New annual self-review return requirements for non-charitable not-for-profit organisations that wish to access an income tax exemption
From 1 July 2024, non-charitable not-for-profit organisations that wish to access an income tax exemption will be required to lodge a self-review return with the Australian Taxation Office each year, to confirm their entitlement for the exemption.
These changes will affect organisations that:
- are not registered as charities with the Australian Charities and Not-for-profits Commission; and
- currently self-assess each year as exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 (Cth).
Affected organisations may include sporting clubs or associations, professional associations, employer associations, trade unions, and community service clubs.
This annual self-review return will provide greater certainty to non-charitable not-for-profit organisations regarding their entitlement to an income tax exemption. As non-charitable not-for-profit organisations previously were not required to report to the Australian Taxation Office if they self-assessed their entitlement to an income tax exemption, many such organisations had to seek private binding rulings from the Australian Taxation Office to confirm their entitlement. Going forward, non-charitable not-for-profit organisations that do not complete an annual self-review return and provide it to the Australian Taxation Office are unlikely to be entitled to an income tax exemption.
The first such annual-self review returns will need to be lodged by affected organisations between 1 July 2024 and 31 October 2024.
The Australian Taxation Office is currently developing the questions to be included in the self-review return. These questions will check whether affected organisations meet each of the eligibility criteria that must be satisfied before they are entitled to an income tax exemption.
To prepare for these changes, your non-charitable not-for-profit organisation may wish to consider the following questions relevant to eligibility criteria that must be satisfied, to determine its entitlement to an income tax exemption:
- What are your organisation’s purposes and activities?
- Is your organisation not-for-profit – that is, not carried on for the profit of gain of its members? Is this reflected in your organisation’s constitution or similar governing documents?
- Does your organisation have a physical presence in Australia? Through your organisation’s Australian activities and presence, does your organisation incur its expenditure and pursue its objectives principally in Australia?
- Does your organisation comply with the substantive provisions (that is, the provisions that define the important rights and duties of your organisation) set out in its constitution or similar governing documents?
- Does your organisation apply its income and its assets solely for its purposes?
Please contact Samuel Chu or Josephine Heesh if you require advice or assistance to determine whether your non-charitable not-for-profit organisation is entitled to access an income tax exemption.