While the primary focus of a not-for-profit (NFP) organisation is to create positive impact, strong governance and compliance with not for profit accounting rules are essential. Staying on top of your tax and governance obligations is the key to maintaining vital concessions like income tax exemption and DGR endorsement.
Income Tax Exemption: What’s Changed?
From 1 July 2023, all non-charitable NFPs with an active ABN must lodge an annual ATO NFP self review return confirming their income tax exemption status. (NFPs already registered as charities with the ACNC aren’t required to lodge this return.)
This new annual ATO NFP self assessment regime was introduced to strengthen transparency and accountability sector-wide, and applies for each financial year. Importantly, the deadline for all required not for profit tax returns and self-review lodgements is 31 October.
Recent ATO figures show that many NFPs have fallen behind. Of the 155,000 required to lodge, only 32,000 did so last year. If your organisation is catching up, you may need to submit two returns to stay compliant.
Essential Not-For-Profit Accounting Tasks
Undertake an annual review of their activities to confirm ongoing entitlement to:
- Deductible Gift Recipient (DGR) endorsement
- Income tax exemption
- Other not for profit tax concessions
If your organisation changes its governing rules, legal structure, or core activities, it’s critical to notify both the Australian Charities and Not-for-profits Commission (ACNC) and the Australian Taxation Office (ATO). Before doing so, make sure your eligibility for tax concessions still stacks up under the latest legislation.
Annual ATO NFP Self Review Return: What’s Involved?
When completing your annual self review return, your organisation will need to:
- Identify which of the eight exempt categories applies (eg. sporting, community service, scientific, education, etc.)
- Review your organisation’s stated purpose and day-to-day activities to ensure all eligibility criteria are met.
- Nominate your annual gross revenue range (small, medium, or large).
This return can be submitted online via ATO services, through a registered tax agent, or over the phone using the ATO’s self-help service.
Key Not-For-Profit Tax Takeaway
Staying eligible for income tax exemption and other NFP tax concessions isn’t a set-and-forget thing. It requires regular self-reviews and ongoing good governance. Demonstrating compliance each year not only keeps you in the ATO’s good books but reassures funders and members that your NFP is being responsibly managed.
If you’re facing overdue not for profit tax returns, unsure where your organisation fits, or need help with your annual self-assessment, BlueRock’s For Purpose specialists are here to help you navigate every stage.
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