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Self-assessment of NFP income tax exemption to be scrutinised

By Kathy Nguyen, Senior Lawyer, Governology

There are approximately 206,000 registered “not-for-profits” (NFPs) in Australia. Australian Taxation Office (ATO) statistics indicate:

  • 70% are self-assessed income tax exempt, meaning they can self-assess exemption from income tax if they are not a charity and theymeet the requirements of one of eight categories;

  • 27% are endorsed tax concession charities which are registered withthe Australian Charities and Not-for-profits Commission (ACNC)and must be endorsed by the ATO;

  • 3% are taxable not-for-profits that lodge an income tax return andinclude social clubs, certain professional associations, clubs whoseprimarily provide hospitality for members, and political parties. Governology predicts these statistics will change in future years, with the 70% becoming 60% or less and the 3% moving well into double figures. This is because from 1 July 2023, non-charitable not-for-profits with an active ABN will be required to lodge an annual self-review form to access an income tax exemption. In brief, the ATO will be asking NFPs which self-assess as being income tax exempt to declare their reasons for being income tax exempt.

In the experience of Governology, many association boards and committees of management are not aware of their income tax status. In the forthcoming financial year, we would be pleased to assist professional and industry associations and other for-purpose organisations clarify their income tax position.


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