Financial reporting thresholds for small and medium charities registered with the Australian Charities and Not-for-profits Commission (ACNC) are set to be lifted next year.

The federal government says this move will cut red tape for thousands of charities, according to ProBono Australia.

Each year charities must report to the ACNC, with their reporting obligations dependent on their size.

At the moment, small charities are classed as those with an annual revenue under $250,000, and medium charities have annual revenue of between $250,000 and $1 million.

On Wednesday, Assistant Treasurer Michael Sukkar announced that reforms agreed to by the Council on Federal Financial Relations would come into effect from 1 July 2022.

Under the reforms, the threshold for small charities will increase to under $500,000 annual revenue and the thresholds for medium-sized charities will increase to under $3 million annual revenue.

The changes will simplify financial reporting requirements for more than 5,000 charities and save them thousands of dollars a year.

The government also announced changes in reporting obligations for large charities (with an annual revenue over $3 million).

From 1 July 2022, large charities with two or more key management personnel will be required to report remuneration paid to responsible persons (directors) and senior executives on an aggregated basis in their 2022 Annual Information Statement.

In addition, from 1 July 2023 all charities will be required to report related party transactions in their annual reporting to the ACNC.

Minister Sukkar said the ACNC would work with the charity sector to develop appropriate guidance and education resources to help the sector to understand and meet the new requirements.