Non-Charitable NFPs: New Income Tax Reporting Requirements
Significant regulatory changes are now in effect for non-charitable not-for-profits (NFPs) in Australia, requiring those with an active Australian Business Number (ABN) to lodge an annual self-review return to maintain their income tax exemption status.
Understanding the NFP Tax Change
Effective from the 2023/24 financial year, all non-charitable NFPs that self-assess as income tax exempt must now lodge an annual self-review return with the ATO.
This change aims to enhance transparency and ensure that only eligible NFPs benefit from tax exemptions.
The first of these returns is due between 1 July 2024 and 31 October 2024.
Who is Affected?
This new requirement impacts non-charitable NFPs that:
- Have an active ABN.
- Self-assess to determine their eligibility for income tax exemption.
Importantly, these changes do not apply to charities registered with the Australian Charities and Not-for-profits Commission (ACNC).
Instead, they specifically target NFPs who have not registered with the ACNC but are eligible to do so.
Types of Organisations Affected by the New Reporting Requirements
The new income tax reporting requirements will affect a diverse range of non-charitable not-for-profits that are not registered with the ACNC:
Community Service Organisations
Includes groups providing services such as:
- housing,
- family support,
- childcare, and
- emergency relief.
Cultural Associations
Organisations promoting the arts, including:
- theatre groups,
- museums, and
- cultural heritage societies.
Educational Groups
Non-charitable entities involved in educational initiatives that provide community education.
Sporting Clubs
Those that don’t qualify as charities but are primarily engaged in the promotion of sports or recreational activities.
Health Promotion Entities
Organisations engaged in health promotion but not qualifying as charitable under ACNC’s regulations.
Environmental Groups
Entities focusing on environmental conservation and awareness, which are not registered as charities.
Social Clubs
Clubs existing primarily for the benefit of their members, including hobbyist groups and recreational associations not focused on profit-making.
Religious Groups
Non-charitable religious institutions involved in community support and religious education but not registered as charities.
Steps Your Organisation Should Take
Review Your Status
Reassess whether your NFP genuinely qualifies as a charity.
If eligible, consider registering with the ACNC to access various tax concessions.
Prepare to Lodge Your Return
Familiarise yourself with the ATO’s guide on preparing a self-review return.
Ensure your organisation understands the requirements and gathers the necessary information to demonstrate eligibility for tax exemption.
Update Your Details
Keep your organisation’s details up-to-date with the ATO.
Common Challenges & How to Overcome Them
Documentation & Record Keeping
Many NFPs struggle with maintaining accurate and comprehensive records that substantiate their tax-exempt status, largely due to their reliance on volunteers.
It’s essential to systematically organise all financial statements, minutes of meetings, and other relevant documents to streamline the lodgement process.
Understanding the Criteria for Tax Exemption
The criteria for tax exemption are specific and can be complex.
It is important to thoroughly understand these criteria as they apply to your organisation to ensure accurate self-assessment and reporting.
Implications of Non-Compliance
Failure to comply with these new reporting obligations could lead to significant consequences, including:
- Loss of income tax exemption.
- Possible financial penalties.
- Reassessment of previous years’ tax exemptions.
Contact Us
These changes are a call to action for all non-charitable NFPs to ensure compliance with their tax obligations.
As always, staying informed and prepared is your best defence against potential challenges.
Should you need detailed advice or assistance, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.
- Fill in our enquiry form here
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Read more about our Tax Law services here.
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