Running a not-for-profit (NFP) can be likened to sailing a boat - even in calm water you need to keep an eye out for what lies ahead. Knowing what's coming up in your journey makes it much easier to plan for smooth sailing. You also need to be ready to correct course, responding to conditions as they change. For NFPs, knowing about upcoming lodgments makes staying on top of your obligations much easier. And staying alert to changes in your organisation helps you ensure you're correctly accessing your endorsements and concessions.
My column this month looks at getting ready for two upcoming lodgments - the income tax return for taxable NFPs and the NFP self-review return for self-assessing income tax exempt NFPs. Starting to get ready now sets you up for a stress-free lodgment before the deadline for either return. I'll also be discussing the importance of reviewing your NFP when your operations change so you can avoid potential issues.
Review your NFP when your structure or activities change
There are many reasons why your organisation may need to change its structure and activities. Your organisation may change its purpose, size, income, assets, membership numbers or location.
This can have flow on effects - for example, if a change in your organisation's structure results in the creation of a new entity, you need to apply for a new ABN and endorsement for the various concessions your organisation wants to access as the new entity.
Changes that alter the purpose and activities of your NFP organisation can affect your ability to continue to access some endorsements and concessions, such as deductible gift recipient (DGR) status or tax concession charity (TCC) endorsement. Changes may mean that your organisation is no longer eligible for DGR endorsement, and you need to contact us to let us know.
On the other hand, your organisation's fundraising and other activities may have grown to a point where you decide to apply for deductible gift recipient status. You may need to amend your constitution to meet DGR endorsement requirements.
We have worksheets to help you self-review your organisation's entitlement to endorsement and concessions:
- Endorsement review worksheet for income tax exempt charities
- Review of a DGR endorsed as a whole
- Review of a DGR endorsed for the operation of a fund, authority or institution it owns or includes.
We also have a self-governance checklist to help you review your organisation's status as an NFP organisation and its tax obligations.
These tools and other good governance practices help you identify and manage tax and super compliance risks. Use our worksheets and self-governance checklist annually, and whenever there is a change in your organisation structures and activities.
Upcoming income tax return for taxable NFPs
If you're running a taxable NFP you should have a plan in place to lodge your upcoming income tax return. Being prepared avoids a last minute rush and makes it easier to get your lodgment in order. For example, if you use a tax professional to help your organisation, allow enough time to work with them during their operating hours.
In general, taxable NFPs with an income year ending 30 June must lodge their income tax return by 15 May each year. (If your NFP has an ATO-approved substituted accounting period, check your approved balance date as that determines when your NFP's due date is to lodge the 2024–25 income tax return.)
As a reminder, to be exempt from income tax an NFP must meet the requirements to self-assess as income tax exempt or be a registered charity that is endorsed by us as income tax exempt. NFP organisations that generally seek to advance the common interest of their members and do not benefit the broader community won't generally meet the requirements for income tax exemption and may need to lodge a income tax return. You can find out more about taxable NFPs at Taxable NFP organisations.
Prepare now to avoid stress later
Looking further ahead, from 30 June self-assessing NFPs can lodge the annual NFP self-review return. We've seen some NFPs who haven't kept their records up-to-date run into delays because key documents aren’t ready or organisational details haven’t been updated. A quick check now can save you significant time later. Check out these common oversights when lodging an NFP self-review return to help you avoid your lodgment going adrift.
Best regards
Tom