Self-assessment for income tax exempt not-for-profits on the horizon

During the recent The Education Network Charities and Not-For-Profits Conference, assistant commissioner of the Australian Taxation Office (ATO), Jennifer Moltisanti, provided significant updates to the sector with respect to the new reporting requirements for not-for-profits (NFP) that self-assess for income tax exemption.

Key dates

• 1 October 2023 – Publication of questionnaire on the ATO website.
1 July 2024 – Lodgment opens for financial year 2023/24.
• 31 October 2024 – Due date for first lodgment.

Key Highlights

All non-charitable NFPs with an active ABN that are seeking to self-assess as income tax exempt must lodge an annual self-review form for the 2023/2024 financial year. The first day of lodgment will be 1 July 2024. NFPs will not be required to lodge self-review forms in order to obtain an income tax exemption for the 2022/23 financial year.

The Income Tax Assessment Act 1997 (Cth) provides that, in order to be income tax exempt, an NFP must:
• operate for public benefit;
• have a physical presence in Australia;
• meet the eligibility requirements for one of the eight categories that can self-assess as income tax exempt; and
• ensure that its income and assets are used solely for the purposes for which it is established.

How will an NFP self-review?

The ATO is currently developing a self-review return form specifically tailored for non-charitable NFPs. The form will resemble the self-assessment worksheet currently used by NFPs for tax assessment and will feature 10-15 questions. The questions will be published on the ATO website from 1 October 2023. Following their initial submission, NFPs will have the ability to review and update the information provided on the self-review return.

Self-assessment is not available for entities that have a charitable purpose

The Income Tax Assessment Act 1997 (Cth) provides that an NFP that has a charitable purpose is not entitled to self-assess as income tax exempt. Instead, in order to be eligible for income tax exemption that NFP must register as a charity with the Australian Charities and Not-for-profits Commission.

How we can help

Moores can advise on what these proposed changes mean for your NFP and work with you to confirm whether your NFP is entitled to be income-tax exempt or to apply for registration as a charity if required.

Contact us

Please contact us for more detailed and tailored help.

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