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Not-for-profit (NFP) entities that are not registered charities are now required to lodge an annual self-review return, reaffirming their eligibility to self-assess as income tax exempt.
Completing the return itself might be relatively straightforward for many NFPs. However, before you can do that, you must first set up your return access. The set-up process is fraught with possible complications, as it requires working through and connecting four different interactive platforms across two different government bodies in the correct order.
Part 1 of this article outlines which NFPs are required to lodge a self-review return and which are not. Part 2 then walks you through the set-up process and completing the return.
The first step in determining who is required to complete this new self-review return is understanding the distinction between a NFP and a charity. There is confusion sometimes between NFPs and charities and when they are required to register with the Australian Charities and Not-for-profits Commission (ACNC). Here, we have included a summary:
Having an ABN also means having a Tax File Number (TFN), and a NFP that has self-assessed as tax exempt typically notifies the ATO that lodging tax returns is not required. Until now, a NFP might have had no further interaction with the ATO.
The concern has been that some NFPs might have drifted or progressed from their original objectives, whose origins might stretch back years or even decades. Accordingly, it might no longer fall wholly within the bounds of one of those eight abovementioned self-assessing categories. Or perhaps the NFP commenced engaging in charitable activities somewhere along the way, which would mean it is no longer eligible to self-assess as income tax exempt.
Thus, this new self-review return requires NFPs that self-assess as falling into one of the above eight categories and thus self-assess as income tax exempt to reexamine their objectives, activities, and governing documents and reaffirm that they continue to be eligible to self-assess as income tax exempt.
A charity registered with the ACNC is subject to the ACNC’s oversight and reporting obligations and does not self-assess as income tax exempt. Accordingly, they are not required to lodge this new self-review return.
NFPs that seek to advance the common interest of their members and do not benefit the broader community will generally not fall into one of the above eight NFP categories that are eligible to self-assess as income tax exempt. These typically include organisations like social clubs and professional associations, which are required to lodge tax returns disclosing the non-exempt part of their activities.
Taxable NFPs are not required to lodge the self-review return.
From working through the above, we can distil down to the following NFPs being required to lodge this new self-review return with the ATO:
The 2023-24 income year is the first year for which the above NFPs must lodge a self-review return, which you can do from 1 July 2024 and is due by 31 October 2024.
Having determined that your NFP is required to lodge a self-review return, Part 2 of this article will take you through the step-by-step process to set up your access to the return, preparation, and lodgement. The set-up process requires working through and connecting four different interactive platforms across two different government bodies and in the correct order. The key message will be to get started on that as soon as possible.
Speak with your local trusted Nexia Edwards Marshall advisor to discuss whether your NFP is required to lodge this new self-review return.
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.