A not-for-profit entity, if it is not a charity, is likely to be claiming income tax exemption under Division 50 of the Income Tax Assessment Act 1997.
Currently these entities are not required to report to the ATO, unless they receive a request to do so from the ATO.
From 1st July 2023, all NFPs claiming tax exemption (other than charities) will be required to complete and lodge with the ATO an annual self-review. This will enable the ATO to check whether an NFP is still entitled to income tax exemption.
This will impact on the following NFPs:
- community service organisations
- science institutions
- sporting clubs
- employee/employer associations and trade unions
- institutions promoting primary and secondary resources and tourism
- institutions promoting for example IT or Bitcoin
- cultural (which are not charities) and recreational groups
Possible outcomes of the review include a finding that a NFP should not be claiming income tax exemption and in extreme cases a retrospective assessment of income tax payable and the imposition of penalties.
If you wish to consider your NFPs ongoing entitlement to income tax exemption, please contact Lesleigh while there is time to address any issues before this new requirement takes effect.
Featured image by Leon Ephraïm on unsplash