Changes in Tax Reporting Requirements for Not-for-Profits

In a move aimed at enhancing transparency and accountability, not-for-profit organisations (NFPs) (excluding ACNC registered charities) operating with an active Australian Business Number (ABN) are advised to prepare early for the implementation of new annual reporting requirements.

Commencing from the 2023–24 income year onwards, NFPs will be required to lodge an annual NFP self-review return to maintain access to income tax exemptions. This initiative underscores the importance of aligning organisational purpose and activities with the criteria of an eligible income tax exempt entity.

The NFP self-review return will serve as a comprehensive guide, aiding NFPs in assessing their tax-exempt status accurately and reporting it accordingly. It's imperative to note that while NFPs are obligated to file the self-review return, taxation on income will only be applicable if they fall under the category of taxable not-for-profits.

Annual reporting requirements

NFPs can submit the NFP self-review return for the 2023–24 financial year between 1 July and 31 October 2024. The submission process can be facilitated online through Online Services for Business or via a registered tax agent utilising Online Services for Agents, provided they are authorised to lodge on behalf of the NFP.

Preparation for annual reporting necessitates several key actions by the organisation's principal authority:

• Ensuring the organisation's contact details, including ABN registration details, are current
• Reviewing the organisation’s primary purpose and governing documents
• Establishing a myGovID with either a Standard or Strong identity strengths
• Linking the myGovID to the NFP's ABN in Relationship Authorisation Manager to access Online Services for Business.

Failure to submit the NFP self-review return may render an organisation ineligible for income tax exemption, subjecting it to potential penalties.

Reporting exemptions

It's important to note that government entities and charities registered with the Australian Charities and Not-for-profits Commission (ACNC) are exempt from the requirement of lodging an NFP self-review return. Charities are already obligated to submit an annual information statement to the ACNC.

Likewise, taxable NFPs are exempt from filing an NFP self-review return, as they are required to lodge an income tax return or notify the appropriate authorities of an unnecessary return annually.

For updated guidance, NFPs are encouraged to consult the ATO’s Not-for-profits – Enhancing the Transparency of Income Tax Exemptions resource.