Introduction
On 11 May 2021, as a component of the 2021-22 federal budget, the Australian Government announced reforms to the management of not-for-profit (NFP) entities which self-assess their eligibility for an income tax exemption.
Though the ATO is still in a targeted consultation phase, NFP entities can now begin lodging their annual self-review returns to access income tax exemption.
KEY TAKEAWAYS
- The new regime applies to non-charitable NFPs with an active Australian Business Number from 1 July 2023. NFPs who self-asses as exempt from income tax will need to lodge annual self-review returns to access an income tax exemption.
- NFPs seeking income exemption are required to lodge a return for the 2023-24 financial year. This must be lodged between 1 July and 31 October 2024 using the existing ATO online platforms titled “Online Services for Business” and “Online Services for Agents”.
- NFPs having difficulties with the online platforms may lodge their self-review returns by 31 March 2025.
SELF-REVIEW RETURNS CAN NOW BE LODGED
In our previous alert dated 9 November 2023 (available here), we discussed that from 1 July 2023 all non-charitable NFPs who self-assess as tax exempt will need to lodge annual self-review returns to access income tax exemption, with the first annual lodgement due by 31 October 2024. Prior to this reform, NFPs who self-assessed their own eligibility for income tax exemption were not required to report their eligibility to the ATO.
The ATO is currently in a targeted consultation process seeking to understand the impacts the reform will have on self-assessing income tax exempt NFPs and co-design the lodgement process. While the consultation was expected to be completed in August, no updates on this process have been announced. Nevertheless, the new regime is very much alive and active as of 1 July 2024.
As of 1 July 2024, NFP entities can begin lodging their annual self-review returns. For NFPs having difficulties accessing the Online Services for Business platform or the ATO’s Self-help phone service, the ATO is providing transitional support allowing lodgement up to 31 March 2025. NFPs do not need to contact the ATO to request this extra time, as it forms part of the ATO’s transitional support arrangements. However, if an NFP lodges after 31 March 2025, the ATO may apply failure to lodge penalties to that NFP’s account.
To discuss these changes in detail, or how we can assist you in preparing for the new self-assessment regime, please contact us on the details provided below.
This Alert is intended as general information only. It does not purport to be comprehensive advice or legal advice. Readers must seek professional advice before acting in relation to these matters.
