The 2021-22 Federal budget announced reforms to the reporting requirements for not-for-profit (NFP) organisations that would self-assess as income tax exempt. An entity that is exempt from income tax to lodge an income tax return or information under s 161 of ITAA 1936
From 1 July 2023, non-charitable NFP organisations with an active Australian business number (ABN) that wish to access an income tax exemption are required to lodge an annual self-review return.
The reforms apply from 2023-24 income year, with lodgments falling due between 1 July 2024 and 31 October 2024, early balancers may commence preparations after the self-review return is made available by the ATO in July 2024.
Preparation for annual reporting
To prepare for self-review annual return lodgment, NFP organisations should:
– ensure the organisation’s ABN details are up to date
– ensure myGovID and Relationship Authorisation Manager (RAM) authorisations have been established for online services for business (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 NFP organisations introduced by the ATO.
Transitional arrangements
The ATO has indicated transitional support arrangements will be available for entities that require additional time to meet their obligations. This may include:
- lodgment deferrals
- payment plans for organisations that identify they are a taxable not-for-profit for the 2023–24 income year
- remission of general interest charges and other penalties that may apply.
As a transitional arrangement for the 2023-24 income year, eligible NFPs can use ATO’s interactive voice response phone service if they are unable to lodge online.
Entities exempt from changed reporting requirements
The following entities are exempt from the changed reporting requirements:
- a government entity or charity registered with the Australian Charities and Not-for-profits Commission (ACNC), as they already lodge an annual information statement with the ACNC each year, and
- taxable NFP organisations, as they already lodge an annual income tax return
Next steps
Consider if your organisation is eligible to be registered as a charity, and if you would like to register with the ACNC to avoid falling under the changed reporting requirements that are now in effect.
Only certain categories of NFP organisations are eligible to self-assess as income tax exempt, so it is prudent to make sure your organisation fits into one of the 8 eligible categories and understand the additional requirements to be eligible to self-assess.
Should you have any queries, or if you would like to discuss further, please feel free to contact our office.
The team at EMspire Advisory are trusted, qualified Chartered Accountants, tax agents, and small business accountants. We work closely with our clients to achieve the best possible outcomes. To find out more, please contact us!
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.