Is your Not-for-Profit ready for new reporting rules?

On 11 May 2021, as part of the 2021 Federal Budget, the Australian Government announced reforms to the administration of Not-For-Profit (NFP) organisations that self-assess as exempt from income tax. These changes, including the annual self-review requirement, will take effect this year on 1 July 2024.

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nnual self-review returns for non-charitable NFPs

From 1 July 2024, non-charitable NFPs with an active Australian Business Number (ABN) that wish to access an income tax exemption are required to lodge an annual self-review return. Charities registered with the Australian Charities and Not-For-Profits Commission (ACNC) are not captured by these new reporting requirements.

The initiative was introduced with the goal of encouraging trust and confidence in the tax system by ensuring only eligible NFP organisations access the tax concessions. The requirement to lodge will commence for the 2023-2024 financial year, with lodgements due between 1 July 2024 and 31 October 2024. Early balancing entities will need to hold off on preparing the annual self-review return until the return is made available in July 2024.

What we know about the NFP self-review return so far

The ATO has developed the return and administrative infrastructure in consultation with the Not-For-Profit community. The ATO has indicated that the self-return will:

• Be simple to prepare
• Include questions similar to those in the existing self-review worksheets
• Guide NFP organisations to consider their purpose and activities against specific eligibility requirements for income tax-exempt entities
• Not include questions of a financial nature, except for an estimated income range to determine the size of the organisation.

The return will be lodged digitally through the ATO’s online services for business (OSB), or online services for agents (OSfA) if you engage a tax agent.

Penalties may apply under the ATO’s standard penalty framework for organisations who have a lodgement obligation and fail to lodge on time. In the future, an organisation’s failure to lodge an annual self-review return is likely to preclude an NFP organisation from eligibility for an income tax exemption.

What should your organisation do to prepare for the lodgement?

To prepare for self-review annual return lodgement, NFP organisations should:

• Ensure the organisation’s ABN details are up to date
• Ensure myGovID and RAM authorisation have been established for OSB
• Consider whether to appoint a tax agent
• Locate and review the organisation’s governing documents and identify the substantive provisions
• Continue to review the organisation’s purpose, obligations, and activities for compliance with the purpose
• Consider the categories of Division 50 under which the NFP considers itself to be covered
• Understand the compliance conditions attached to the category
• Review the existing income tax status worksheet for self-assessing Not-For-Profit organisations introduced by the ATO.

For further information about this reform, please visit the ATO website.

Visit BDO website to learn more about how our Not-For-Profit specialists can support your organisation in preparing for compliance obligations, including the self-review annual return.