Financial Governance & Sustainability · 3 November 2026
A loan between an association and one of its own directors, or a close family member of one, is not a private arrangement the board can quietly handle informally, regardless of how good the intentions on both sides are. It is a related party transaction, specifically named by the regulator as a leading example of the category, and it now carries reporting obligations that apply to every charity, not just the larger ones this series has previously discussed in other financial governance contexts.
The Requirement Is Now Universal, Not Just For Larger Charities
Medium and large charities have long been required to disclose related party transactions in their financial reports under AASB 124, discussed earlier in this series. A more recent change extends reporting obligations to every charity, including small ones, through the Annual Information Statement itself. A charity that identifies a reportable related party transaction must now specify what type it involved, and a loan from or to a related party, regardless of whether interest is charged, is explicitly named by the ACNC as one of the clearest, most common examples of the category. The definition of a related party is broad even for small charities: a person or organisation connected to the charity with significant influence over it, capturing Responsible People, senior management, and their close family members.
Why A Loan Specifically Draws This Level Of Attention
A related party transaction is a transfer of resources, services, or obligations between related parties, and it is captured by this reporting regime regardless of whether a market price or genuine commercial terms were applied. A loan is a particularly clear example because it creates an ongoing financial relationship, not a single point-in-time transaction, and because favourable terms, no interest, an unusually long repayment period, or forgiveness of the debt, are precisely the kind of private benefit this reporting regime exists to surface. The ACNC has directly stated that improperly managed related party transactions have led to situations where Responsible People obtained private benefit from their own decisions, and in some cases this has resulted in a charity's registration being revoked entirely, a consequence considerably more serious than the loan itself. A related party loan is not automatically improper. What makes it improper is the absence of genuine, arm's-length terms, proper board process excluding the conflicted party, and honest disclosure, exactly the pattern this series has already identified as the difference between a manageable conflict and a governance failure.
The Additional Layer For Organisations Structured As Public Companies
Associations structured as companies limited by guarantee carry an additional, separate legal requirement under section 208 of the Corporations Act: member approval must generally be obtained before the company gives a financial benefit to a related party, a category that squarely includes a loan on favourable terms. Specific exceptions exist for arrangements made on arm's-length commercial terms and certain other defined circumstances, but a board should never assume an exception applies without confirming it, given that both the ACNC and ASIC can independently take an interest in the same transaction under their respective regimes.
- Treat any loan between the association and a Responsible Person, senior manager, or their close family member as a related party transaction requiring disclosure, regardless of whether interest is charged or the amount seems modest.
- Confirm whether your organisation's structure as a company limited by guarantee triggers the separate section 208 member approval requirement before any financial benefit, including a loan, is provided to a related party.
- Apply the conflict of interest discipline discussed earlier in this series in full, disclosure followed by the conflicted person's exclusion from the actual decision, to any related party lending arrangement under consideration.
- Maintain a related party register capturing enough detail about each transaction to meet your Annual Information Statement reporting obligations without a last-minute scramble at reporting time.
- Seek professional advice before finalising any related party loan, since the combined ACNC and, where applicable, Corporations Act requirements intersect in ways worth confirming precisely rather than assuming.
The regulator is not treating related party lending as an obscure technicality. It has specifically named loans as a leading example of the category, extended reporting obligations to every charity regardless of size, and demonstrated willingness to investigate and act where the underlying governance has failed. A board that treats an informal loan to one of its own as a private matter between friends is exposing the organisation, and the individuals involved, to a risk considerably larger than the value of the loan itself.
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— Annie