NFP Tax-Exempt Status: Key ATO Requirements
If you oversee a not-for-profit (NFP), it’s crucial to understand your core obligations, especially if your organisation is tax-exempt. A recent requirement from the ATO means eligible NFPs must now complete an annual self-review return to maintain their income-tax-exempt status.
Annual NFP self-review return
From the 2023–24 income year, every non-charitable NFP with an active ABN needs to lodge this self-review return. It comprises three parts:
The return has three sections:
- Organisation details (basic NFP information).
- Income-tax self-assessment (confirmation of your Tax-exempt status).
- Summary and declaration (formal acknowledgement of the answers provided).
A key question asks whether your governing documents prohibit distributing income or assets to members both while operating and on winding up. Answering “yes” is mandatory for self-assessment. If your rules lack these clauses, you can still self-assess for 2024—provided no distributions have occurred—but you must update your governing documents by 30 June 2025. Missing this deadline means you cannot self-assess for the 2025 year and may be treated as a taxable entity required to file a tax return.
Your governing documents define your NFP’s purpose, decision-making processes, and lifespan. To satisfy the ATO:
- Include a clause forbidding income or asset distributions to members during operations and winding up.
- Specify that any remaining assets, upon dissolution, transfer to another similar NFP.
- Implement controls ensuring members only receive remuneration for services or lawful expense reimbursements.
Review these documents at least annually or whenever your structure or activities change—your AGM is an ideal checkpoint. Proactive reviews not only ensure compliance but also reinforce your organisation’s commitment to robust governance.