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Not-for-profits – enhancing the transparency of income tax exemptions

Details of reforms to the administration of not-for-profit (NFP) entities that self-assess as income tax exempt.

Last updated 9 August 2023

Not for profit reforms

On 11 May 2021, as part of the 2021–22 federal Budget, the Australian Government announced reforms to the administration of not-for-profit (NFP) entities that self-assess as income tax exempt. The measure is designed to enhance trust and confidence in the sector by ensuring only eligible NFPs access income tax exemptions, and that NFPs operate on a level playing field.

A charity registered with the Australian Charities and Not-for-profits Commission (ACNC) is not captured by the new requirements. Charities are endorsed by the ATO to access an income tax exemption and are required to submit an annual information statement to the ACNC.

Summary of changes

From 1 July 2023, non-charitable NFPs with an active Australian business number (ABN) will be required to lodge an annual self-review return in order to access an income tax exemption.

The annual self-review return for the 2023–24 year will be required to be lodged between July and October 2024 using the existing online and secure platform - Online Services for Business and Online Services for Agents.

Questions will guide clients to consider purpose and activities against specific eligibility requirements of an income tax exempt entity. These are not financial in nature and only one question will relate to estimating income range to indicate the size of the not-for-profit.

After submitting the first annual self-review return, NFPs can annually confirm or update information on a pre-populated self-review return.

If a self-review return is not lodged each year, NFPs may become ineligible for an income tax exemption. Penalties may apply under the ATO’s penalty framework.

We are consulting with the sector to develop the self-review return. The new self-review return will provide a tailored and guided decision path. It will comprise questions similar to the current self-review worksheet, with real-time prompts.

Prepare for the changes

NFPs can do the following things now to prepare for lodgment in 2024.

Self-assess your tax status now

Locate and review your governing documents to ensure you are operating for purpose and that the documents contain appropriate NFP clauses. Organisations that access tax concessions, including income tax exemptions, must have governing documents.

Find out more about income tax exempt and taxable not-for profits at 'Does your not-for-profit need to pay income-tax?

Check the types of NFP organisations that can self-assess income tax exemptions at Types of income tax exempt organisations.

Use our worksheets to review your eligibility for an income tax exemption. These worksheets have been provided to support record keeping and good governance, they are not required to be submitted to the ATO.

Ensure you are keeping your records in an accessible form (either printed or electronic) to assist with your lodgment.

Sporting clubs

If you are a sporting club, use the Working out your club’s income tax exempt status worksheet. This worksheet includes a financial comparison for multi-purpose sporting clubs in Schedule 1, which will not be a part of the self-review return.

Other NFPs

For all other not-for-profits use the Income tax status review worksheet for self-assessing not-for-profits form.

Get up-to-date and digital ready

Update your organisation's contact details and notify us of changes to your organisation. It’s an ABN registration requirement to keep your contact details current, and it also means you’ll receive important information about your tax and superannuation obligations.

Get digital ready - apply for a myGovIDExternal Link with a standard or strong identity strength. Then set-up a RAM authorisationExternal Link in preparation to access Online services for business.

If your organisation needs to hand over its tax affairs to a new administrator, download the Handover checklist for not-for-profit administrators.

Subscribe to the monthly newsletter at ato.gov.au/nfpnews.

More information

Check the NFP Newsletter for regular updates as they are published. This will keep you informed with the new reporting requirements, including:

  • refreshed information about what you can do to prepare your NFP for the new reporting requirements
  • a step-by-step guide on the self-review process.

If you have any questions about your NFP or its tax status, phone us on 1300 130 248 between 8:00 am and 6:00 pm, Monday to Friday.

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