asked to report on their related parties transactions when completing the Annual Information Statement Submission.
This means charities will need to keep records of related party transactions from the start of their 2023 reporting period; for many charities, this period began on 1 July 2022.
For further information relating to related party transactions, please see circular 081.05.2023 – Changes to ACNC Annual Information Statement
What is a related party transaction?
A related party transaction is a transfer of resources, services, or obligations between related parties. It does not have to include financial payment.
A related party transaction can include:
- purchases, sales or donations
- receiving goods, services or property
- leases
- transferring property, including intellectual property
- loans
- guarantees
- providing employees or volunteers
- a Responsible Person of a charity providing professional services (for example, accounting or legal services) at a discounted rate or for free.
Examples of transactions that need to be reported in the Annual Information Statement
- A charity’s Responsible Person is also a director of a web development company, ABC Web Pty Ltd. The charity paid ABC Web Pty Ltd to update the charity’s website. ABC Web Pty Ltd provided the service under normal commercial terms and conditions. The charity must select the transaction type – ‘Fees paid to a related party for providing goods or services to the charity’ in the 2023 Annual Information Statement.
- The daughter of a charity’s president was employed by the charity as a paid part-time finance officer. The charity must select the transaction type – ‘Salary/wages paid to a related party’s relative(s)’ in the 2023 Annual Information Statement.
- A charity paid a rent or lease payment for the office space owned by one of the members of its management committee to deliver their charitable work. The charity must select the transaction type – ‘Fees paid to a related party for providing goods or services to the charity’ in the 2023 Annual Information Statement. The charity could also include additional information, for example that the rent charged was below the market rates for this type of office space in the area.
Types of related party transactions generally not reportable
- a gift of a box of chocolates to charity board members to say thank you for their pro-bono service
- donations received by the charity from a related party
- reimbursement of reasonable out-of-pocket expenses incurred by a related party in their duties for the charity
- volunteer services provided by a related party that are the same as (or similar to) services provided by the charity’s other volunteers
- a related party receiving goods or services from the charity as a beneficiary on the same terms as other beneficiaries
- a related party buying goods from the charity on the same terms offered to the public.
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