What has changed?
Not-for-profit organisations with an active ABN that are not registered charities and that self-assess as income tax exempt are now required to submit an annual self-review return with the Australian Tax Office.
How will these changes affect my organisation?
These changes will affect not-for-profits differently:
1. Charity that is registered with the Australian Charities and Not-for-profits Commission (ACNC)
If your organisation is already registered with the ACNC you do not need to make any changes or conduct any self-review – your organisation will still have income tax exemption.
2. Not-for-profit that could be a charity
If your organisation operates as a not-for-profit and has a charitable purpose, you must register the organisation as a charity with the ACNC in order to obtain income tax exemption. You cannot self-assess as income tax exempt.
To determine if your not-for-profit organisation is eligible to register as a charity, download our complimentary Income Tax Exemption Assessment Guide and follow the prompts.
3. Not-for-profit that is entitled to income tax exemption
If your not-for-profit organisation does not meet the criteria to be a charity, you may still be income tax exempt if you fall into one of the ATO’s categories for income tax exempt entities. To determine if your not-for-profit organisation falls into one of these categories, download our complimentary Income Tax Exemption Assessment Guide and follow the prompts.
If your organisation meets the criteria for an income tax exempt entity, you will now need to submit an online form with the ATO to remain income tax exempt using an individual MyGovID.
For the 2023/24 financial year, the forms have been made available for lodgement until 31 March 2025. You can lodge the forms yourself or via the use of a registered tax agent. The return contains questions about eligibility and will ask you to consider whether your not-for-profit meets the eligibility requirements.
Following the first lodgement, you will be able to annually confirm or update information on a pre-populated self-review return. Your not-for-profit may become ineligible for an income tax exemption and face penalties if a self-review return is not lodged each year and you claim income tax exemption.
4. Not-for-profit that is not entitled to income tax exemption
For these organisations, you will need to pay income tax on assessable income. However, as you only need to pay income tax on assessable income, income derived from your members may not be assessable income under the mutuality principle. If you think this might apply to your organisation, please get in touch for further advice.
Additionally, if your organisation is below the threshold of net assessable income of $416, you can continue to remain income tax exempt.
Download the Moores Income Tax Exemption Assessment Guide to help you determine how these changes will affect your organisation.