From 1 July 2023, non-charitable not-for-profit organisations with an active Australian Business Number (ABN) will now need to lodge a NFP Self-Review Return to access income tax exemption.
The first NFP self-review return is due by 31 October 2024, or after the end of your reporting year if you have an approved substituted accounting period.
It is designed to enhance transparency and integrity in the system, by ensuring only eligible NFPs access income tax exemption. The NFP self-review return will serve as a comprehensive guide, aiding NFPs in assessing their tax-exempt status accurately and reporting according.
The changes do not apply to charities registered with the Australian Charities and Not-for-Profits Commission (ACNC).
If you are not sure whether your organisation is a registered charity, you can search the ABN Lookup Tool and the ACNC Register.
How the annual NFP Self-Review Return will work?
NFPs will be required to complete a self-review, the process guides NFPs to consider their purpose and activities and requires an estimate of the gross revenue range of the organisation with the result being one of these likely outcomes:
- The ATO will determine that the tax exemption remains in place if it fits into one of the eight types of entities and meets all the requirements for an income tax exemption.
- The ATO will determine that the NFP doesn’t not fit into one of the eight types of entities nor is it ‘charitable’ and will be required to prepare an income tax return for that year to assess the taxable income.
- The self-assessment indicates the NFP should be reclassified as a charity and therefore need to consider registration with the Australian Charities Not-for-Profits Commission.
Eligible types of income tax exempt entities
There are 8 categories of income tax exempt entities that can self-assess eligibility, outlined in Division 50 of the Income Tax Assessment Act 1997.
- Community Service
- Sporting
- Cultural
- Educational
- Health
- Employment
- Scientific
- Resource Development
What needs to be done now to Prepare to Lodge:
- An early review of your eligibility by using the guide at the Australian Taxation Office website
- Review of your ABN registration details to ensure they are up to date, including authorised associates, contacts and addresses
- Review of your purpose and governing documents to understand the type of NFP you are
- Ensure they contain an appropriate non-for-profit clause, dissolution clause, and you are operating for your purpose.
- Your organisation must have sufficient controls in place to ensure that members and other private persons don’t receive property or assets of the organisation.
- Ensure your authorised associate has set up a myGovID and link it to their organisation’s ABN using Relationship Authorisation Manager
In Summary
All non-charitable not-for-profit organisations with an active Australian Business Number (ABN) will now need to lodge a NFP Self-Review Return to access the income tax exemption.
Deadline for reporting is 31 October 2024, unless you have an approved substituted accounting period.
Review your eligibility, ABN registration details and governing documents.
Ensure your authorised associates have set up a myGovID.
If your need assistance with these new income tax reporting requirements or preparing for the upcoming changes, get in touch with MJJ Accounting and Business Solutions.
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