Changes To Income Tax Reporting Requirements
There have been some amendments to the administration of not-for-profit organisations that self-assess as income tax exempt.
The amendments will affect the NFP organisations that:
- are not registered as charities with the ACNC; and
- have an active ABN; and
- currently self-assess each year as exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 (Cth).
The new requirement stipulates that any not-for-profit club or association accessing an income tax exemption must lodge a self-review return each year, with the first annual self-review return for sporting clubs due to be lodged between 1 July 2024 and 31 October 2024.
The changes do not apply to charities registered with the ACNC.
The changes do apply to NFPs that have not registered with the ACNC but are eligible to do so.
The changes do apply to NFPs that wish to continue receiving income tax exemption.
What should your organisation be doing?
Prior to the review date of 1 July 2024, any NFP organisations that self-assess as income tax exempt should ask themselves the following questions:
Question 1: Is Your Organisation Eligible To Register As A Charity?
An organisation may meet the statutory definition of ‘charity’ but choose not to register as a charity with the ACNC. An organisation in this position is not entitled to assess income tax exemption.
If your organisation is eligible to register as a charity, it has two options:
- register as a charity and apply for income tax exemption through the ATO; or
- stop self-assessing as income tax exempt, and lodge a tax return.
If you are unsure whether your organisation is eligible to register as a charity with the ACNC, Carroll & O’Dea Lawyers can assist.
Question 2: Is Your Organisation Eligible To Self-Assess As Income Tax Exempt?
Only certain categories of NFP organisations are eligible to self-assess as income tax exempt.
If your organisation is eligible to self-assess, it must submit a self-review return between 1 July 2024 and 31 October 2024 to the ATO.
Question 3: Is Your Organisation Required To Lodge A Tax Return?
If your organisation is not eligible to self-assess, not eligible to register as a charity, or decides that it does not wish to register as a charity, you need to consider whether it needs to lodge an income tax return.
The implication of lodging a tax return is the possibility of paying income tax.
Next Steps
Any NFP organisation that may be affected by the new amendments should review the ATO’s guide to completing the self-review return form.