Not-For-Profit reporting and regulatory update

The Australian Taxation Office (ATO) has changed the reporting regime for Not-for-Profit (NFP) entities for the 2023-2024 financial which includes the need to prepare and lodge an annual NFP self-review return each year.

From 1 July 2023, tax exempt NFP entities with an active ABN will be required to submit annual self-review forms with the ATO. These forms will contain information the NFP ordinarily uses to self-assess their eligibility for the income tax exemption to ensure they are accessing the income tax exemption correctly.

In subsequent years, NFPs will be required to confirm or amend information provided to the ATO on a pre-filled self-review return. If the return is not lodged, their income tax exemption status may be lost and penalties may apply under the ATO’s penalty framework.

The annual self-review forms are to be lodged between 1 July – 31 October, starting in 2024 and each year thereafter.
 

Who needs to self-assess?

Only NFPs that are not a charity need to self-assess their income tax status. These organisations therefore determine whether they are a tax exempt or a taxable organisation. If you are an NFP, which is not a charity, and you self-assess your income tax status, there is no need for a separate ATO endorsement.

All charities must be endorsed by the ATO to receive a tax-exempt status and are therefore not required to self-assess.

How do organisations self-assess their income tax exemption?

You can self-assess that you are exempt from income tax if you are not a charity, and you meet the requirements within the categories for income tax exemption including community service, cultural, educational, employment, health, resource development, scientific and sporting organisations.

If your organisation fits within any of the types of exempt entities, you will need to check the requirements for that entity type to ensure that you meet all the requirements.

Your organisation can complete the relevant worksheet as a record of the annual review. Sporting organisations can use the self-review worksheet in the ATO guide Income tax exemption and sporting club, and other not-for-profit organisations can use Income tax status review worksheet for self-assessing non-profit organisations.

Once the form has been completed, your organisation will broadly fall into either of the two categories:

Exempt
If your organisation is income tax exempt:

• You do not need to pay income tax or lodge income tax returns, unless requested by the ATO.
• You do not need to get confirmation of its exemption from the ATO.
• You should carry out a yearly review to check if the organisation is still exempt.

• The organisation is taxable and may have to lodge income tax returns and pay tax.
• You may have the benefit of special rules for working out its taxable income, lodging income tax returns and special rates of tax.

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