Taxable NFP organisations

Income tax

Examples of taxable NFP organisations include:

• social clubs
• some business and professional associations
• clubs whose main purpose is providing hospitality services for members
• political parties.

If your NFP organisation is taxable, you may have to lodge tax returns and pay income tax. Understanding mutuality and taxable income is also important as it affects lodging and what you pay tax on.

To work out if you need to lodge a tax return and what rate of tax you pay, you'll need to work out if your organisation is an NFP company or other taxable company. This distinction is important because NFP companies have special arrangements for lodging tax returns and special rates of income tax.

NFP companies

If the organisation's constituent documents prohibit it from making any distributions –whether in money, property or otherwise – to its members, the organisation is treated as an NFP company.

An NFP company with taxable income of:

• $416 or less a year is not required to lodge a tax return if an Australian resident (unless specifically requested to do so)
• more than $416 a year is required to lodge a tax return for that year.

Income tax rates for the 2021–22 income year – other NFP companies

Taxable income	Rate of tax
0 – $416	nil
$417 – $915	55% for every dollar over $416
$916 and above	30% on the whole amount of taxable income

 

Other taxable companies

Clubs, societies and associations whose constituent documents don't prohibit them from making distributions to their members are treated as other taxable companies.

Other taxable companies must lodge a tax return each year, regardless of their taxable income. They have the same rates of tax applied as other companies.

There is no tax-free threshold for other taxable companies – they are taxable from the first dollar. That is, they are taxable on all levels of taxable income.

For the 2021–22 income year, the rate of tax is:

• 25% if the company is a base rate entity
• 30% if the company isn't a base rate entity.

The taxable income of a club, society or association is calculated in the same way as a company for tax purposes. However, you will need to know about how amounts received from members are treated. Briefly, under the mutuality principle:

• receipts derived from mutual dealings with members are not assessable income (these are called mutual receipts)
• expenses incurred to get mutual receipts are not deductible.

For help completing your tax return, see Not-for-profit guide to company tax return.

Income tax rates for the 2021–22 income year – NFP companies that are base rate entities

Taxable income	Rate of tax
0 – $416	nil
$417 – $762	55% for every dollar over $416
$763 and above	25% on the whole amount of taxable income

Capital gains tax

Capital gains tax (CGT) applies to NFP clubs, societies and associations that are treated as companies for income tax purposes in the same way as it does for other companies that pay income tax.

Pay as you go instalments

Pay as you go (PAYG) instalments is a system for paying amounts towards the expected tax liability on your business and investment income for the financial year.

Consolidations

Wholly-owned corporate groups may have the option of consolidating for income tax. Consolidation is optional but cannot be reversed. The consolidated group operates as a single entity for income tax purposes, lodging a single tax return and paying a single set of PAYG instalments.

When a group consolidates, it is a 'one in, all in' situation, in which all of the head company's eligible wholly-owned subsidiary members become part of the group.

There are specific rules about the types of entities that can be a head company or a subsidiary member of a consolidated group.

Some not-for-profit (NFP) organisations aren't exempt from income tax and may have CGT or PAYGI obligations.