How To Prepare Your Not-For-Profit For The ATO’s Latest Changes To Tax Exempt Status

As you are likely already aware, early in 2024, the Australian Tax Office (ATO) announced changes to how not-for-profits (NFPs) qualify for tax-exempt status. If you are not already aware of this, you can find out more about it here. 

On Wednesday, the 27th of November 2024, Business NSW hosted a webinar titled Understanding new ATO reporting requirements for non-charitable NFPs, featuring Jennifer Moltisanti, Assistance Commissioner of the ATO. 

They held this webinar to help clarify the recent changes to how taxation works for non-profits.

Now, I realise that most people who run NFPs have extremely busy schedules, and a decent percentage of people who these changes will affect probably weren’t able to make the conveniently timed 11:30 am webinar. However, have no fear because I, Member Jungle’s resident hack, did attend the webinar, and I have the low down on what was discussed during it. 

Disclaimer

I am not a legal expert, tax expert, or financial advisor. The following is not legal or tax advice; it is just my best effort to translate the webinar from politician-speak into English and to give you a few pointers on how to continue your research into the subject. This absolutely can not be the sum of your investigation into these changes; it is just a starting point. 

What Are The Changes To The ATO’s Reporting Requirements For NFPs?  

The changes are that not-for-profit organisations will now need to complete an NFP Self-Review in order to keep their tax-exempt status. 

Not all NFPs will be affected by this. If you are a registered charity with the Australian Charities and Not-for-profits Commission (ACNC) or do NOT have a registered Australian Business Number (ABN), you will be exempt. 

However, if you are a not-for-profit organisation with an ABN and are not a registered charity, you will have to complete an NFP Self-Review in order to keep your tax-exempt status.   

Basically, the current NFP breakdown, according to the ATO, looks like this. 

 

 

Of all the NFPs with ABNs, roughly 26% are registered charities, 4% are currently taxable, and 69% are self-assessing as tax-exempt. 

The ATO seems to be of the opinion that some portion of the roughly 69% that are self-assessing as tax-exempt should actually be in the taxable bracket. They are introducing these NFP Self-Reviews to work out who belongs where.

Again, to the best of my knowledge, this means that every year from now on, all NFPs who are self-assessing as tax-exempt will need to complete an NFP Self-Review to ensure they still qualify for tax exemption. Those who do not qualify for tax-exempt status will need to lodge their income tax return by the 15th of May 2025. 

Here is a direct quote from the ATO’s website, “For organisations with an income year ending the 30th of June, you have until the 15th of May 2025 to lodge your income tax return or notify us of a non-lodgment advice. If you have an ATO approved SAP* your due date to lodge the 2023-24 income tax return is determined by your approved balance date,”.  

In this quote from the ATO, SAP refers to substituted accounting periods. A SAP is an agreement between the ATO and an individual or organisation that allows them to use a financial year different from the standard fiscal year (1 July to 30 June). This means their tax return due date will also differ from the usual 31st of October deadline. More information is available on the ATO website at Substituted Accounting Periods. 

If your organisation needs to start lodging tax returns, the ATO has more information here: Taxable NFP organisations.

What Does An NFP Self-Review Involve? 

According to the ATO, there are four steps to completing an NFP Self-Review. 

Step One: Check Whether You Fit Into One Of The Income Tax Exempt Categories 

There are eight kinds of organisations that, according to the ATO, are income tax exempt. 

These are:

1. Community service organisations
2. Cultural organisations
3. Educational organisations
4. Employment organisations
5. Health organisations
6. Resource development organisations
7. Scientific organisations
8. Sporting organisations

 

The first step in proving that you are tax-exempt is proving that you fit into one of these categories. To do this, you can go to this page, Eligible types of income tax exempt organisations on the ATO website, and scroll down until you see this graphic.  

 

These are the eight tax-exempt categories; you can click on whichever one you think you fit into.

Step Two: Check That You Meet All the Requirements For That Category

Once you have selected a category, you will be taken to an eligibility checklist and will have to make sure you pass one of the three “tests” to prove that you belong in this category.   

Here is an example of this from the Community Service Organisation page.  

 

Step Three: Complete The NFP Self-Review

The third step is to actually complete the NRP self-review. You will need to go to this page on the ATO website: Reporting requirements to self-assess income tax exemption. Then, you will need to follow the steps and either lodge your self-review online via Online services for business or via a registered tax agent. 

Step Four: Get The Results & Take The Next Steps  

Once you have completed your self-review, you will be informed whether your organisation is still tax-exempt or whether it will need to lodge a tax return for the 2024-25 financial year.  Please note that the NFP Self-Reviews are an annual thing and will need to be completed each year. 

Resources To Help With The ATO Tax Law Changes & NFP Self-Reviews

I’ll be real with you; just going to this webinar and digging through their website gave me a literal headache. I cannot begin to imagine how those of you facing these challenges must feel. However, what I can do for you is give you every single hopefully helpful resource I have come across in my research. 

Please note the Assistant ATO Commissioner publicly gave out her contact information during the webinar and said she and her office are open to field calls from NFPs with questions. 

So, without further ado. 

Phone numbers

• ATO: 13 28 66
• ATO NFP Advice Service: 1300 130 248
• Assistant ATO Commissioner Jennifer Moltisnati:(03) 9285 1711 - 0423 022 278
• Self-help service for not-for-profits 13 72 26

Emails

• ATO: PWGovernment@ato.gov.au 
• ATO NFP Advice Service: atoendorsements@ato.gov.au
• Assistant ATO Commissioner Jennifer Moltisnati: Jennifer.Moltisanti@ato.gov.au 

Social Media

• Assistant ATO Commissioner Jennifer Moltisnati: https://www.linkedin.com/in/jennifer-moltisanti-6872442a/ 

Newsletters

• Monthly ATO Newsletter: ato.gov.au/nfpnews 
  • Their monthly newsletter contains information and updates on these changes and their effects.

Webinars

• ATO Webinar from March 2024: Webinar New reporting requirements for not-for-profits
• The ATO Webinar I attended: Understanding new ATO reporting requirements for non charitable NFPs 

Websites

• Australian Charities and Non-profits Commission 
• ATO Income tax returns for not-for-profits 
• NFP self-review return question guide

Some Good News

Assistant ATO Commissioner Jennifer Moltisnati said during the webinar that this will be the hardest year. I know that doesn’t sound like good news, but bear with me. She said this will be the hardest year for NFPs because they have to find a lot of information they haven’t had to use or track in years. However, once they have that information for this year's self-review, each following year will be much easier as you will already have all the information and know the process. 

So, yes, this year will likely be stressful and complicated, but this whole process can only get easier. 

Stay With Member Jungle For All Your Other Membership Management Needs

Member Jungle is dedicated to making things as easy as possible for clubs and associations. However, the only thing we can really help with this one is keeping you informed and pointing you in the right direction to do further research into it. 

So, on behalf of the Member Jungle team, we wish you good luck.

Check out our website and Learning Centre for all your other membership management needs.