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Lodgment rules and tax rates

Last updated 3 December 2018

For income tax purposes, taxable NFP organisations are treated as either:

  • not-for-profit companies
  • other taxable companies.

This distinction is important because not-for-profit companies have special arrangements for lodging tax returns and special rates of income tax.

Find out about:

Not-for-profit or other taxable company

To work out if your organisation needs to lodge an income tax return and what rate of tax it pays, you first need to determine if your organisation is a not-for-profit company or other taxable company.

A NFP organisation does not need to be incorporated to be treated as a company for income tax purposes.

Not-for-profit companies

For your organisation to be a not-for-profit company it must meet the 'not-for-profit requirement'. This means that:

  • it must be a company that is not carried on for the purposes of profit or gain to its individual members
  • its constituent documents must prohibit it from making any distribution, whether in money, property or otherwise, to its members.

Your organisation can be a not-for-profit company and still make a profit. However, any profits it makes must be used to carry out its purposes. The profits must not be distributed to members.

Example: Making a profit

A society makes a $40,000 profit for the year. It uses the profit to reduce its debts and provide for the activities it will carry on next year.

End of example

The prohibition on distributions applies while the organisation is operating and on its winding up. If it permits its members to transfer the assets to themselves on winding up, it is not a not-for-profit company.

A not-for-profit company can make payments to its members as bona fide remuneration for services they have provided to it, and as reasonable compensation for expenses incurred on behalf of the organisation.

The income tax law does not prescribe a form of words that a not-for-profit company must have in its constituent documents. The following example clauses would be acceptable, as long as other clauses were not contrary to them. The organisation's activities must be consistent with the clauses.

Example clauses for not-for-profit companies

Non-profit clause

'The assets and income of the organisation shall be applied solely in furtherance of its above-mentioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.'

Dissolution clause

'In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes and which has rules prohibiting the distribution of its assets and income to its members.'

End of example

Organisations carried on for the joint or common benefit of their members can qualify as not-for-profit companies. An example would be a professional association established to advance the professional interests of its members. However, the association must not be carried on for the profit or gain of its individual members.

Other taxable companies

Clubs, societies and associations that do not meet the 'not-for-profit requirement' are treated as other taxable companies.

This means that other taxable companies will include clubs, societies and associations that are not carried on for the purposes of profit or gain to their individual members but whose constituent documents do not prohibit distributions to their members.

Find out about:

Lodgment rules

Not-for-profit companies

Not-for-profit companies that are Australian residents have a taxable threshold. If the taxable income of a not-for-profit company in an income year is below the threshold of $416 per year, it is not required to lodge a tax return for that year.

Taxable income is rounded down to the nearest dollar – that is, cents are ignored.

Table: Not-for-profit company lodgment rules

Taxable income

Is the company required to lodge a return?

0 – $416

No.

However, we may notify a particular company that it is required to lodge a return.

$417 and above

Yes.

 

Example: Rounding down to nearest dollar

An organisation's taxable income is $416.73. It reports its taxable income as $416.

End of example

We explain how to calculate taxable income in Taxable income and mutuality.

Other taxable companies

Other taxable companies are taxed on every dollar of taxable income. They must lodge an income tax return each year.

Company tax return

Not-for-profit companies and other taxable companies use the company tax return to lodge a return.

To know how to complete the company tax return, see Guide to company tax return for not-for-profit organisations.

Find out about:

Tax rates

Not-for-profit companies

The income tax payable for not-for-profit companies depends on the level of taxable income and whether they are a:

Before 1 July 2015, the rates of tax and taxable income levels were the same for all not-for-profit companies.

The tables below set out the rates of tax and taxable income levels.

Table: Not-for-profit company income tax rates – from the 2017–18 income year

Not-for-profit companies that are base rate entities

Other not-for-profit companies

Taxable income

Rates of tax

Taxable income

Rates of tax

0 – $416

Nil

0 – $416

Nil

$417 – $832

55% for every dollar over $416

$417 – $915

55% for every dollar over $416

$833 and above

27.5% for every dollar

$916 and above

30% for every dollar

Note: If the taxable income is $833 or more, the whole amount is taxable.

Note: If the taxable income is $916 or more, the whole amount is taxable.

Table: Not-for-profit company income tax rates – for the 2016–17 income year

Not-for-profit companies that are small business entities

Other not-for-profit companies

Taxable income

Rates of tax

Taxable income

Rates of tax

0 – $416

Nil

0 – $416

Nil

$417 – $832

55% for every dollar over $416

$417 – $915

55% for every dollar over $416

$833 and above

27.5% for every dollar

$916 and above

30% for every dollar

Note: If the taxable income is $833 or more, the whole amount is taxable.

