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Related Directors and Board Members

What ASIC, federal legislation, tax law, the ACNC and the Charities Act 2013 actually say about family and related people serving together on an Australian non-profit or charity board — and the governance principles that apply where the law is silent.

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DISCLAIMER: This information is not and is not to be considered or used as legal, financial, governance or taxation advice and is general in nature. While we present this publicly available information in a clear and concise manner, it may become outdated or inaccurate. Information provided is not to be classified as an opinion and/or advice. You are obligated to check the latest information and regulatory requirements with the appropriate Australian Government and State regulatory authorities. Non Profit Specialists take no responsibility for any inaccuracies and refuse any and all responsibility and liability for decisions you make based on publicly available information republished on our website.

Key legislation at a glance

  • Corporations Act 2001 (Cth) — ss 180, 181, 182, 183, 184 (general director’s duties); ss 191, 192 (disclosure of material personal interest and standing notices); s 195 (public company directors excluded from voting/presence on conflicted matters); s 206B and related provisions in Part 2D.6 (director disqualification — bankruptcy, convictions, ASIC/court orders); ss 207-230, being Chapter 2E (related party transactions); s 588G (duty to prevent insolvent trading).

  • Corporations Regulations 2001 (Cth) — regulations made under the Corporations Act that supplement the sections above (e.g. prescribed forms and thresholds).

  • Australian Charities and Not-for-profits Commission Act 2012 (Cth) — s 45-10 (power to make Governance Standards); s 45-15 (consultation); Part 4-1 and related provisions on disqualification and removal of Responsible Persons.

  • Australian Charities and Not-for-profits Commission Regulation 2022 (Cth) — the six Governance Standards, in particular Governance Standard 4 (suitability of Responsible Persons) and Governance Standard 5 (duties of Responsible Persons, including disclosure of conflicts of interest).

  • Charities Act 2013 (Cth) — s 5 (definition of charity); s 6 (public benefit); s 11 (disqualifying purposes); s 12 (the 12 charitable purposes).

  • Income Tax Assessment Act 1997 (Cth) — Division 50 (income tax exemption for NFPs and charities); Division 30 (deductible gift recipients — the general DGR framework within which ancillary funds sit).

  • Taxation Administration Act 1953 (Cth) — s 426-103 and related provisions, being the head of power under which the Commissioner makes the Ancillary Fund Guidelines referred to below as legislative instruments.

  • Corporations Regulations 2001 (Cth) — regulations made under the Corporations Act that supplement the sections above (e.g. prescribed forms and thresholds).

  • Taxation Administration (Private Ancillary Fund) Guidelines 2019 (Cth) — a legislative instrument; Guideline 12 sets the ‘responsible person’ independence requirement, including the exclusion of founders, donors of more than $10,000, and their associates.

  • Taxation Administration (Public Ancillary Fund) Guidelines 2022 (Cth) — a legislative instrument; sets the stricter majority-of-responsible-persons requirement for public ancillary funds.

  • A New Tax System (Goods and Services Tax) Act 1999 (Cth) — checked for relevance; contains no board-composition provisions.

  • Fringe Benefits Tax Assessment Act 1986 (Cth) — checked for relevance; contains no board-composition provisions.

  • Fair Work Act 2009 (Cth) — checked for relevance; regulates employment relationships, not board composition, though relevant where a related person is both a board member and an employee.

  • Privacy Act 1988 (Cth) — checked for relevance; no board-composition provisions.

  • Associations Incorporation Acts (all 8 states/territories) — each contains its own material-personal-interest/conflict-of-interest disclosure provision for committee members, modelled on the Corporations Act approach, but none restrict related people from serving together.

This list is exhaustive of the legislation identified as relevant to this question. Always check the current, in-force version of each Act, Regulation and legislative instrument at legislation.gov.au, as amendments occur regularly.

The short answer

​No general prohibition — but real duties once related people are on the same board

Australia has no general law that prohibits related people — spouses, parents and children, siblings, or other family members — from serving together as directors, committee members or trustees of the same not-for-profit or charity. This is a genuine point of difference from some other jurisdictions (for example, the United States’ IRS rules for 501(c)(3) public charities effectively require a majority of unrelated board members to preserve quorum independence — there is no Australian equivalent).

