Related party transactions are a normal part of doing business, especially where an organisation works closely with other entities or individuals. However, these transactions can give rise to conflicts of interest and may not always be in the best interests of the charity. It is therefore important that these transactions are managed and disclosed properly.

Currently, preparing special purpose financial statements (SPFS) is still an option for charities registered with the Australian Charities and Not-for-Profits Commission (ACNC) where the charity is not deemed to be a ‘reporting entity’ under Statement of Accounting Concepts 1: Definition of a Reporting Entity. This may change for certain charities once the AASB has completed its NFP Tier 3 project.

To give effect to certain recommendations stemming from the 2018 ACNC Legislative Review, related party disclosure requirements for charities preparing SPFS were enhanced in the interest of improving transparency around transactions that pose a higher risk of charitable assets being used for private benefit.

What is a related party?

The ACNC defines a related party differently according to charity size.

Small charities

For small charities, a simplified definition of related party is used. In this context, a related party is a person or organisation that is connected to the charity and has significant influence over the charity. This includes:

  • a charity’s Responsible People and their close family members
  • a charity’s senior management and their close family members
  • other people or organisations that can influence a charity’s decision making

As the ACNC points out, a person is not a related party simply by virtue of being an employee or volunteer. A related party relationship exists only where a person or organisation has significant influence over the charity’s strategic and financial decisions.

Medium and large charities

The related party definition in AASB 124 Related Party Disclosures applies to medium and large charities that prepare SPFS. This includes:

  • a person that is connected to the charity, such as a Responsible Person or a close member of their family, that has control or joint control of the charity
  • an organisation that is connected to the charity and has control or significant influence over the charity, such as a parent entity of the charity
  • an organisation that the charity has control or significant influence over, such as a subsidiary entity
  • any organisation and the charity that are members of the same group (for example, fellow subsidiaries)
  • a member of the charity’s key management personnel (people with authority and responsibility for planning, directing and controlling the activities of the charity directly or indirectly) or a close member of their family
  • an associate (an entity over which the charity has significant influence) or joint venturer (an entity that shares control of an arrangement with the charity and has rights to the net assets of the arrangement).

Reporting of related party transactions

Again, related party reporting requirements differ according to charity size.

Small charities

Small charities are not required to prepare financial statements. As such, they must disclose reportable related party transactions in their Annual Information Statement (AIS). This is required from the 2023 AIS onwards.

Medium and large charities

Medium and large charities are required to disclose material related party transactions in their AIS and financial statements.

For reporting periods ending on or after 30 June 2023, charities that prepare SPFS have the option to apply either:

  • The six ‘mandatory standards’ for special purpose reporting, being:
  • AASB 101 Presentation of Financial Statements
  • AASB 107 Statement of Cash Flows
  • AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
  • AASB 124 Related Party Disclosures (now also a ‘mandatory standard’)
  • AASB 1048 Interpretation of Standards
  • AASB 1054 Australian Additional Disclosures


  • The recognition and measurement requirements of the above standards but the equivalent disclosures for these standards contained in AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2.

Consequently, a medium or large charity preparing SPFS that has had related party transactions during the reporting period will have to disclose the nature of the related party relationship, as well as information about transactions with those related parties and any associated outstanding balances at reporting date.

The ACNC Commissioner relieved charities from the need to provide comparative information in the first year the new related party disclosures are made, whether applying AASB 124 or AASB 1060. This means that charities that made the new related party disclosures in their 30 June 2023 SPFS did not have to provide the related comparative information. Comparative information will, however, be required in their 30 June 2024 SPFS.

Other types of charities

Basic religious charities are not required to lodge financial reports, nor do they have to report related party transactions in the AIS. However, if a medium or large basic religious charity chooses to prepare and submit a financial report, it will be subject to the same reporting requirements as other medium or large charities, including the need to disclose related party transactions.

Ancillary funds are subject to the Ancillary Fund Guidelines which specifically prohibit certain related party transactions.

Where a charity is a public company registered with the Australian Securities and Investments Commission (ASIC), the related party requirements applicable under the Corporations Act 2001 must be considered and applied.

This article was first published in issue 18 of The Bottom Line.