It’s tax time. My favourite time of the year; fielding questions from my family, especially my son whose main concern is when he can lodge his tax return. Until now, my son, like many students who work part time, has received a refund. This is because his taxable income was under the taxable threshold. Now that he’s working full time, however, I’ve told him to follow my colleague Tim Loh on LinkedIn, and me, his mum, to get the latest information. This has had great traction because he’s been saving all his receipts digitally to substantiate his work-related expenses. (Thanks Tim!) I’ve also reinforced the opportunity to give back to the community through donations and asked him to think strategically about who he wants to support, and how, in the not-for-profit sector.
I recently joined Friedrich Housa from the Australian Accounting Standards Board, Chris Maddock from OneCare, Geelong, and Mel Yates from the Australian Charities and Not-for-profits Commission on a panel at the ACNC’s annual Regulators Day to discuss changes to charity reporting obligations. Chris reminded us that many not-for-profits are small, volunteer-based organisations that have set up charities to pursue a cause, with not much thought given to reporting obligations, let alone tax.
Speaking from experience, I know this to be generally true. When I set up my first not-for-profit, I didn’t think about tax until I was asked whether donations were tax deductible. Similarly, when I volunteered at my children’s soccer, footy and netball clubs I didn’t think about tax because the income earned from the food and drinks sold during game day, went back to the club. I didn’t know about Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997), and that legally, those clubs met the conditions of the sporting club category, making them eligible to self-assess as income tax exempt. Like many in the community, I assumed my charity and the clubs I volunteered at were automatically income tax exempt.
Income tax exemption, however, is not automatic. The law provides conditions and requirements that must be satisfied for not-for-profits to be entitled. From a tax perspective, the new reporting requirements, that came into effect on 1 July 2023, requiring non-charitable not-for-profits to lodge an annual review return, are aimed at ensuring only eligible not-for-profits access income tax exemption. This is important because trust and confidence underpin our administration of an effective tax system. While the community expects government policy to support the not-for-profit sector, it also expects the ATO to ensure only eligible not-for-profits access tax concessions; and that we deal effectively with those seeking to undermine the sector.
I’ve been speaking about the new reporting requirements for over a year now and generally my messages are well received. I’ve spoken to many clubs and associations, big and small, as they become aware of the new reporting obligations. And I’m always pleased to see most people want to prepare early so they get it right. Many acknowledge that trust and confidence is pivotal to growing a thriving not-for-profit sector.
My team has been working with a range of not-for-profits to ensure the design of the return is easy to understand and complete. We’re currently testing the return with clients and incorporating their feedback to make final improvements. We’re expecting to publish the questions that will be on the return in about October so they can be considered at board meetings and AGMs. This is an important part of governance, so ensure you make time to review your entitlement to income tax exemption by using our worksheets.
To help you prepare, I’ll give you a sneak peek at the return and let you know it comprises 3 sections you need to complete:
- Organisational details.
- Income tax exemption eligibility.
- Summary and declaration.
As we finalise the return, we’re simultaneously mapping the lodgment channel. As I’ve previously mentioned, the return needs to be lodged digitally; either through Online service for business (OSB) or if you use an agent, Online services for agents (OSfA). We know many not-for-profits haven’t needed, until now, to register digitally with the ATO. But now is the time! Last month, I outlined that becoming digital ready included applying for a myGovID and setting up RAM authorisations to prepare to access OSB. We’ll provide further information on this soon, including ‘how to' videos and fact sheets.
Update contact details to get digital ready
We know many not-for-profit organisations elect office bearers for an annual term, and authorised contacts often change yearly. Notifying us about changes to your authorised contacts will enable them to make enquiries and set up access to OSB.
You can notify us of changes online, by phone or via paper form. If you contact us by phone, we'll need to confirm you have the right to access information about the organisation you’re asking about. This will include a 2-step process where you’ll need to meet proof of record ownership requirements. If you haven’t updated your contacts with us for a while, it might be difficult for you to confirm by phone. If this is the case, you can notify us of changes by completing the Change of registration details form (NAT 2943) and posting it to us at the address on the back of the form.
You can order a paper copy of the form by:
- ordering online, or
- phoning 1300 720 092 any time.
We suggest including an agenda item in your annual general meeting and keeping minutes to ensure you record any key personnel changes. You can also use our handover checklist when your organisation changes its tax administrator; for example a treasurer, office bearer or employee involved in the tax administration of your organisation. Recording changes is part of good governance.
- Tax Time 2023 is from 1 July to October 2023 – it’s the perfect time to review your not-for-profit’s purpose and obligations.
- The annual self-review return for non-charitable not-for-profits with an ABN will assist in providing trust and confidence that only eligible organisations access income tax exemptions – your compliance is critical to maintaining integrity.
- Preparing early allows you to collect information and update details so you can make informed decisions – it’s never too early to talk to your board.
- Make time to review your entitlement to income tax exemption – make sure your purpose in your governing documents reflects what you do.
- Update your contact details so you can get digital ready – remember to include important office bearer changes in your AGM minutes and use our handover checklist to record key information.
Remember, we’re here to help and support you. We update our web guidance regularly, and a new detailed landing page will go live this month.
You can subscribe to our Not-for-profit newsroom for the latest tax and super news, as well as tips and advice, sent directly to your inbox! If you’ve still got questions, my staff in Paramatta operate the ATO’s dedicated Not-for-profit service which you can call on 1300 130 248.
Take care and stay safe.
JenniferThis month, Assistant commissioner Jennifer Moltisanti discusses tax time, reporting, and how to get digital-ready.