What Australian law DOES do is impose duties to disclose and manage conflicts of interest once related people are on the same board, and — in one specific and narrow area (ancillary funds used for tax-deductible giving) — impose an actual legal bar on a related person filling a particular independence-testing role. This document sets out, source by source, exactly where the law is silent, where it regulates conduct rather than composition, and where it draws a hard line.

Part 1

ASIC and the Corporations Act 2001 (Cth)

ASIC administers the Corporations Act 2001 (Cth), which governs companies limited by guarantee (the structure used by many larger charities and NFPs). Nothing in the Act, and no ASIC policy, prohibits related people from being co-directors. The Act instead regulates HOW a conflicted director must behave, not WHO can sit on the board.

1.1 No prohibition on related directors

  • There is no provision anywhere in the Corporations Act 2001 (Cth) that limits or bans spouses, relatives, or other related people from being directors of the same company — public or proprietary, charitable or not.

  • Director disqualification under the Act (s 206B and related provisions) is based on specific triggers — being an undischarged bankrupt, certain criminal convictions, or an ASIC or court disqualification order — none of which relate to family or personal relationships with other directors.

  • There is no ASIC ‘fit and proper person’ independence test of the kind used for some regulated licence-holders (e.g. AFS licensees) that would catch related directors of an ordinary company limited by guarantee.

1.2 What the Act DOES require — disclosure and management of conflicts

1.3 What this means in practice for a related-director board

Two spouses, or a parent and adult child, can lawfully both be directors of the same company limited by guarantee. If a matter comes before the board that specifically benefits one of them (or a business they’re connected to), that director must disclose the interest under s 191, and — if the company is a public company — must generally leave the room and not vote under s 195, unless the other directors resolve to let them participate. The other, unrelated (or differently-related) directors then decide the matter. The law manages the conflict transaction-by-transaction; it does not prevent the relationship existing on the board in the first place.

Quorum risk

If a meaningful share of the board is related, and a conflicted-interest matter requires those people to step out under s 195 or Governance Standard 5, the remaining board may fall short of quorum and be unable to validly decide the matter at all.

‘Block voting’ risk

Related directors who discuss matters privately before a meeting and then vote identically can function, in substance, as a single decision-maker with multiple votes — undermining the individual duty of care and diligence each director independently owes under s 180, even though no specific provision of the Act addresses this pattern directly.

Neither risk is separately regulated by statute — both are practical risks worth naming.

Part 2

Other Federal Legislation

The ACNC Act and the Governance Standards made under it (s 45-10) are the primary federal regime for charity governance. Nothing in the Act or Regulation caps the number or proportion of related Responsible People on a charity’s board.

2.1 ACNC Act 2012 (Cth) and Regulation 2022 (Cth)

Governance Standard 4 — often mistaken for a ‘related persons’ rule, but it isn’t one

Standard 4 requires a charity to take reasonable steps to be satisfied its Responsible People are not disqualified from managing a corporation under the Corporations Act, or disqualified from being a Responsible Person by the ACNC Commissioner. This is sometimes summarised as ensuring a charity ‘is not controlled by people who may pose a risk to the charity’s financial position or its charitable work’ — but the risk being tested is disqualification (bankruptcy, relevant convictions, an ACNC or court disqualification order), NOT family relatedness. A charity board made up entirely of members of one family does not, by itself, breach Standard 4.

Governance Standard 5 — the operative duty, same as under the Corporations Act

Standard 5 requires Responsible People to disclose actual or perceived conflicts of interest and to act honestly and fairly in the charity’s best interests. This applies identically whether the charity is a CLG, incorporated association, trust or unincorporated body — it is the ACNC’s functional equivalent of Corporations Act ss 191/195, and it applies regardless of legal structure (unlike ss 191/195, which technically only bind companies).

