Income tax guide for non-profit organisations

Employment organisations

Requirements checklist Your organisation will be exempt from income tax, and can self-assess its exemption, if it meets all of the following requirements: it is one of the following types of organisations a trade union an employee association an employer association it meets both of the following conditions it must be located in Australia it must pursue their objectives and incur their expenditure principally in Australia. Review your Entitlements and responsibilities and complete the Income tax status review worksheet for self-assessing not-for-profit organisations (NAT 74141).

Types of organisations

Three types of employment organisations can be exempt from income tax:

• trade unions
• employee associations that are registered or recognised under the Fair Work (Registered Organisations) Act 2009 or an Australian law relating to the settlement of industrial disputes
• employer associations that are registered or recognised under the Fair Work (Registered Organisations) Act 2009 or an Australian law relating to the settlement of industrial disputes - an employer association that is not registered cannot qualify as a trade union.

Conditions

For an employment organisation to be exempt from income tax, it must meet both conditions:

• it must be located in Australia
• it must pursue its objectives and incur its expenditure principally in Australia.

Principally means mainly or chiefly. Less than 50% is not considered principally.

The pursuit of objectives in Australia can include things done offshore if they are only a means of pursuing those objectives. For example, sending employees to an offshore conference to aid their efficiency for the Australian objectives will be pursuing objectives in Australia.

You will also meet the conditions if your organisation exists, operates, pursues its objectives and incurs its expenditure solely and entirely in Australia.

Entitlements and responsibilities

Being exempt from income tax means your organisation:

• does not need to lodge an income tax return (unless specifically asked to)
• does not need to get confirmation of its exemption from us.

To work out if your organisation is exempt from income tax, you should: complete the Income tax status review worksheet for self-assessing not-for-profit organisations (NAT 74141) for your organisation's records use the worksheet to carry out a yearly review to check your organisation is still exempt - you should also do a review when there are major changes to your organisation's structure or activities.

Regardless of whether your organisation is income tax exempt, other taxes and concessions may apply to your organisation.

For more information about other taxes and concessions, refer to Tax basics for not-profit organisations (NAT 7966).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the Types of income tax exempt entities.

Organisations that are not exempt are taxable.

For more information about taxable organisations, refer to Mutuality and taxable income (NAT 73436).

Sections within Requirements for self-assessing income tax exempt entities

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