Is your Not-For-Profit ready for new reporting requirements?

On 11 May 2021, as part of the 2021 Federal Budget, the Australian Government announced reforms to the administration of Not-For-Profit (NFP) organisations that self-assess as income tax exempt.

From 1 July 2023, non-charitable NFPs with an active Australian Business Number (ABN) that wish to access an income tax exemption are required to lodge an annual self-review return. Charities registered with the Australian Charities and Not-For-Profits Commission (ACNC) are not captured by these new reporting requirements.

The initiative was introduced to ensure there is trust and confidence in the tax system, by ensuring only eligible NFP organisations access the tax concessions. The requirement to lodge will commence for the 2023-2024 financial year, with lodgements falling due between 1 July 2024 and 31 October 2024. Early balancing entities will need to hold off on preparing the annual self-review return until the return is made available in July 2024.

The ATO is in the process of developing the return and administrative infrastructure, in consultation with the Not-For-Profit community.

The ATO have indicated that the self-return will:

  1. Be simple to prepare
  2. Include questions similar to those in the existing self-review worksheets
  3. Guide NFP organisations to consider their purpose and activities against specific eligibility requirements for income tax exempt entities
  4. Not include questions of a financial nature, with the exception of an estimated income range to determine the size of the organisation.

The return will be lodged digitally through the ATO’s online services for business (OSB), or online services for agents (OSfA) if you engage a tax agent.

An organisation’s failure to lodge a self-review annual return is likely to preclude an NFP organisation from eligibility for an income tax exemption. Penalties may also apply under the ATO’s penalty framework for organisations who have a lodgement obligation and fail to lodge.

What should your organisation do to prepare for the lodgement?

To prepare for self-review annual return lodgement, NFP organisations should:

  • Ensure the organisation’s ABN details are up to date
  • Ensure myGovID and RAM authorisation have been established for OSB
  • Locate and review the organisation’s governing documents and continue to review the organisation’s purpose, obligations and activities
  • Review the existing income tax status worksheet for self-assessing Not-For-Profit organisations introduced by the ATO.

If you require assistance in preparing for your organisation’s compliance obligations, including the self-review annual return, please reach out to our specialist Not-For-Profit team.

For further information about this reform, please visit the ATO website.