Source

Australian Charities and Not-for-profits Commission Act 2012 (Cth) s 45-10; Australian Charities and Not-for-profits Commission Regulation 2022 (Cth); ACNC — Governance Standards; ACNC — Governance Standard 4: Suitability of Responsible People

2.2 Charities Act 2013 (Cth)

The Charities Act defines ‘charity’ and ‘charitable purpose’ (ss 5, 12) and sets the public benefit test (s 6) and disqualifying purposes (s 11). It says nothing about board composition or relationships between Responsible People — it is a purpose-and-benefit test for the ORGANISATION, not a fitness test for individual board members. A charity with related directors is assessed against the same charitable-purpose and public-benefit criteria as any other charity; relatedness among the board is not itself relevant to charity registration eligibility.

Source

Charities Act 2013 (Cth) ss 5, 6, 11, 12

2.3 Other federal Acts checked — no restriction found

  • Fair Work Act 2009 (Cth) — regulates employment, not board composition; a related person can be both a board member and, separately, an employee, though this itself is a common related party transaction requiring disclosure (see the companion related party transactions document).

  • Privacy Act 1988 (Cth) — no relevance to board composition.

  • Income Tax Assessment Act 1997 (Cth) generally — no provision restricting related directors for ordinary income tax exemption purposes (Division 50); the one place tax law does impose a related-persons rule is ancillary funds — see Part 3.

  • State Associations Incorporation Acts (all 8 states/territories) — none of the state Acts restrict related people from sitting on the same incorporated association committee. All require disclosure of a ‘material personal interest’ or ‘conflict of interest’ by a committee member, broadly mirroring the Corporations Act model, but none impose a numeric or relationship-based cap.

  • Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) — contains director conflict-of-interest and disclosure provisions analogous to the Corporations Act, administered by ORIC; no restriction on related directors for CATSI corporations.

Source

Charities Act 2013 (Cth) ss 5, 6, 11, 12

Part 3

Tax Law: The One Place Australian Law Draws an Actual Line

Ordinary charity and company law leaves related-director composition to disclosure and process. Tax law governing ancillary funds — the trust structures used for tax-deductible philanthropic giving — is different. Here, a genuine, binding exclusion applies to relatives and associates of the fund’s founder or major donors, though it is narrow in scope (it applies to ancillary funds specifically, not to charities or NFPs generally).

3.1 Private Ancillary Funds

A Private Ancillary Fund (PAF) — a common structure for family philanthropic giving — must at all times have at least one ‘responsible person’ involved in its decision-making. Guideline 12 (Private AF Guidelines 2019) sets out who qualifies:

  • A responsible person must have a degree of responsibility to the Australian community as a whole (the ATO’s examples include holders of certain public offices, judges, members of parliament, and members of a professional body with a code of ethics, e.g. chartered accountants, lawyers, doctors, engineers).

  • Critically, the responsible person CANNOT be: a founder of the fund; a donor who has given more than $10,000; or an associate of a founder or such a donor — and ‘associate’ extends to relatives under the general tax-law associate definition.

  • Every PAF must have a corporate trustee, and that trustee’s board must include at least one genuinely independent responsible person meeting this test — a family member of the founder cannot fill this specific role, however well-qualified they otherwise are.

Other PAF board seats can still be held by family members — the requirement is for at least one independent responsible person, not for the whole board to be unrelated.

Source

Taxation Administration (Private Ancillary Fund) Guidelines 2019; ATO — Private ancillary funds; ATO — Establishing a private ancillary fund

3.2 Public Ancillary Funds

  • The rule for Public Ancillary Funds (PuAFs) is stricter: at ALL times, a MAJORITY of the individuals involved in decision-making for the fund must be responsible persons (not just one, as for PAFs).

  • A responsible person must be an active director of the trustee (or active member of any other controlling body) and must independently meet the same ‘degree of responsibility to the community’ test used for PAFs.

  • The trustee must not exercise any discretion or power while this majority requirement is not being met, with narrow exceptions.

