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  • Completing the company tax return

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Non-profit organisations that are required to lodge a tax return use the company tax return.

    The following tips will help you to avoid common errors made by non-profit organisations when completing the company tax return.

    Relevant period

    'Relevant period' label from Company tax return 2012

    An entity's income year for the purposes of tax law is usually the period of 12 months ending on 30 June each year.

    If you do not write any dates in this field, then your organisation will be treated as having a 1 July to 30 June income year.

    Common errors: dates shown incorrectly

    There are two main errors:

    • writing a period other than ending 30 June, without having an approved substituted accounting period (SAP)
    • having an approved SAP, but not writing any dates.

    Consequence of these errors

    We may return your tax return as incomplete and ask you to lodge it with the approved SAP balance date, that is, the date on which your income year ends. We will consider that you have not lodged a tax return until you lodge your corrected tax return.

    We may approve a SAP retrospectively, but this can result in:

    • pay as you go instalments being allocated to a wrong year
    • incorrect due dates for lodgment
    • delays in the processing of refunds
    • the application of penalties in appropriate circumstances.

    Tips

    An entity that wishes to adopt a SAP can only do so by obtaining leave of the Commissioner of Taxation.

    An entity with an approved SAP should use the company tax return for the correct income year. For example, if an organisation has an approved SAP with a balance date between:

    • 1 July 2011 and 30 November 2011 inclusive, it should use the 2011 company tax return
    • 1 December 2011 and 30 June 2012 inclusive, it should use the 2012 company tax return.

    How do you know whether your organisation has an approved SAP?

    We would have sent you a letter confirming your approved SAP.

    You can also check whether your organisation has an approved SAP by phoning us on 1300 130 248.

    Do your organisation's circumstances warrant the granting of a SAP?

    A SAP may be approved if your organisation can demonstrate that its circumstances are out of the 'ordinary run'.

    Circumstances which are out of the 'ordinary run' include:

    • an ongoing event, industry practice, business driver or other ongoing circumstance which makes 30 June either inappropriate or impractical as a balance date
    • alignment of balance dates within a group.

    See also:

    • While it is not possible to set out all the circumstances in which a SAP may be granted, Law Administration Practice Statement PS LA 2007/21 - Substituted accounting periods contains examples of facts and circumstances that may be considered relevant in deciding if a SAP should be granted.

    Item 2 Description of main business activity

    'Item 2 Description of main business activity' labels from Company tax return 2012

    Item 2 requires an entity to describe as accurately as possible the business activity from which it derives the most gross income.

    Write at B the appropriate industry code for the entity's main business.

    For a full listing of industry codes, see Business industry codes.

    Common error: inappropriate industry code

    An inappropriate industry code is entered at B.

    Consequence of this error

    An incorrect code may result in your organisation:

    • not receiving a necessary service or material from us
    • being inappropriately selected for audit.

    Tips

    Write the code that most accurately describes your business activity.

    Industry codes commonly used by taxable non-profit member-based organisations are listed in the following table.

    Industry codes commonly used by taxable non-profit member-based organisations

    Code and description

    Organisations covered

    45301

    • Clubs - licensed

     

    Organisations mainly engaged in providing hospitality services to their members. These hospitality services include gambling, sporting or other social or entertainment facilities.

    Examples:

    • community clubs - mainly hospitality
    • football clubs - mainly hospitality
    • hospitality clubs or associations
    • leagues clubs - mainly hospitality
    • RSL clubs - mainly hospitality
    • social clubs in association with hospitality
    • sporting clubs or association in association with hospitality
    • sports clubs - mainly hospitality
    • workers clubs - mainly hospitality
     

    45302

    • Clubs - not licensed, hospitality, with staff
     

    As above

    95599

    • Automobile association operation
    • Clubs not elsewhere classified - not licensed, for promotion of community or sectional interests
    • Consumers associations operation
     

    Organisations mainly engaged in activities which promote the interests of their members (except religious, business and professional, and labour association services). Also included are organisations not elsewhere classified providing a range of community or sectional interests or in providing civic and social advocacy services.

    Examples:

    • car clubs and motor vehicle associations
    • clubs for the promotion of community or sectional interests (except recreation, sport or hospitality clubs)
    • discount buying schemes - by clubs or associations
    • military services clubs (except hospitality)
    • social clubs
    • youth clubs and associations
     

    95510

    • Business associations
    • Professional associations
    • Trade association operation - except trade union
     

    Organisations mainly engaged in promoting the business interests of their members (except of organised labour associations and union members).

    Examples:

    • chambers of commerce
    • law societies
    • retailers associations
    • societies of accountants
     

    Item 3 Status of company

    'Item 3 Status of company' labels from Company tax return 2012

    Item 3 requires an entity to select the most appropriate description of its status.

    You need to select one box from C1 to C3 and one box from D1 to D11.

    You may also need to select Z1 or Z2, and one box from E1 to E3.

    Common error: D1 to D11 incorrectly selected

    An incorrect box is selected from D1 to D11.

    Consequence of this error

    Marking an incorrect box may result in your organisation:

    • not receiving a necessary service or material from us
    • paying an incorrect tax rate
    • being inappropriately selected for audit.

