From 1 July 2023, approximately 155,000 not-for-profits (NFPs) around Australia must comply with new legal changes. Previously, NFPs could self-assess as income tax exempt by simply not lodging a tax return with the Australian Taxation Office (ATO). Importantly, these new changes only apply to NFPs that are not registered charities. The annual reporting requirement is designed to enhance transparency and integrity in the system, by ensuring only eligible NFPs access income tax exemption.
Under the new legislation, any not-for-profit with an Australian Business Number (ABN) must now lodge a self-review return with the ATO, specifying which of the 8 categories of income tax exempt NFP they fall under and providing information about their activities. This means that the returns for the 2023/24 income year are now due to be prepared and lodged.
Which Not-for-Profit Categories Are Affected?
The relevant categories in the tax legislation are:
- Sporting organisations
- Community service organisations
- Cultural organisations
- Educational organisations
- Health organisations
- Resource development organisations
- Employment organisations (i.e., trade unions and other employee or employer organisations)
- Scientific organisations
A Path to Simplification: Applying for Charity Status
It's worth noting that many NFPs might have charitable purposes, making them eligible to become registered charities with the Australian Charities and Not-for-Profits Commission (ACNC). A successful application for charity status can result in an endorsement as income tax exempt (as a charity), thereby bypassing the new compliance requirements.
Accounting Challenges for Grassroots Not-for-Profits
Many NFPs are small grassroots clubs and associations run by volunteers, often with limited resources and time. This new compliance requirement has the potential to cause significant stress for these organisations. BlueRock’s For-Purpose Industry experts stand ready to assist with all not-for-profit accounting and compliance needs, including completing their ATO self-review returns, as well as a range of other professional services to support their operations and growth.
How BlueRock Can Help Not-for-Profits Thrive
BlueRock recognises the complexities these changes present to NFPs and offers comprehensive support to ensure compliance. Our team can guide NFPs through the self-review return process and explore the potential benefits of registering as a charity. If your organisation needs assistance navigating these compliance changes, please get in touch with us via the form below.
