Are you or any of your family volunteers? There are some changes coming for not-for-profit organisations with an ABN. Chartered accountant GAIL FREEMAN shares some helpful reminders.

If your organisation is a not-for-profit, has an ABN, is not registered with the Australian Charities and Not-for-profits Commission (ACNC) and does not lodge a tax return, this information is for you. 

If your organisation is registered with ACNC, then ACNC administers your tax position and you lodge an annual statement with ACNC every year. The information below does not apply to you. Likewise, if your organisation lodges an annual income tax return, the information below does not apply to you, either.

The change – effective from July 1 2024 – means your organisation will have to lodge an annual self-review return with the ATO. 

The first one needs to be lodged between July 1 2024 and October 31 2024 if you lodge using ATO online services or there may be a later date if you use a registered tax agent. 

There will be no financial questions on the form. If you do not lodge the form you may become ineligible for future income tax exemption.

The return will include questions similar to those in the self-review worksheet that currently exists. On the ATO website you’ll find a worksheet titled “income tax status review worksheet for self-assessing non-profit organisations”. 

You will need to complete a short questionnaire, currently it lists the name of your organisation, the ABN, the year and why you’re completing the return.

Then you are asked if your organisation has a charitable purpose. If you answer “yes”, you’ll need to be registered with ACNC. I recommend that you look at the questions carefully and go to the ACNC website if that’s where you should be registered.

If your organisation is not a charity then you have to determine the category that your organisation belongs to. You will need to read the definitions very carefully. 

The categories listed include organisations involved with community service, cultural, educational, employment, health, resource development and scientific. Sporting organisations are covered on a separate form.

Once you have indicated you’re an exempt entity, you need to advise whether your organisation meets all the requirements for that type of exempt entity.

Again, this means a careful reading of the information on your type of tax-exempt organisation. 

I often hear people say, “we are not-for-profit therefore we don’t have to pay income tax”. That is not correct; you have to fall within the above listed categories to be tax exempt.

To clarify if you are a not-for-profit you are automatically exempt on your member income, that is the income from your members, so member income and related expenses are income tax exempt. 

If you are in receipt of sponsorship and you make a profit you could be taxable on that profit. If you earn interest in excess of $416 that could also be assessable, so please don’t assume that “not-for-profit” means not taxable.

There is a lot of information on the ATO website about this and for quick clarification that’s the best place to look. 

In some instances it is not clear, so I recommend you do your research now so that when July comes you can complete the form easily. As I understand it, in future years you will just need to confirm that the information held at the ATO is correct. 

If you need assistance with your not-for-profit organisation or with completing the annual form please contact the friendly team at Gail Freeman and Co Pty Ltd on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.