Source

Taxation Administration (Public Ancillary Fund) Guidelines 2022; ATO — Public ancillary funds

3.3 Why this matters for the ‘can related people be on a board’ question

This is genuinely the only place in Australian charity/NFP law where a related person is legally barred from a specific governance role, rather than merely required to disclose and step back from a vote. It is narrow: it applies only to the ‘responsible person’ role within an ancillary fund, and only to founders/major donors and their associates — not to charity boards or CLG boards generally. Outside ancillary funds, no equivalent rule exists anywhere in Australian tax, corporations, or charity law.

3.4 Other tax law checked

  • Income tax exemption (Division 50, ITAA 1997) — no related-director restriction, whether self-assessed by a non-charitable NFP or ATO-endorsed for a registered charity.

  • DGR endorsement generally (outside ancillary funds) — no related-director restriction; DGR eligibility turns on the fund/institution category, not board composition.

  • GST and FBT law — no relevance to board composition.

Source

Income Tax Assessment Act 1997 (Cth); ATO — Not-for-profit tax concessions

Part 4

The ACNC’s Regulatory Guidance and Opinion

Distinct from binding law, the ACNC publishes extensive guidance on managing conflicts arising from related board members. This is regulatory expectation and best-practice steer, not a separate legal prohibition — but it shapes how the ACNC will assess a charity’s Governance Standard 5 compliance in practice.

4.1 The ACNC’s own words on related people on a board

  • The ACNC’s guidance explicitly acknowledges close friends and relatives commonly sit on the same charity board, and does not tell charities to avoid this — instead, it tells them to manage the resulting conflicts.

  • The ACNC flags ‘conflicting loyalties within the board’ as a real risk: ‘if there are close friends or relatives on the board, there is a risk that decisions could be influenced by other board members, rather than being made independently, in the best interests of the charity.’

  • A frequently cited scenario in ACNC guidance and webinars: a Responsible Person’s family member is directly employed by the charity, or a Responsible Person’s relative’s business is awarded a contract — both are treated as related party transactions requiring disclosure, an out-of-the-room vote for the conflicted person, and (per general legal principle reinforced by ACNC commentary) terms no more favourable to the relative than would be obtained from an unrelated third party.

  • The ACNC’s Commissioner’s Policy Statement on the number of Responsible People a charity needs specifically addresses small or single-Responsible-Person charities and states that ‘perceived or actual conflicts of interest must be managed appropriately’ as a standalone principle — recognising that smaller, closely-connected boards face a heightened version of this issue.

Source

ACNC — Managing conflicts of interest; ACNC — Conflicts of interest and related party transactions (webinar); ACNC — Commissioner’s Policy Statement: Number of Responsible People in a registered charity — Governance Standards

4.2 The ACNC’s practical enforcement posture

The ACNC does not investigate every related-party arrangement or every family board. Its stated regulatory approach focuses on serious or deliberate breaches — for example, diverting charity money to non-charitable purposes via undisclosed related transactions, or grossly negligent financial management — rather than the mere fact of family members serving together where conflicts are properly disclosed, minuted and managed.

Source

ACNC — Governance Standards (compliance approach)

Part 5

Putting It Together: What’s Allowed and What Isn’t

Allowed (subject to disclosure/process duties)

  • Spouses, parents and children, siblings, or other relatives serving as co-directors of the same company limited by guarantee.

  • Family members serving together on the committee of an incorporated association, in every state and territory.

  • Related trustees of a (non-ancillary-fund) charitable trust.

  • A charity board that is entirely, or mostly, made up of members of one family — this does not by itself breach any ACNC Governance Standard.

  • A related person being both a Responsible Person/director AND an employee, contractor, or supplier of the charity/NFP — provided it is disclosed and managed as a related party transaction (see the companion document).

Not allowed / legally restricted

  • A founder, major donor (over $10,000), or their associate/relative acting as the sole or only qualifying ‘responsible person’ of a Private Ancillary Fund, or forming part of the required independent majority for a Public Ancillary Fund — this is a hard rule under the Taxation Administration (Private/Public Ancillary Fund) Guidelines.

  • A conflicted director of a public company (which includes most CLGs) being present or voting on a matter they have a material personal interest in, without either the other directors’ resolution or ASIC’s leave (s 195).

