Further to announcements made by the Australian government in the 2021-22 Federal Budget, the time is rapidly approaching for non-charitable Not-for-Profits (NFPs) with an active Australian Business Number to commence lodging an annual self-review return with the Australian Taxation Office (ATO) to maintain their income tax exempt status.
The purpose of this reporting change is to enhance transparency of income tax exemptions by ensuring the activities of a NFP continue to meet the eligibility requirements for exemption. Gone are the days of set and forget when it comes to tax exemption. The roles and operations of organisations can and do change over time and this measure will act as a prompt for organisations to reassess their entitlement to income tax exemption.
For the 2023/24 financial year, impacted NFPs will be required to lodge a self-review return electronically either through the Online Services for Business platform or via a Tax Agent.
Depending on an NFP’s financial year-end date, the first annual self-review return should fall due sometime between July and October 2024. The ATO has announced that failure to lodge on time will see an NFP’s tax exempt status revoked and failure to lodge financial penalties apply.
While the ATO is currently consulting with the NFP sector on the final format of the return, there are things NFPs should be considering now, to prepare for the change:
1. Self-assess tax status right now
(a) Review the governing documents/constitution to ensure the organisation is operating for a purpose, within the rules set out in the documents and that the documents include appropriate NFP clauses
(b) Ensure the organise falls into one of the following broad categories:
- Community service organisation
- Cultural organisation
- Educational organisation
- Employment organisation
- Health organisation
- Resource development organisation
- Scientific organisation
- Sporting organisation
(c) Confirm the organisation does not distribute profits and applies its income and assets solely for the purpose for which it was established
(d) Check the organisation is either:
- Physically present in Australia
- Has been granted Deductible Gift Recipient status; or
- It is prescribed by law – i.e. the organisation is names in the income tax regulations decided by government
2. Get ready to lodge digitally
(a) Ensure your organisation is set-up to access Online Services for Business, via use of myGovID and RAM authorisation; or
(b) Appoint a Tax Agent to take care of the annual lodgement on your behalf
Should you need any assistance to prepare for the changes please reach out to one of our NFP experts.