Annual Self Review for NFPs

Annual Self Review for NFPs

From 1 July 2023 onwards, not-for-profit (NFP) entities that are self-assessing their entitlement to income tax exemption will need to lodge an annual self-review from with the ATO after the end of each financial year.

There are a number of things a NFP should be considering to ensure they are ready for the new requirements.

Review your governing document

It is expected the ATO will require the organisation to provide a copy of its constituent document. This document sets out the NFP nature of the organisation, the organisation’s purposes, its governing body and its responsibilities to members.

The governing document will vary depending on the type of entity structure. Common structures and documents are:

A NFP entity with only charitable purposes cannot self-assess its entitlement to income tax exemption.

You should locate your organisation’s governing document and review it to make sure it is fit for purpose and accurately reflects the current purposes of the organisation. If need be, you should update your constituent document. How this is done will depend on the type of entity but may require approval by the organisation’s members.

ATO Online Services

The annual self-review form will need to be submitted electronically through the ATO’s Online services for business. You may need to set up a myGovID before you can link it to the organisation’s business account with the ATO. Your accountant or tax agent cannot assist you with myGovID so you should attend to this well in advance.

Complete an ATO Self Review Worksheet

The ATO provides self-review worksheets that can assist a NFP determine whether it fits within one of the self assessment categories and meets all the income tax exemption requirements. Income tax status review worksheet for self-assessing non-profit organisations | Australian Taxation Office (ato.gov.au)

Carefully completing the worksheet may enable a NFP to determine whether it is correctly self-assessing its income tax exemption. The worksheet includes links to other ATO information, including details of the various exemption categories.

Consider whether your organisation is a charity

A NFP entity with only charitable purposes cannot self-assess its entitlement to income tax exemption. It must register with the Australian Charities and Not-for-profits Commission (ACNC) to be income tax exempt. Charitable purposes include advancing health, education, social or public welfare, culture, religion and the natural environment.

It is possible for a NFP entity to appear to fit within one of the self-assessment categories, but it is actually a charity because all its purposes fit within one or more of the charitable categories. Sporting and employment organisations are unlikely to be charitable, but many NFP organisations that appear to fall within one of the other self-assessment categories will find they also fall within the definition of a charity.

How we can assist

Saward Dawson can assist your NFP to determine its income tax exemption entitlement. If your entity is actually a charity, we will advise on your charity obligations and prepare your charity registration application. For NFPs that determine they are not income tax exempt, we can prepare your organisation’s income tax returns.

You should locate your organisation’s governing document and review it to make sure it is fit for purpose and accurately reflects the current purposes of the organisation.