  • Any Responsible Person or director failing to disclose a material personal interest at all — this is a breach of s 191 of the Corporations Act (criminal offence, up to 30 penalty units) and/or ACNC Governance Standard 5, regardless of whether the interest arises from family relatedness or something else.

  • A charity’s Responsible Person being someone disqualified from managing a corporation, or disqualified as a Responsible Person by the ACNC Commissioner — this is about disqualification history, not family relatedness, but is often confused with a ‘related persons’ rule.

Part 6

Best Governance Principles Where the Law Doesn’t Prohibit Related Directors

Because Australian law generally permits related board members, the practical safeguards below are governance choices, not legal requirements — a board or a charity’s own constitution can adopt some or all of them to reduce risk, but nothing compels it to.

1. Maintain a register of interests covering every Responsible Person/director’s family and business relationships, updated at least annually and whenever circumstances change.

2. Adopt a written conflict of interest policy that specifically addresses related-party scenarios — family employment, related-party contracts, and overlapping board memberships across related organisations.

3. Disclose early — as soon as a related-party matter is identified, not when it reaches the board table.

4. Exclude the conflicted person from discussion and voting on the specific matter, and record this exclusion (and the reason) in the minutes — this mirrors s 195 even for structures (incorporated associations, trusts) where s 195 doesn’t technically apply.

5. Test fair value independently — obtain competing quotes before engaging a related party’s business, and document that the terms are no better than would be offered to an unrelated party.

6. Consider a constitutional cap on related directors as a voluntary, above-the-law safeguard — for example, a rule that no more than one-third of the board may be related to one another, or a rule requiring at least one genuinely independent director/committee member with no family or business ties to any other board member. This mirrors, without being legally required to follow, the general listed-company market practice of favouring boards with a majority of independent directors — a practice that has no legal application to NFPs or charities, but that some larger charities and CLGs voluntarily adopt as a governance discipline.

7. Avoid concentrating financial sign-off with related people — require two unrelated signatories for payments above a threshold, so a related pair cannot both approve the same transaction.

8. Rotate the chair and committee roles periodically, and consider term limits, to prevent decision-making patterns from calcifying around one family or friendship group over time.

9. For any ancillary fund, appoint a responsible person who genuinely meets the ATO’s independence test (not a founder, major donor, or their associate/relative) from the outset, and document how that person meets the ‘degree of responsibility to the community’ criteria.

10. Provide conflict-of-interest training to all Responsible People/directors, with particular attention to related-party scenarios, so disclosure becomes routine rather than reactive.

11. Where a board is small and closely related, consider recruiting at least one external, unrelated member — this directly addresses the ACNC’s stated concern about ‘conflicting loyalties’ and disproportionate influence, and strengthens the charity’s ability to demonstrate Governance Standard 5 compliance if ever questioned.

Source

ACNC — Managing conflicts of interest; ACNC — Conflict of interest policy template; ACNC — Governance for Good: A Guide for Responsible People; Corporations Act 2001 (Cth) ss 180-184, 191, 195

General information: for general questions about charity registration or ACNC requirements, you can contact the ACNC directly on 13 22 62.

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Sources

ACNC (acnc.gov.au)

  • Related party transactions

  • Managing conflicts of interest

  • Small Charities Library — Managing conflicts of interest

  • Conflict of interest policy template

  • Conflicts of interest and related party transactions (webinar)

  • New rules to reinforce transparency of related party transactions

Legislation and standards

  • Corporations Act 2001 (Cth) — Chapter 2E (ss 207-230)

  • Australian Charities and Not-for-profits Commission Act 2012 (Cth) — s 45-10

  • Australian Charities and Not-for-profits Commission Regulation 2022 (Cth) — Governance Standard 5

  • AASB 124 Related Party Disclosures

  • AASB 1060 General Purpose Financial Statements — Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (paragraphs 189-203, Appendix A)

  • AASB 1054 Australian Additional Disclosures

Legislation current at legislation.gov.au and austlii.edu.au. This document is general information for orientation purposes.

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