Understanding Tier 3 Reporting for Australian Not for Profits
What AASB 1061 means for smaller organisations
In June 2026, the Australian Accounting Standards Board released AASB 1061, introducing a simpler general purpose financial reporting framework for eligible private sector not-for-profit organisations. The reform aims to reduce the reporting burden on smaller entities while preserving information that donors, funders and other users need. [2]
For management teams, the immediate priorities are to establish eligibility and assess how existing accounting policies and reporting processes may need to change.
Follow us on LinkedIn for the latest industry updates and trending news.
01 What the new framework changes
Tier 3 simplifies recognition, measurement, presentation and disclosure. It offers a reporting approach suited to less complex NFPs, with the aim of improving consistency and comparability while reducing preparation costs. [4]
The accompanying AASB 2026-2 limits the ability of certain NFPs to continue preparing special purpose financial statements. Affected organisations will need an appropriate general purpose reporting framework. Access to Tier 3 depends on regulatory requirements; some entities will still need Tier 1 or Tier 2. [3][4]
02 Who can use Tier 3
The AASB’s preparers’ factsheet identifies three core conditions: an entity must be a private sector NFP, must not have public accountability as defined in the standards, and must not be prohibited from using Tier 3 by legislation or its governing document. Eligibility also depends on the applicable regulatory framework. [3]
Being small or having charitable status is therefore insufficient on its own. Organisations should review their registration and reporting obligations, constitutions and other governing documents before confirming the appropriate tier with their accountant.
03 Key accounting simplifications
Revenue and leases deserve early attention. CA ANZ highlights a revenue model based on a shared understanding of performance expectations. Lease payments are recognised on a straight-line basis over the lease term, simplifying the accounting associated with right-of-use assets and lease liabilities. [1]
Other changes include simpler treatment for basic financial instruments, with transaction costs and upfront fees permitted to be expensed as incurred. Donated inventories may be measured at cost or current replacement cost. Provisions use an undiscounted best estimate, and borrowing costs are expensed when incurred. [1]
For group reporting, a parent can choose consolidated financial statements or separate statements alone, with disclosures about notable relationship entities. Investing and financing cash flows may also be presented together. [5]
These changes may affect revenue timing, balance sheet amounts and annual surpluses. Their practical impact should be assessed against each organisation’s funding agreements, leases and investment arrangements.
04 When the changes take effect
The standard and related amendments apply to annual reporting periods beginning on or after 1 July 2029, with early adoption permitted. [2] For an affected organisation using a normal July-to-June reporting year and not adopting early, the first applicable year would generally be 2029–30.
Early adoption of AASB 1061 requires AASB 2026-2 to be applied in the same reporting period. [4] The decision should also consider regulatory permission, system readiness and staffing.
05 How to prepare
Start by documenting the current reporting basis and identifying whether a transition from special purpose reporting is relevant. Next, map major revenue streams, leases and investments to the accounting policies that may change. Use this assessment to discuss transition arrangements, opening balances and evidence requirements with the accountant or auditor.
Management should allow time for staff training and explain potential accounting-driven changes to the board, so that reporting differences are not mistaken for changes in operating performance.
For eligible organisations, Tier 3 offers an opportunity to reduce reporting effort. Confirming eligibility and reviewing contracts and data early will help turn that opportunity into a practical transition plan.
Sources and further reading
Disclaimer
This article reflects publicly available information regarding the exposure of draft legislation as at the date of publication and is general in nature. It does not constitute tax, financial, or legal advice and should not be relied upon without obtaining professional advice tailored to your specific circumstances. To discuss how these proposed changes may affect you or your business, please contact our advisory team at Wis Australia.
Liability Limited By A Scheme Approved Under Professional Standards Legislation.
