Types of NFP organisations

There are 3 main types of NFP organisations:

• charities
• NFPs that can self-assess as being 'income tax exempt'
• taxable NFPs.

Some of these organisations are also deductible gift recipients.

If you’re not sure if your organisation is an NFP or what type it is, phone our dedicated NFP Advice Line on 1300 130 248 or our Indigenous helpline on 13 10 30 (8 am to 6 pm, Monday to Friday, except public holidays).

Charities

Many organisations work to help the community, but only some of these organisations are charities. The word charity has a special legal meaning.

Your organisation may be a charity if it does not operate for profit and has one or more of the following characteristics:

• works for people who are affected by poverty or sickness or who are elderly
• promotes education or religion
• works to benefit the community in another way.

Examples of charities include some religious groups, aged care homes, disability service organisations, animal welfare societies, arts or cultural groups, and environmental protection groups.

Types of charities include public benevolent institutions and health promotion charities, among other charities.

Charities must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and be endorsed by us to get tax concessions.

Income tax exempt organisations

There are 8 categories of income tax exempt entities that can self-assess eligibility for income tax exemption, outlined in Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997). An NFP can self-assess income tax exemption if it is not a charity and meets the requirements of one of the following categories:

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

Generally, if the NFP works in the interests of its members instead of in the interests of the broader community, it won’t meet the requirements for income tax exemption.

Non-charitable NFPs with an active Australian business number (ABN) need to lodge an NFP self-review return each year to confirm their eligibility to self-assess as income tax exempt.

For further guidance, see

• How to lodge the NFP self-review return
• NFP self-review return reporting requirement.

Taxable NFPs

An NFP organisation is taxable if it cannot self-assess as income tax exempt and is not endorsed by us as income tax exempt. To be endorsed, a charity must first be registered with the ACNC.

Taxable NFPs must meet normal tax obligations but may be eligible for concessions that reduce or simplify its tax liability and reporting requirements.

Taxable NFPs may still be eligible for special tax rules because they operate for community or member benefit rather than profit. These include:

• the mutuality principle, where income from:
  • transactions with members (such as membership fees or contributions for shared benefits) is generally not taxable
  • non-members or external sources is usually taxable.
• lodgment concessions
  • some smaller taxable NFPs may qualify for simplified reporting or different lodgment thresholds.

For more information, see Taxable NFP organisations.

Indigenous corporations

Some Indigenous corporations can structure as an NFP organisation. These organisations deliver important services to the community.

As an Indigenous NFP, you may be able to access tax concessions which means you:

• may not have to pay income tax
• may receive tax-deductible donations.

For more information, see:

• Important tax matters for Indigenous corporations
• Office of the Registrar of Indigenous CorporationsExternal Link.

Deductible gift recipients

Some charities are also deductible gift recipients (DGRs).

DGRs are organisations that are entitled to receive tax-deductible donations. DGRs are either:

• endorsed by us
• listed by name in the tax law.

Donations can be gifts or deductible contributions. A tax deduction for a gift is claimed by the person or organisation that makes the gift. A tax deduction for a contribution can only be claimed by an individual taxpayer.

To be entitled to receive tax-deductible donations, an organisation must be a DGR.

For more information, see:

• Tax deductible donations
• Receiving tax-deductible gifts.

DGR status for entities promoting Indigenous arts or languages

The cultural organisation DGR category includes organisations whose principal purpose is promoting Indigenous arts or languages.

Eligible organisations may operate art centres or language centres. They may also undertake activities connected to caring for country if those activities are incidental or secondary to their principal cultural purpose.

To be eligible for DGR endorsement as a cultural organisation, an organisation must meet all eligibility requirements. This includes:

• being registered as a charity (or an eligible government entity)
• having a principal cultural purpose
• maintaining a gift fund.

Before 1 January 2024, cultural organisations and their public funds were required to be listed on the Register of Cultural Organisations (RoCO), administered by the Department of Infrastructure, Transport, Regional Development, Communications and the Arts, to be eligible for DGR endorsement.

From 1 January 2024, we administer the cultural organisation DGR category and are responsible for assessing eligibility for endorsement.

Transitional provisions apply to organisations that had DGR endorsement for a public fund on the RoCO before this date.

For more information, see Cultural organisations.