From the 2024 Financial Year, certain Not-for-profit entities will be required to lodge a NFP Self-review Return to determine their tax exempt status. Previously this has been self-assessed. The new requirements don’t apply to not for profits who are an ACNC type of entity (a charity), certain government entities or entities that are taxable (as they need to lodge a Tax Return anyway). An ACNC type of entity usually doesn’t include social clubs, sporting and recreational organisations or professional trade groups.

Is my Not-for-profit an ACNC type of entity (a charity)?

An ACNC type of entity is one which has the following characteristics:

• Operates on a not-for-profit basis. This needs to be clear in the governing documents and needs to be followed. Distributions to members must be prohibited during operation and wind up
• Have only charitable purposes that are for the public benefit. Recognised charitable purposes are:

• • advancing health
  • advancing education
  • advancing social or public welfare
  • advancing religion
  • advancing culture
  • promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia
  • promoting or protecting human rights
  • advancing the security or safety of Australia or the Australian public
  • preventing or relieving the suffering of animals
  • advancing the natural environment
  • other similar purposes ‘beneficial to the general public’, and
  • promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country (where that change furthers or opposes one or more of the purposes above)

More details on eligibility can be found here: https://www.acnc.gov.au/for-charities/start-charity/you-start-charity/who-can-apply-be-registered

Is my Not-for-profit entity taxable?

To be exempt from tax, a Not-for-profit needs to benefit the broader community and needs to fit under one of the following categories:

• Community service organisations
• Cultural organisations
• Educational organisations
• Health organisations
• Employment organisations
• Resource development organisations
• Scientific organisations
• Sporting organisations

Examples of organisations that are taxable not-for-profits include social clubs, some business and professional associations and political parties. These types of entities are taxed on income that is earned from non-members. Income earned from members is usually exempt under the mutuality principle (that you can’t earn income from yourself). If your organisation is a Company and its taxable income is below $416, a non-lodgement advice should be lodged as no tax is payable. If the Company’s taxable income is over $416 then a Tax Return needs to be lodged and tax will be payable. If your entity is an association, trust or partnership, there is no tax free threshold and you will need to lodge a Tax Return if your entity is has a taxable purpose.

Do I need to lodge a NFP Self-Review Return?

If your answer to the above to questions was no, then your not-for-profit entity will need to lodge a self-review Return before 31 October 2024 and each year thereafter to confirm your tax exemption. Note that in the first year the ATO has provided an extension until 31 March 2025.

What information do I need to provide in the NFP Self-Review Return?

You will need to provide the following information:

• The organisation’s turnover,
• What type of activity best reflects the organisation’s main purpose. It must fit one of the below categories. If the answer is none of the above, the organisation is taxable. You can find more information on each category by clicking on the links below

• • Community service
  • Cultural
  • Educational
  • Employment
  • Government
  • Health – hospital
  • Health – private health insurer
  • Resource development
  • Scientific – research fund
  • Scientific – other
  • Sporting
  • None of the above

• Whether the organisation’s governing documents prohibit the distribution of income or assets to members either during operation or on wind up. If the answer is no, then if the documents are updated to include such a clause before 30 June 2025, your organisation may still be eligible for a tax exemption as long as no distributions have been made to members.

More information can be found at https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/statements-and-returns/how-to-prepare-a-nfp-self-review-return?redirected_NFPselfreviewguide=