In the past few months, I’ve delivered numerous sector engagements with a particular focus on the new reporting requirements for not-for-profits that self-assess income tax exemption. This has generated a lot of interest from a wide range of stakeholders, particularly with respect to delivering transparency while minimising the compliance burden. So, I thought it might be timely to update you on our progress and what we’re hearing.
Many of you know that the vast majority of not-for-profits self-assess income tax exemption. This equates to about 70% of the broader population or about 140,000 organisations. Charities already registered with the ACNC are not affected by the new reporting requirements. Registered charities can apply for tax charity concessions with the ATO once their ACNC registration is complete.
As the administrator for not-for-profits, we want to support the sector to continue to deliver the important services it provides to the Australian community. A fundamental part of this is ensuring not-for-profits that self-assess income tax exemption are reviewing their eligibility through lodging an annual form, referred to as a 'return'. While we haven’t yet designed the form, we have started to consider the administrative design within which the form will be lodged. There are 3 parts to this:
- Raising awareness of the new reporting requirements.
- Initial lodgment.
- Subsequent review and lodgment.
1. Raising awareness of the new reporting requirements
We provide 2 worksheets to help not-for-profits review their tax status correctly. The first worksheet is for sporting clubs (PDF, 218KB)This link will download a file and includes a schedule for multi-purpose clubs; the second is designed for all other not-for-profit organisations (PDF, 227KB)This link will download a file. However, our research has indicated that few not-for-profits are aware of the worksheets or the need to self-assess eligibility. In fact, our research has confirmed that many organisations assume they're automatically exempt because they are not-for-profit.
There's been a lot of interest in the new reporting requirements for not-for-profits that self-assess income tax exemption, particularly from the peak bodies including Certified Practicing Accountants Australia and Chartered Accountants Australia and New Zealand. We’re looking forward to engaging all peak bodies and you can expect to see future webinars and podcasts on the topic.
Our engagement is already driving and shifting behaviours with some not-for-profits registering with the ACNC while others have realised they may not meet one of the 8 categories and are in fact a taxable not-for-profit.
Whatever the case, the ATO will help you get it right going forward.
2. Initial lodgment
While the new reporting requirements come into effect from 1 July 2023, the first lodgments are expected to occur from 1 July 2024. We're currently developing the administrative infrastructure to make lodgments quick, easy and simple. This will include how the form is designed, collected and used. We anticipate developing new guidance that will provide clear examples of reporting requirements and transitional arrangements that may need to be put in place.
Whatever your size or circumstance, the ATO will help you to understand and meet your requirements.
3. Subsequent review and lodgment
We anticipate future returns will be streamlined so that not-for-profits can continue to focus their attention on what matters most.
Wherever possible the ATO is committed in making your experience with us a good one.
Engaging the sector
In July, we convened the NFP Stewardship Group (NFPSG) which was intended to be face-to-face but occurred virtually. Notwithstanding, it was a productive meeting chaired by Krystian Seibert from the Centre for Social Impact, Swinburne University of Technology. One of the key topics discussed was the new reporting requirements.
During the meeting, members raised questions about how the new annual return form would be used to improve transparency and integrity in the system. The group will meet again on 15 September 2022 for a collaborative design session dedicated to working through the questions raised regarding policy intent, the form and supporting guidelines. I will continue to share developments as they unfold.
We also invited Anthony Ward to attend the meeting as an observer. Anthony is a Director and Company Secretary of The Dreaming Foundation LimitedExternal Link an all- Indigenous led not-for-profit. I am pleased to announce that Anthony has accepted our invitation to join the group as an ongoing member. We're thrilled to have an Indigenous voice at our forum and by the diversity this will bring.
I’ve always been committed to personal development and growth – I think it stems from having 3 parents and being the first born. I was home schooled by my mum, dad, and uncle long before it became popular. They taught me how to read, write and speak and how to engage with people. I was also taught that what people say is sometimes not what they mean.
One particular memory I have is getting into trouble because my mum asked me to fetch 2 potatoes. When I delivered them she berated me, saying she couldn’t possibly feed the entire family with just 2 potatoes – what was I thinking? Didn’t I realise that 2 didn’t really mean 2, but enough to feed the family?
The lesson learned has remained with me throughout my life and it reflects my approach to engaging and communicating with people. Choosing not to jump to solutions but instead to draw out the drivers of issues and positions has often led to long-lasting relationships and sustainable outcomes.
This is the approach we aim to foster in all our NFP sector engagements as we continue to develop our roadmap for the future.
Take care and enjoy the last month of winter.
JenniferThis month, Assistant Commissioner Jennifer Moltisanti focuses on NFPs that self-assess income tax exemption.