Australia: New self-assessment requirement for non-charitable not-for-profit entities
Self-assess income tax exempt status, submit an annual self-review return
Self-assess income tax exempt status, submit an annual self-review return
The Australian government introduced reforms requiring non-charitable not-for-profits (NFPs) to notify eligibility to self-assess their income tax exempt status and submit an annual self-review return.
The Australian Taxation Office (ATO) released additional details in relation to this reform.
Entities that need to file a self-review return
NFPs that are not registered as charities by the Australian Charities and Not-for-profits Commission (ACNC) and have an active Australian Business Number (ABN) will be required to submit an annual self-review return declaring their income tax exempt status from income years beginning on or after 1 July 2023.
When to submit the return
The first self-review return for 30 June year-end entities will be available from the ATO’s Online Services platform for filing from July 2024 and will be by 31 October 2024.
How it will work
The self-review return will include questions requiring NFPs to assess their purpose and activities against specific eligibility requirements to their income tax exempt status. The ATO has advised that the questions will be specific to the type of NFP entity, meaning the form for an entity such as a NFP sporting organisation is likely to differ to that of a community purpose organisation.
The ATO is currently aiming to publish these questions on the ATO website in October 2023.
Charities registered with the ACNC are not affected by this new requirement but will continue to be required to be registered as a charity with the ACNC to qualify for income tax exemption.
Other implications
These changes bring important implications for non-charitable NFPs in Australia. NFPs must therefore familiarize themselves with the new requirements and take the necessary steps to ensure they can comply with the self-assessment process to maintain their income tax exempt status.
If a return is not filed, NFPs may become ineligible for an income tax exemption, and penalties may apply.
NFPs that do not qualify for an income tax exemption would be required to calculate their taxable income and lodge an annual income tax return.
For more information, contact a KPMG tax professional in Australia:
Daniela Chiew | dchiew@kpmg.com.au
Kristie Schubert | kschubert3@kpmg.com.au
Emily Shin | eshin2@kpmg.com.au
Cameron Dimeck | cdimeck2@kpmg.com.au
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