In May 2021, the federal government unveiled changes to the tax administration of Nonprofit (NFP) organisations that self-assess as income tax exempt. The changes require NFPs with an active Australian Business Number (ABN) to submit an annual NFP self-review return to self-assess eligibility for exemption from income tax.

What are the changes?

The new regime came into effect for the 2023-24 income year and requires NFPs to report the specific basis of their assessment. That is, NFPs must report the category of organisation and the eligibility criteria that specifically apply to the organisation.

What entities are affected?

Division 50 of the Income Tax Assessment Act 1997 sets out the 8 categories of tax-exempt entities that can self-assess eligibility for income tax exemption. These are:

1. Community service
2. Sporting
3. Cultural
4. Educational
5. Health
6. Employment
7. Scientific
8. Resource development

The new reporting requirements affect these organisations. It is important to note, however, that the new reporting requirements apply only to non-charitable not-for-profits with an active ABN that are eligible to self-assess their income tax exemption. As such the following types of entities are not included in the new regime:

• Charites registered with the ACNC;
• Taxable NFPs; and
• Government entities.

This means the changes will principally affect organisations that fall within the community service, sporting and cultural categories.

The new requirements do not mean that an organisation should reflexively rush to cancel their ABN, as the ABN may be required for other tax obligations such as GST or PAYG withholding.

If you are unsure if your organisation is affected by the new reporting requirements, or require assistance in navigating the changes, or have other issues affecting your NFP that you are struggling to grapple with, please get in contact with us and we can assist you.