Choosing the right tier
Updated June 2026
Registered charities report to Charities Services using a tier system. Your reporting tier depends on:
- the accounting method your charity uses
- your charity’s annual operating payments or expenses
- whether your charity has public accountability.
Each tier has specific accounting standards. You must use the correct standards when you prepare your reporting.
How to work out your reporting tier
Use the reporting tier flowchart to help you decide which tier and standards applies to your charity.
Accounting methods
Your charity’s accounting method helps determine which reporting tier applies.
Cash-based Accounting (Tier 4)
Cash-based accounting records transactions only when money is received or paid.
This method is usually suitable for charities with simple financial activities. Charities often use a cash book to track transactions.
Cash-based accounting:
- does not record income that has not yet been received
- does not include depreciation
- does not record expenses that have not yet been paid.
Accrual-based Accounting (Tiers 1, 2, 3)
Accrual-based accounting records income and expenses when they are earned or incurred, even if money has not yet been received or paid.
Charities using this method often have more complex transactions. They may use accounting software or an accountant.
Accrual-based accounting includes:
- depreciation
- debtors and creditors.
Public accountability
Most charities do not have public accountability for financial reporting purposes.
Public accountability has a specific meaning under the Accounting Standards. A charity has public accountability if it:
- is listed on a public market, such as the New Zealand Stock Exchange
- provides financial services to a broad group of people, such as banks, credit unions or insurance companies
- is required to do so under the Financial Markets Conduct Act 2013.
If your charity has public accountability, you must report using the Tier 1 accounting standards.
Tier thresholds and standards
The criteria below show how the reporting tiers are set and the applicable standards.
PBE stands for Public Benefit Entity. These are accounting standards used by charities and other public benefit organisations in New Zealand.
Tier 4 | Tier 3 | Tier 2 | Tier 1 |
Annual operating payments less than $140,000 No public accountability Uses cash accounting | Annual expenses less than $5 million No public accountability Uses accrual accounting | Annual expenses more than $5 million and less than $33 million No public accountability Uses PBE Standards Reduced Disclosure Regime (RDR) | Annual expenses over $33 million, or Charity has public accountability Uses full PBE Standards |
Moving between tiers
Moving up to a higher tier
If your charity no longer meets the criteria for its current tier, you do not need to change tier straight away.
You can stay in your current tier for two reporting periods. You must move to the higher tier in the third year.
Exception
- Tier 2 charities that exceed $33 million in expenses for two consecutive years must move to Tier 1 in the second year.
Moving down to a lower tier
If your charity meets the criteria for a lower tier, you can move down straight away.
You may choose to stay in your current tier if you expect to exceed the threshold again soon. This can help avoid moving back and forth between tiers.
Exception
- To move down to Tier 4, your operating payments must have been under $140,000 in at least one of the previous two financial years.
- If your charity used Tier 1 because of public accountability, you must keep using Tier 1 until that accountability ends. You can then move to the tier that matches your expenses.
Examples of moving tiers
Example A
| Year Ending | Total Operating Payments | Guidance Note | Tier Applied |
| 31 March 2021 | $110,000 | Charity meets the Tier 4 criteria | Tier 4 |
| 31 March 2022 | $160,000 | Charity may continue to use Tier 4, as it has operating payments below $140,000 in at least one of the previous two financial years | Tier 4 |
| 31 March 2023 | $145,000 | Charity may continue to use Tier 4, as it has operating payments below $140,000 in at least one of the previous two financial years | Tier 4 |
| 31 March 2024 | $120,000 | Charity meets the Tier 4 criteria | Tier 4 |
| 31 March 2025 | $130,000 | Charity meets the tier 4 criteria | Tier 4 |
Example B
| Year Ending | Total Operating Payments | Guidance Note | Tier Applied |
| 31 March 2021 | $135,000 | Charity meets the Tier 4 criteria | Tier 4 |
| 31 March 2022 | $145,000 | Charity may continue to use Tier 4 as it has operating payments below $140,000 in at least one of the previous two financial years | Tier 4 |
| 31 March 2023 | $150,000 | Charity may continue to use Tier 4 as it has operating payments below $140,000 in at least one of the previous two financial years | Tier 4 |
| 31 March 2024 | $165,000 | Required to move to Tier 3 this year | Tier 3 |
| 31 March 2025 | $180,000 | Charity continues to meet Tier 3 | Tier 4 |
Example C
| Year Ending | Total Operating Payments | Guidance Note | Tier Applied |
| 30 June 2021 | $1,800,000 | Charity meets the Tier 3 criteria | Tier 3 |
| 30 June 2022 | $1,900,000 | Charity meets the Tier 3 criteria | Tier 3 |
| 30 June 2023 | $2,500,000 | Charity no longer meets the Tier 3 criteria but may continue to use Tier 3 | Tier 3 |
| 30 June 2024 | $3,500,000 | Threshold changes to <$5 million and charity meets the Tier 3 criteria | Tier 3 |
| 30 June 2025 | $4,000,000 | Charity meets the Tier 3 criteria | Tier 3 |
Example D
| Year Ending | Total Operating Payments | Guidance Note | Tier Applied |
| 30 June 2023 | $25,000,000 | Charity meets the Tier 2 criteria | Tier 2 |
| 30 June 2024 | $36,300,000 | Charity no longer meets the Tier 2 criteria but may continue to use Tier 2 | Tier 2 |
| 30 June 2025 | $35,500,000 | Required to move to Tier 1 this year | Tier 1 |
More information
For more details about tiers and the standards, visit the External Reporting Board's website.