ato logo
Search Suggestion:

Straight from the source - November 2022

Last updated 10 November 2022

Part of my role in leading the ATO’s NFP Centre is strengthening the system which includes leading for public value, cultivating and inspiring connections across borders and contributing to the ATO’s stewardship of the sector.

Recently, I’ve contemplated my leadership role as part of my ongoing commitment to development. This has been a timely exercise given the dynamic environment in which we’re operating and has demanded a high level of introspection. It has challenged me to think about my leadership purpose, the shadow I cast and the roles to which I’ve gravitated.

Having acknowledged my authentic-self and embraced vulnerability, I’ve reached a renewed and clear understanding of my role as a leader. My purpose is and always will be to make good, better; and better, exceptional!

Just as we all reflect on our journey and purpose, so too should organisations review where they've come from and where they're heading. This is of particular importance for not-for-profits especially given the changing landscape.

The operating environment

I‘ve addressed several questions of late with respect to the operating environment and what’s on the horizon for not-for-profits. As most readers are aware, the government is committed to partnering with the sector and doubling philanthropy by 2030.

There are also a number of measures in progress aimed at strengthening transparency and reducing administrative complexity.

The Budget

'Through a devastating pandemic, through a succession of dangerous and damaging natural disasters, through global uncertainty and painful price rises –

The Australian people have demonstrated the best of our national character.

Resolute and resilient in hard times.

Practical and pragmatic about the challenges we confront.

Optimistic and confident in a better future.

And ready to work together to build it.'

With these words, the Treasurer handed down the 2022-23 BudgetExternal Link on 25 October. Three announcements related specifically to the not-for-profit sector:

  1. The government’s decision not to proceed with the measure to establish a deductible gift recipient (DGR) category for providers of pastoral care and analogous well-being services in schools.
  2. Updates to the list of specifically listed DGRs.
  3. The development of the not-for-profit blueprint as a roadmap toward expanding services in coming years.

Mitigating risks

It is good practice to review your purpose and governance at least annually and this should be tabled at relevant board or committee meetings. Understanding and addressing your risk exposure to what attracts our attention is part of good governance.

We've recently synthesised what attracts our attention into 4 categories:

  1. Operating for purpose.
  2. Self-assessing income tax exemption.
  3. Ancillary funds.
  4. Emerging risks.

We're increasing our focus on emerging risks particularly where not-for-profit vehicles are used inappropriately to avoid tax or obtain a benefit without entitlement.

While the ATO cannot comment on the tax affairs of any individual or entity due to our obligations of confidentiality under the law, we use intelligence from many sources including media reports, information from the public and referrals from other government agencies to assess issues and risks.

Where, as a result of an assessment, we form a view that individuals or entities are not acting in accordance with their obligations, we will take appropriate action, which may include a review or audit.

We will revoke entitlement to tax concessions including DGR endorsement when we come to the view that an organisation does not meet the eligibility requirements set out in the tax law.

Timely reminders

A reminder for DGRs is that time is running out if you’re required to register as a charity. You’ll recall that from 14 December 2021, charity registration is required for all non-government DGRs except ancillary funds or organisations specifically listed in the tax law.

Eligible not-for-profits can apply for a 3-year extension with the ATO to register as a charity to maintain their DGR status and if approved, they will have until 14 December 2025 to register as a charity with the ACNC.

Not-for-profits that don't meet these new requirements or haven't applied for a 3-year extension by the required date, will no longer be entitled to DGR endorsement and will have their status revoked.

Last month I referred to the new reporting requirements that will impact the vast majority of not-for-profits. From 1 July 2023, not-for-profits that self-assess income tax exemption and have an active Australian Business Number (ABN) will be required to lodge an annual self-review return. The first return will need to be lodged for the 2023–24 income year, which means the earliest anyone will be required to submit a return is 1 July 2024.

While we’re still working with the sector to design the form, there are 3 things you can do to prepare:

  1. Update your contact details with us. 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 super obligations.
  2. Use our worksheets to review your eligibility for an income tax exemption
  3. Stay informed.

With major floods creating challenging conditions in parts of Tasmania, Victoria, New South Wales and Queensland, we know that not-for-profits will face a unique set of challenges. If you or your staff or clients have been affected by the recent floods and are struggling to meet your obligations, we offer a range of support options.

You can visit Support in difficult times for detailed information and you can also find information on establishing a relief fund or organising a fundraising appeal or event to help those affected by the floods.

To reiterate the message in the Treasurer’s speech - not-for-profits demonstrate the best of our national character. I have known them to be resolute and resilient in hard times; practical and pragmatic about the challenges we confront; optimistic and confident in a better future; and ready to work together to build it.

Taking a moment to reflect and review is both cathartic and rewarding. Understanding the landscape, opportunities and challenges is a shared role and I look forward to our continued relationship as we continue to strive for 'exceptional'.

Stay safe.