New reporting requirements for not-for-profits:
self-assessment of income
tax exemption

Starting from the 2023-24 financial year, non-charitable not-for-profit (NFP) organisations with an active Australian Business Number (ABN) are required to self-assess their income tax exemption. These changes were announced as part of the 2021–22 Federal Budget on 11 May 2021. 

The changes mean non-charitable NFPs with an active ABN have to submit an annual NFP self-review return to check their eligibility for income tax exemption with the Australian Taxation Office (ATO).

The new annual reporting obligation aims to improve transparency and integrity within the NFP sector, ensuring that only eligible organisations can qualify for income tax exemption.

Who does it apply to?

Organisations with a purpose that fall into the following 8 categories can self-assess eligibility for income tax exemption1:

• community service
• sporting
• cultural
• educational
• health
• employment
• scientific
• resource development

Exemptions

Certain NFP’s are exempt from the new reporting requirements. These include:

1. Charitable NFP’s: Charitable organisations that meet the ATO's criteria for income tax exemption and are registered with the Australian Charities and NFP’s Commission (ACNC).

2. Government entities including:

• municipal corporation,
• local governing body,
• public authority constituted under an Australian law, and
• constitutionally protected fund.

3. Taxable NFP’s: Organisations that only serve their members' interests and not the wider public will usually not qualify for income tax exemption. Taxable NFP’s include:

• social clubs and fraternal organisations,
• some business and professional associations,
• clubs whose main purpose is providing hospitality services for members; and
• political parties.

4. Other entities already required to lodge a tax return or notify the ATO when a tax return is not necessary.

How it works

Annual self-review return: NFP’s must lodge an annual self-review return using ATO online services for business or through a registered tax agent.

The ability to self-assess as income tax exempt is only available to NFPs that meet specific criteria and conditions (outlined above), including that:

1. they fall under one of the specific categories listed in Division 50 of the Income Tax Assessment Act 1997; and
2. they are not charitable NFP’s and are not registered (or eligible to be registered) with the ACNC.

Key dates

• First return: The first NFP self-review return due date for the 2023-24 income year is the 31st of October 2024 for those with an income year ended 30 June. The ATO have recognised this may not be feasible for all organisations and have extensions available.
• Extensions available: Additional time to lodge is available up to the 31st of March 2025 for organisations having difficulties lodging their first return.
• Subsequent years: NFPs must submit the self-review return annually for each subsequent income year.

Transitional support

If your organisation needs more time to meet these obligations, transitional support arrangements are available.

Remember, accurate reporting ensures compliance and maintains your NFP’s tax-exempt status. If you are unsure if your organisation will be required to comply with the new obligations, please reach out to your usual Brentnalls SA contact for further assistance.

For further information on the new reporting requirements, please refer to the ATO’s website:

https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/statements-and-returns/in-detail/reporting-requirements-to-self-assess-income-tax-exemption

Disclaimer

The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.