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  • Not-for-profit organisations

    There are 600,000 not-for-profit (NFP) organisations in Australia. Approximately 194,000 are registered with the ATO so that they can access various tax concessions and meet tax and superannuation obligations.

    The NFP sector is diverse in terms of turnover, purpose, workforce and organisational structures. It covers activities and services, including health, social services, education, sport and recreation, arts and culture, environment, animal welfare, human rights and religious practices.

    Many NFPs rely on volunteers, not just to carry out their core work but also for business management and governance – often without the assistance of tax agents or other intermediaries to help manage their tax affairs. With limited resources, they sometimes find it challenging to meet their regulatory obligations, including tax and superannuation.

    Indicators of participation

    Correctly registering in the system

    NFPs are generally correctly registered in the tax and superannuation systems. The main registration integrity risks are whether the organisation has correctly self-assessed its entitlement to tax concessions, or sought registration with the Australian Charities and Not-for-profits Commission (ACNC) and endorsement by the ATO.

    Lodging tax information on time

    The vast majority of NFPs are not required to lodge an income tax return, with the exception of taxable NFPs and public and private ancillary funds. Monitoring of ancillary funds indicates some issues about the timeliness of their annual returns. The introduction of an online, consolidated reporting framework with the Australian Charities and Not-for-profits Commission (ACNC) for 2015–16 is expected to improve lodgment performance.

    For activity statement lodgments, 90% of NFPs reporting monthly lodged their statements on time which is an improvement on the previous year. This increased to 94% lodged within four weeks of being due; and by 30 June 2017, 97% were lodged overall.

    For NFPs reporting quarterly, 76% lodged their statements on time, which is a decline compared to the previous year. This increased to 81% lodged within four weeks of being due; and by 30 June 2017, 87% were lodged overall.

    Reporting complete and accurate information

    As most NFPs do not need to report information to the ATO on their NFP status, incorrect reporting is not a significant issue for the sector. However, NFPs must meet certain tax requirements to remain entitled to access a range of tax concessions, such as exemption from income tax and fringe benefits tax, and to receive tax deductible gifts. NFPs are required to notify the ATO if circumstances change that affect their entitlement to access tax concessions.

    To ensure tax concessions are being used appropriately, in 2016–17, we conducted 911 audits and reviews of high-risk clients to identify instances of incorrect reporting, take corrective action and help ensure future compliance. Our audits and reviews resulted in $1.46 million of additional revenue. Some of the more common instances of incorrect reporting identified include NFPs undertaking activities not consistent with the requirements of an exempt entity and incorrectly providing private benefits to individuals. We also used the results of these activities to improve our education material on and hosted a number of related webinars.

    Paying tax obligations on time

    In 2016–17, almost 98% of tax liabilities were paid on time, and almost 100% were paid within 90 days of the due date. This is consistent with last year.

    At 30 June 2017, NFPs owed $96.8 million in collectable tax debt, up almost 3% from last year.

    NFPs accounted for 0.5% of total collectable debt.

    How we are making it easier

    Tailoring support to achieve better outcomes

    We recognise that NFPs do not always have the resources to navigate the complexities of the tax and superannuation systems. To improve their experience with tax and super and allow them to focus on their valuable work, we are tailoring and enhancing the way we support NFPs.

    New support options were introduced during the year to help NFPs understand their entitlements and obligations. Activities included hosting a number of webinars, improving our website content and layout, an FBT video for NFPs, participating in several seminars around the country, and providing opportunities for NFPs to engage with us early to resolve complex issues.

    Improving understanding through consultation and research

    Our NFP Stewardship Group includes key members of the not-for-profit sector, as well as representatives from the ACNC and Treasury. Members work with the ATO to identify opportunities to improve the client experience or the law. Many of the new initiatives we introduced this year were a result of the active participation of this group.

    We also recently conducted a survey of approximately 700 NFPs to help us better understand the experience NFPs have when they interact with the ATO. We will be using this feedback to improve and more effectively market our services and products.

    The survey results show that 79% of NFP respondents agreed that the ATO makes it easy for them to meet their tax and superannuation obligations and access tax concessions, and that the ATO is approachable. These respondents also indicated satisfaction with a number of our products and services tailored for NFPs, including the ATO website (83%), the Not-for-Profit News Service (79%) and our dedicated NFP phone service (63%).

    Collaborating with the ACNC and other agencies

    We work in collaboration with the ACNC to support charities and improve their experience as clients of the ATO.

    In collaboration with the ACNC and the NFP Stewardship Group, we streamlined reporting obligations for private ancillary funds (PAFs) registered as charities. They now only need to report once to the ACNC, rather than lodge separate forms with the ACNC and the ATO. To improve awareness of PAF issues among our staff, we ran a series of in-house webinars attended by 270 of our people through 2016–17.

    We co-hosted webinars and co-attended events with the ACNC at NFP peak body conferences, including ‘Ask ACNC’ seminars across the country, to help answer questions on tax and superannuation.

    In partnership, we seconded an officer to work in a law firm specialising in not-for-profit matters. This gave valuable insights for ACNC and the ATO on the experience NFPs have when dealing with the law firm and, in turn, highlighting how we can better support clients.

    We also collaborated with ACNC, the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Attorney-General’s Department to undertake a comprehensive risk assessment of terrorism financing.

      Last modified: 30 Oct 2017QC 53660