    Tips

    Organisations that are 'non-profit companies' should select D3Non-profit.

    For administrative purposes, non-profit organisations that are 'other taxable companies' should select D10 Public.

    Consolidation

    If your organisation is a non-profit company and a head company of a consolidated group, you will need to select Z1 Consolidated head company.

    If your organisation is a non-profit company, it cannot be a subsidiary member of a consolidated group or a multiple entry consolidated (MEC) group. You cannot select Z2 Consolidated subsidiary member.

    See also:

    Item 6 Calculation of total profit or loss

    'Item 6 Calculation of total profits or loss' labels from Company tax return 2012

    The Income and Expenses amounts you write at item 6 are accounting system amounts and correspond to the amounts in the financial statements for the income year, except for the depreciation expenses of small business entities using the simplified depreciation rules.

    Common errors: income and expenses incorrectly shown

    Income and expenses from financial statements are often shown incorrectly at item 6. There are two main errors:

    • showing incorrect amounts
    • using incorrect labels.

    Consequence of these errors

    Errors in item 6 could lead to your organisation:

    • paying an incorrect amount of tax
    • being inappropriately selected for audit.

    Tips

    Mutual receipts and expenses

    You must include receipts and expenses that relate to mutual dealings with members at the relevant labels in the item.

    It is important you include these items at item 6 in order to correctly reconcile the accounting total profit or loss to the taxable income or loss in item 7 Reconciliation to taxable income or loss.

    I Fringe benefit employee contributions

    Write at I Fringe benefit employee contributions all payments that the entity has received from recipients of fringe benefits.

    Employee contributions form part of the employer's or associate's assessable income if employees make payments for fringe benefits that they have received.

    Some important points to note about employee contributions are:

    • an employee contribution may be made only from an employee's after-tax income
    • you cannot use an employee contribution towards a particular fringe benefit to reduce the taxable value of any other fringe benefit
    • in certain circumstances, journal entries in your accounts can be an employee contribution
    • an employee contribution paid directly to you (including those received by journal entry) are included in your assessable income (as a general rule, the costs you incur in providing fringe benefits are allowable deductions)
    • an employee contribution paid to a third party who is not an associate (for example, for the servicing of a car) is not assessable to you
    • when calculating the taxable value of a benefit, you use the full GST-inclusive amount of the contribution to reduce the taxable value of the benefit.

    X Depreciation expenses

    Where an entity uses the simplified depreciation rules, the actual tax deduction for depreciation is included at X. Otherwise, only write the amount of depreciation for accounting purposes.

    For more information on completing this label, see Guide to depreciating assets 2012.

    Item 7 Reconciliation to taxable income or loss

    'Item 7 Reconciliation to taxable income or loss' labels from Company tax return 2012

    Item 7 deals with adjustments for tax purposes to reconcile accounting total profit or loss to the taxable income or loss.

    Common errors: amounts incorrectly shown

    Various errors are made in item 7, including the incorrect use of labels to report revenue and expenses relating to mutual dealings with members.

    Consequence of these errors

    Errors in item 7 could lead to your organisation:

    • paying an incorrect amount of tax
    • being inappropriately selected for audit.

    Tips

    W Non-deductible expenses

    W Non-deductible expenses includes amounts that are expenses for accounting purposes but are not deductible for income tax purposes, including timing variations.

    Expenses relating to mutual dealings with members are included at W.

    W excludes any amount included at U Non-deductible exempt income expenditure item 7.

    Depreciation / decline in value

    Depreciation for accounting purposes is included at W. This is also the amount entered at X Depreciation expenses item 6.

    Enter the tax-deductible amount of decline in value at F Deduction for decline in value of depreciating assets item 7.

    For more information on completing these labels, see Guide to depreciating assets 2012

    V Exempt income

    Write at V all income that is exempt from Australian tax. Do not include at V amounts that are not assessable income and not exempt income.

    Do not include mutual receipts at V Exempt income. Include these amounts at Q Other income not included in assessable income.

    Q Other income not included in assessable income

    Q includes amounts that are income for accounting purposes but not assessable for income tax. Mutual receipts are included at Q.

    Item 15 Licensed clubs only

    'Item 15 Licensed clubs only' label from Company tax return 2012

    Write the percentage (in whole figures) of total income attributable to non-members at A Percentage of non-member income item 15.

    Common errors: percentage shown incorrectly or item left blank

    There are two main errors:

    • showing an incorrect percentage
    • not writing any percentage.

    Consequence of these errors

    Errors in item 15 could lead to your organisation:

    • paying an incorrect amount of tax
    • being inappropriately selected for audit.

    Tips

    The percentage of non-member income is the total non-member income divided by the total income, multiplied by 100.

    The percentage entered at this item differs to the percentage calculated by the Waratahs formula where:

    • total income includes non-member income such as bank interest
    • more than one method of apportionment has been used.

    For an explanation of the Waratahs formula, see Waratahs formula in Mutuality and taxable income.

    Last modified: 10 Feb 2017QC 26072