Types of NFP organisations
For tax purposes, the main types of not-for-profits (NFPs) are:
- charities
- NFPs that self-assess as income tax exempt
- taxable NFPs.
Depending on the type of NFP, your organisation may be eligible for a range of tax concessions. Tax concessions include:
- income tax exemption
- fringe benefits tax and GST concessions, and
- deductible gift recipient (DGR) status.
NFPs (including charities) are organisations that operate for purpose and not for the profit or gain (either direct or indirect) of individual members. All profits must go back into the services the organisation provides and must not be distributed to members, even if the organisation winds up. They can include:
- art centres
- church schools
- churches
- community child care centres
- cultural organisations
- environmental protection organisations
- neighbourhood associations
- public museums and libraries
- scholarship funds
- scientific organisations
- scouts
- sports clubs
- surf lifesaving clubs
- traditional service clubs.
Governing documents
NFPs are required to maintain governing documents that demonstrate they operate on a NFP basis, including organisations that self-assess their income tax exemption. They must have and include clauses that prevent the NFP from distributing income or assets to members, both while it operates and when it winds up.
Is your organisation a charity?
Generally, charities are eligible for more concessions than other NFPs. Charities must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and endorsed by us to access charity tax concessions.
To be a charity, your organisation must:
- be a not-for-profit organisation
- have a charitable purpose
- be for the public benefit (other than where the charitable purpose is the relief of poverty).
Examples of charities include:
- religious groups
- not-for-profit aged care homes
- homeless shelters
- disability service organisations
- universities and colleges
- animal welfare organisations
- artistic or cultural groups.
Charities can be further broken down into the following types:
- Public Benevolent Institution (PBI)
- Health Promotion Charities (HPC)
- other charities.
PBIs and HPCs receive wider tax concessions than other charities. Religious institutions that are registered with the ACNC for the charity subtype 'advancing religion' may be entitled to access additional tax concessions.
More information on what is a charity is available on the ACNC websiteExternal Link.
Taxable NFPs and NFPs that aren't charities
Some NFP organisations that aren't charities are able to self-assess as income tax exempt if they fall into one of the 8 categories outlined in Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997). NFPs that seek to advance the common interest of their members and don't benefit the broader community won't generally meet the requirements for income tax exemption.
If your organisation is eligible to self-assess, it doesn't need to be endorsed by us to access the concession.
NFP organisations that are not eligible to self-assess as income tax exempt are taxable, but may be entitled to special rules for calculating taxable income, lodging income tax returns and special rates of tax.
Taxable NFP organisations may have to lodge an income tax return or notify us that one is not necessary.
Deductible gift recipients and NFPs
Some charities, clubs, societies and associations are also deductible gift recipients (DGRs).
DGRs are organisations that are entitled to receive tax-deductible gifts. DGRs are either:
- endorsed by us
- listed by name in the tax law.
Tax deductions for gifts are claimed by the person or organisation that makes the gift. Gifts are also referred to as donations.
To be entitled to receive tax-deductible donations, an organisation (including a charity) must be a DGR.