Australia’s charities regulator – the Australian Charities and Not-for-profits Commission – has urged the not-for-profit sector to be aware of changes to the way some organisations assess themselves as exempt from paying income tax.
The changes are focussed on over 150,000 organisations that are non-charitable not-for-profits, that self-assess as being exempt from income tax.
If an organisation is a not-for-profit, but has what are known as ‘charitable purposes’, it may meet the eligibility requirements to register as a charity and can no longer self-assess as being exempt from income tax.
These organisations will need to apply for charity registration with the ACNC and be endorsed by the Australian Taxation Office (ATO) to remain eligible for income-tax exemption.
If an organisation is a not-for-profit, has an active Australian Business Number (ABN), but does not have ‘charitable purposes’, it will need to lodge an annual NFP self-review return with the ATO in order to self-assess as eligible for income tax exemption each year.
The first NFP self-review return that these ‘non charitable not-for-profits’ will need to lodge covers the 2023-24 income year.
Both the ACNC and ATO have urged not-for-profits that might be affected by this change to act now to prepare for their first lodgement.
The ACNC has urged not-for-profits to learn more, clarify what they need to do, and see if they need to register as charities by reading guidance on both the ACNC and ATO websites.
ATO guidance is available at: ato.gov.au/NFPtaxexempt and ato.gov.au/NFPselfreviewguide.
ACNC guidance is available at: www.acnc.gov.au/organisations-have-been-self-assessing-income-tax-exempt.
Again, the changes to self-assessment are focussed on non-charitable not-for-profit organisations.
There is no change for organisations already registered as charities with the ACNC.
Organisations that are not registered charities but have deductible gift recipient (DGR) status may need to take action, and should refer to the ACNC and ATO guidance for more information.
If you have more questions about this issue please get in touch with the CBAA team at support@cbaa.org.au or on our Online Community.