Date posted: 08/09/2023

Update for New Zealand Charities and Incorporated Societies

The for-purpose sector in NZ is undergoing several changes – here we outline the significant developments members need to be aware of

In brief

  • The XRB has revised the Tier 3 and Tier 4 reporting requirements, and Charities Services is consulting on revisions to align its Annual Returns
  • The Charities Amendment Act 2023 has received the Royal Assent
  • The Incorporated Societies Regulations 2023 have been issued

External Reporting Board standards

In May the External Reporting Board (XRB) issued updated Tier 3 and Tier 4 not-for-profit reporting standards.

The new Tier 4 Standard is now less complex, including no longer requiring a Statement of Resources and Commitments. A dedicated web page for small charities has also been created which includes:

The new Tier 3 Standard changes some existing requirements and adds some new requirements. Again, there is a reporting template to assist entities. Plus, an at-a-glance document outlines what has changed in the new Tier 3 Standard as follows:

  • The terms “outcomes” and “outputs” for service performance reporting have been removed and replaced with terms that are more aligned with the Tier 2 Standard.
  • Property, plant and equipment, investment property, and financial investments that are publicly traded can now be revalued without opting up to the Tier 2 Standards.
  • A new requirement to provide a description of the purpose of each reserve, the entity’s plans for applying the reserve, and when the entity expects the reserve will be applied to advance the entity’s objectives.
  • The “use or return” condition has been removed, and revenue can now be recognised over time as a “documented expectation” is satisfied.
  • The categories for classifying revenue and expenses have been clarified.

The new standards must be applied for accounting periods beginning on or after 1 April 2024. The new standards may be applied for any accounting period that ends after 15 June 2023.

Charities Amendment Act 2023

In June the Charities Amendment Act 2023 received the Royal Assent. This is the result of a five-year long process to comprehensively review the Charities Act 2005. It introduces a suite of changes including giving Department of Internal Affairs (DIA) Chief Executive the power to exempt ‘very small’ charities from preparing general purpose financial reports in accordance with the XRB reporting standards. The threshold will be developed in regulations (in consultation with the sector). Such charities will still be required to file an annual return containing some basic financial information.

Charities Act 2005

Key changes from the Charities Amendment Act 2023

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Incorporated Societies Regulations 2023

The Incorporated Societies Regulations 2023 were gazetted on 7 September 2023 and will come into force on 5 October 2023. They include the definition of ‘total current assets’ which is used in the definition of a ‘small’ society – those which are not required to prepare general purpose financial reports in accordance with the XRB reporting standards. They also include the threshold for which societies will need to have their financial statements audited (total operating expenditure ≥$3m in each of the 2 preceding accounting periods).

Incorporated Societies Act 2022

A comparison to the 1908 Act.

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Charities Services annual returns

Charities Services is now consulting on proposed changes to the forms that charities use for their annual return. Several of the proposed changes come from the Charities Amendment Act 2023 and the XRB’s revised Tier 3 and Tier 4 reporting requirements. There are also some changes being proposed to make things easier for charities and improve the data on the Charities Register. The consultation period runs until 24 October. We will be making a submission and are keen to hear your views.