Note: If the taxable income is $916 or more, the whole amount is taxable.

Table: Not-for-profit company income tax rates – for the 2015–16 income year

Not-for-profit companies that are small business entities

Other not-for-profit companies

Taxable income

Rates of tax

Taxable income

Rates of tax

0 – $416

Nil

0 – $416

Nil

$417 – $863

55% for every dollar over $416

$417 – $915

55% for every dollar over $416

$864 and above

28.5% for every dollar

$916 and above

30% for every dollar

Note: If the taxable income is $864 or more, the whole amount is taxable.

Note: If the taxable income is $916 or more, the whole amount is taxable.

Table: Not-for-profit company income tax rates – before 1 July 2015

Taxable income

Rates of tax

0 – $416

Nil

$417 – $915

55% for every dollar over $416

$916 and above

30% for every dollar

Note: If the taxable income is $916 or more, the whole amount is taxable.

Tax rate examples

If the taxable income is $416 or less for a year, no tax is payable.

Example: Nil rate of tax

A not-for-profit company has taxable income of $416.84 in 2017–18.

The income tax is nil.

It is calculated as $416 x nil.

End of example

If a not-for-profit company has a taxable income between $417 and $915 (or between $417 and $863 for a base rate entity from 1 July 2017 the amount in excess of $416 is taxed at 55%.

Example: 55% rate of tax

A not-for-profit company has taxable income of $703.48 in 2017–18.

The income tax is $157.85.

It is calculated as ($703 – $416) x 0.55.

End of example

For the 2017–18 income year onwards, if the taxable income is more than $832 for a not-for-profit company that is a base rate entity, the tax rate of 27.5% is applied to all the taxable income.

Example: 27.5% rate of tax

A not-for-profit company that is a base rate entity has taxable income of $925.34 in 2017–18.

The income tax is $254.37.

It is calculated as $925 x 0.275.

End of example

For the 2015–16 income year, if the taxable income is more than $863 for a non–profit company that is a small business entity, the tax rate of 28.5% is applied to all the taxable income.

Example: 28.5% rate of tax

A non–profit company that is a small business entity has taxable income of $925.34 in 2015–16.

The income tax is $2263.62.

It is calculated as $925 x 0.285.

End of example

The ordinary company tax rate of 30% is applied to all the taxable income if the taxable income is more than $915 for either:

  • any not-for-profit company in the 2014–15 income year and earlier
  • a not-for-profit company that is not a base rate entity in the 2017–18 income year onwards.

Example: 30% rate of tax

A not-for-profit company that is not a base rate entity has taxable income of $2,182.92 in 2017–18.

The income tax is $654.60.

It is calculated as $2,182 x 0.30.

End of example

Other taxable companies

Other taxable companies are taxable from the first dollar. That is, they are taxable on all levels of taxable income and there is no threshold.

From 1 July 2017, the rate of tax is:

  • 27.5% if the company is a base rate entity
  • 30% if the company is not a base rate entity.

Your organisation is a base rate entity if it is a company that:

  • has an aggregated turnover less than the aggregated turnover threshold – which is $25 million for the 2017–18 income year, and
  • 80% or less of your assessable income is base rate passive income.

For the 2016–17 income year, the rate of tax is:

  • 27.5% if the company is a small business entity
  • 30% if the company is not a small business entity.

For the 2015–16 income year, the rate of tax is:

  • 28.5% if the company is a small business entity
  • 30% if the company is not a small business entity.

Your organisation is a small business entity if it is a company that:

  • is carrying a business for all or part of the year
  • has an aggregated turnover of less than $10 million for the 2016–17 income year (or an aggregated turnover of less than $2 million for the 2015–16 income year) – that is, your organisation's annual turnover plus the annual turnovers of any businesses it is connected or affiliated with.

Before 1 July 2015, the rate of tax is 30% (regardless of whether a company is a small business entity).

See also:

Turnover includes all ordinary income that your organisation earns in the ordinary course of business for an income year.

If your organisation is a not-for-profit company, its ordinary income includes its income from members.

Table: Turnover of not-for-profit companies

Include these amounts

Do not include these amounts

  • revenue from sales to members and non-members
  • fees for services provided to members and non-members
  • interest from business bank accounts
 

 

If your organisation is an 'other taxable' company, do not include mutual receipts in the calculation of aggregated turnover as they are not income.

See also:

QC23099