The Government has announced within the 2021-22 Federal Budget, that there will be a reform surrounding the administration of non-charitable not-for-profit (NFP’s) organisations that rely on a self-assessed income tax.
Currently, non- charitable NRP’s can self-assess their eligibility for income tax exemptions with no obligation to report to the ATO or ACNC on operational or financial matters. From 1 July 2023 however, self-assessors with an active ABN will be required to submit an annual self-review form online which we anticipate will report on comparative and measurable factors that will support their eligibility to self-assess for income tax exemption.
From 2022-23, the ATO has been allocated $1.9 million in capital funding from the Federal Government to build an online portal which will enable self-assessors to facilitate and report their annual self-review form electronically.
It has been noted that the proposed new reporting requirements will provide the ATO with additional data to assist with compliance reviews and enable them to gather and analyse the information submitted. As a result this will ensure only eligible NFP’s are accessing income tax exemptions and those that are deemed ineligible will be liable for penalties under the ATO’s penalty framework.
It is estimated that the new reporting measures will see an increase in compliance costs for NFP’s, although this should be negligible for those who undertake appropriate record keeping.
We recommend that any organisations that self-assess their annual income tax begin to prepare for the new compliance and reporting process now by evaluating their eligibility for ongoing self-assessed income tax exemption, managing and testing their data and seeking professional compliance advice.