
A new tax rule has some not-for-profit (NFP) organisations concerned about their futures. Under the changes, not-for-profit organisations must notify the tax office of their tax exemption status or start paying income tax.
From 1 July this year, 150,000 non-charitable not-for-profits (NFPs) with an active Australian Business Number (ABN) who currently self-assess as income tax exempt will be required to lodge a new annual NFP self-review return to the Australian Taxation Office (ATO).
ATO Assistant Commissioner Jennifer Moltisanti said the ATO is supporting these NFPs to help them get ready now before the changes come into effect. Deakin University has also developed a tool to help NFPs navigate the changes.
“This new reporting requirement will help drive a level-playing field, giving confidence to not-for-profits that only organisations who are entitled to concessions can access those concessions.” Moltisanti explained.
Non-charitable NFPs who have an active ABN can get ready now by:
- conducting an early review of their eligibility by using the ATO’s guide
- checking all their details are up to date, including authorised associates, contacts and their addresses are current
- reviewing their purpose and governing documents to understand the type of NFP they are
- setting up myGovID and linking it to the organisation’s ABN using Relationship Authorisation Manager.
When it comes time to lodge, NFPs can use Online services for business which lets organisations manage their reporting at a time that is convenient to them. For NFPs that have engaged a registered tax agent, their agent can also lodge on their behalf through Online services for agents.
As an interim arrangement for the 2023–24 transitional year, eligible NFPs unable to lodge online will be able to submit their NFP self-review return using an interactive voice response phone service.
The first return is for the 2023–24 tax year and NFPs will need to prepare and submit their annual self-review between July and October 2024.
“We encourage affected not-for-profits to reach out to us or their registered tax agent if they need help understanding and meeting their obligations,” said Moltisanti.
For more information about the upcoming changes and how organisations can get ready, go to the ATO website at ato.gov.au/NFPtaxexempt
Deakin University has teamed up with Neighbourhood Houses to develop a simple online tool that can help not-for-profits (NFPs) better understand the administrative changes and determine how to secure or retain a tax exemption if they are eligible.
“Each of these community organisations rely on an income tax exemption to be financially viable and deliver their important work, and many are run by a team of volunteers with little to no legal or accounting experience,” said Cameron MacRae, Chief Operating Officer of the Australian Neighbourhood Houses.
McRae said it is important for NFPs to ensure that their constitutions or rules are up to date, their statement of purpose is compliant, and their policies fulfil relevant obligations. Otherwise, they may determine that registering as a charity is instead the best way forward, which requires its own set of criteria to be managed.
Recently, the diagnostic tool was rolled out to more than 1000 entities associated with Neighbourhood Houses in Australia. Deakin also has plans to adapt the tool for use by other bodies preparing for the changes and is already in talks with local councils and industry associations. For more information email.