New Requirements for Non-Charitable Not-for-Profits: Annual Self-Review Returns from July 2023
There are compliance changes coming within the non-charitable not-for-profit sector, with new reporting requirements being introduced. Commencing July 1, 2023, if your not-for profit has an Australian Business Number (ABN) and claims to be income tax exempt, you will be required to lodge an annual self-review return with the Australian Tax Office (ATO). This must be done to maintain the income tax exemption status. The ATO has initiated these changes to enhance accountability and oversight within this sector.
Why This Matters
Being a non-profit organisation means you're dedicated to a cause, but it also means you have certain tax rules to follow. The Income Tax Assessment Act 1997 (ITAA 1997) lays out the rules for tax-exempt groups. If your non-profit has an ABN but doesn't meet the requirements for tax exemption, you'll be considered taxable. If your income is more than $416 in a year, you'll need to file a tax return.
Who Do These New Requirements Apply To
It depends on your entity status as to how the reporting may or may not apply. For example:
No ABN? No Worries: If your organisation doesn't have or need an ABN, these new rules don't apply to you. Not everyone needs an ABN, so don't worry about it.
Registered Charities: If your group is already registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC), you're not affected by these new rules. But if you're a tax concession charity, make sure you're meeting your ongoing obligations.
Think You're Charitable? If you believe your group has charitable purposes, check out the ACNC checklist before reaching out to them. It'll help you understand what you need to do before making an inquiry.
Tax-Exempt? You've Got Time: If your non-profit qualifies for tax exemption in one of the eight categories specified by tax law, you have time to get ready. The first time you'll need to file the new return is on July 1, 2024.
Not Tax-Exempt and Not Charitable: If your group doesn't meet the requirements for tax exemption and isn't charitable, you might have to pay taxes. But don't worry, you've got time to prepare. The ATO is working on support to help you figure out your income. If your income is under $416, you might not need to file a return, but if it's more, you'll need to file an Income Tax Return.
Attending to The Return
If your not-for profit falls into the tax-exempt category, as many do, starting from the 2023–24 financial year, you'll need to file the annual self-review return. You can do this using the existing Online Services platform, starting on July 1, 2024, or alternatively we can assist and attend to these reporting requirements using our agent online services.
Preparing For the Changes Now:
While the first report is not due for some time, if you are a not-for profit steps you can consider now include:
Check Your Organisation's Purpose: Make sure your group's goals align with the requirements for tax exemption. For not-for profits we work with in this space, we complete an income tax status review on a regular basis which can be accessed from the ATO website https://www.ato.gov.au/Forms/Income-tax-status-review-worksheet-for-self-assessing-non-profit-organisations/
Review Your Activities: Think about what your group does and how it fits with the rules for tax exemption.
Budget for Compliance: Set aside some money in your budget in case you have to pay taxes or cover compliance costs.
Stay Informed: Keep an eye out for updates from the ATO about the new self-review return and any guidance they provide.
By taking these steps now, your not-for profit organisation can smoothly adapt to these new reporting requirements and continue to follow the law.