On May 11, 2021, the Australian Government introduced changes to the administration of non-profit (NFP) entities that self-assess as income tax exempt, as part of the 2021–22 Federal Budget.
From 1 July 2024, Not-for-profits (NFP) that need to lodge the annual self-review return can lodge through Online services for business.
It’s important to note that NFPs may lose their eligibility for income tax exemption if they fail to lodge a self-review return each year. Penalties may be applied in accordance with the ATO’s penalty framework.
These changes require that non-charitable NFPs holding an active ABN must now submit an annual self-review return to assess their eligibility for income tax exemption.
All non-charitable NFPs are required to file the self-review return for the 2023–24 income year and each subsequent income year, with the 2023–24 return due between July 1 and October 31, 2024
Who needs to lodge
All non-charitable not-for-profits (NFP) are required to lodge an annual self-review return to self-assess for income tax exemption.
Eligible types of income tax exempt entities
There are 8 categories of income tax exempt entities that can self-assess eligibility for income tax exemption, outlined in Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997). These are:
- community service
- resource development.
Who doesn’t need to lodge
The following organisations are eligible for income tax exemption but are not required to lodge an annual self-review return:
- Not-for-profits (NFP) registered with the Australian Charities and Not-for-profits Commission (ACNC) and endorsed by the ATO as income tax exempt.
- A Government entity that is exempt by definition set-out in section 50-25 of the Income Tax Assessment Act 1997. This includes a
- municipal corporation
- local governing body
- public authority constituted under an Australian law
- constitutionally protected fund.
- A State or Territory body that is exempt under Division 1AB of Part III of the Income Tax Assessment Act 1936.
What to do and how to lodge
Non-profit organizations that need to file the annual self-review return can do so through ‘Online services for business.’ To access this service, you will need to set up ‘myGovID’ and ‘RAM’.
Once ‘myGovID’ and ‘RAM’ are set up, you will be able to view and complete the annual self-review return in ‘Online services for business’ starting from July 1, 2024.
If an NFP chooses to engage a registered tax agent for the submission of the annual self-review return, the agent can file it through ‘Online services for agents.
The self-review return will:
- include questions like those provided in the current self-review worksheets. You can use these worksheets to self-assess your tax status now
- guide NFPs to consider their purpose and activities against specific eligibility requirements of an income tax exempt entity
- not include questions that are financial in nature, however, one question will relate to NFPs estimating their income range to indicate the size of the organisation
NFPs will receive a notification that summarises their self-assessed eligibility for income tax exemption once the self-review return is lodged.
Following the first lodgment, NFPs will be able to annually confirm or update information on a pre-populated self-review return.
If you require assistance with the submission, we are more than happy to assist you.