The 2022 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 must lodge an income tax return or information under s 161 of the Income Tax Assessment Act 1936

From 1 July 2023, non-charitable NFP organisations with an active Australian Business Number (ABN) seeking income tax exemption are required to lodge an annual self-review return.

The reforms apply from the current 2024 financial year, with tax lodgements falling due between 1 July 2024 and 31 October 2024. Organisations with earlier year ends than 30 June 2024 may commence return preparation after the self-review form is made available by the Australian Taxation Office (ATO) in July 2024.

Preparation for annual reporting

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

• Ensure the organisation’s ABN details are up to date on the public register (https://abr.business.gov.au/)

• Ensure myGovID and Relationship Authorisation Manager (RAM) authorisations have been established for online services for business (OSB)

• Locate the organisation’s governing documents and review the organisation’s purpose, obligations, and activities

Transitional arrangements

The ATO has indicated that transitional support arrangements will be available for entities that require additional time to meet their obligations. This may include:

• Lodgement deferrals

• Payment plans for organisations that identify they are a taxable not-for-profit for the 2024 income year

• Remission of general interest charges and other penalties that may apply.

As a transitional arrangement for the 2024 financial year, eligible NFPs can use the ATO’s interactive voice response telephone service if they are unable to lodge online.

Entities exempt from the 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 ensure your organisation fits into one of the eight eligible categories and understand the additional requirements to be eligible to self-assess.

Contact us with any enquiries.