Income tax guide for non-profit organisations

Health 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: if it is a hospital it is either a public hospital or a hospital that is carried on by a non-profit society or association it is not a registered charity it meets at least one of the three tests if it is a benefits organisation, it is a non-profit organisation. Review your Entitlements and responsibilities and complete the Income tax status review worksheet for self-assessing non-profit organisations (NAT 74141).

Hospital

A hospital is an institution in which patients are received for continuous medical care and treatment for sickness, disease or injury. The provision of accommodation is integral to a hospital's care and treatment.

Clinics that mainly treat ambulatory patients who return to their homes after each visit are not hospitals. However, day surgeries that provide beds for patients to recover after surgery may be hospitals.

Homes to provide nursing care such as feeding, cleanliness and similar care are not hospitals. However, nursing homes for people suffering from illness are accepted as hospitals.

Hospices for the terminally ill will generally be hospitals. Minor outpatient and nursing care will not prevent an institution being a hospital.

Non-profit hospitals include those run by churches and religious orders.

Three tests

For a hospital that is not a registered charity to be exempt from income tax, it must pass one of the following tests:

• physical presence in Australia test
• DGR test
• prescribed by law test.

If your organisation exists, operates and incurs its expenditure solely and entirely in Australia, you meet the physical presence in Australia test. You do not need to read anything further about the three tests.

If your organisation does not exist, operate and incur its expenditure solely and entirely in Australia, see the Explanation of the three tests to work out if you meet any of them.

Benefits organisation

A benefits organisation that is a private health insurer within the meaning of the Private Health Insurance Act 2007 is exempt from income tax if it is not carried on for the profit or gain of its individual members.

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 non-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 non-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