July 2024
Beginning with the 2023-24 income year, non-charitable Not For Profit (NFP) organisations with an active ABN are required to lodge an annual NFP self-review return to self-assess their income tax exemption.
NFPs will need to advise the ATO of their gross revenue and select one of 8 exempt categories that aligns with the main purpose of their organisation. Each category may have specific eligibility requirements so it’s important to review them and ensure that your NFP meets these.
The categories are:
- Community service
- Cultural
- Educational
- Employment
- Health
- Resource development
- Scientific
- Sporting
Organisations that don’t belong to one of these categories are not eligible to self-review as income tax exempt.
The self-review also asks NFPs about their prohibition of the distribution of incomes or assets to members; whether they exist, operate, and incur expenditure in Australia; and whether they have any charitable purposes.
Once the self-review has been completed a status of either income tax exempt or taxable will be provided. A taxable status will either require an income tax return to be lodged (if taxable income is over $416) or notification to the ATO that you aren’t required to lodge a tax return (taxable income is $416 or less).
NFPs with a status of income tax exempt will need to continue to lodge a self-review each year unless something changes, and they are no longer tax exempt.
While most NFPs will have an outcome that confirms they are income tax exempt, in the first year of self-reviews it is likely that some organisations may realise they are a taxable organisation for the first time.
How can you prepare?
- Ensure your ABN is still valid and registration details are up to date
- Use the ATOs NFP self-review guide to conduct an early review
- Review your purpose and activities to understand the type of NFP you are
- Review your governing documents to ensure they are up to date and include the relevant information and clauses
- Ensure you have set up myGovID and Relationship Authorisation Manager (RAM) to access the online self-review services
It’s important to note that NFP organisations who are obligated to complete a self-review and fail to do so may no longer be eligible for income tax exemption and could face other penalties.
The self-review return will be available to lodge from 1 July 2024 via online services on the ATO website and is due by 31 October 2024.
Charities registered with the Australian Charities and Not-For-Profits Commission (ACNC), certain types of government entities, and taxable NFPs don’t need to complete the self-review.
If you would like assistance with these changes or addressing the requirements please reach out to our Associate, Anthony Seneca, at info@matsteer.com.au or 03 9325 6300.