Useful Information for Treasurers
ATO - New Self Reporting Requirements for Not-for-Profit organisations
About the Changes
- Justice Connect | Understanding recent tax reforms (webinar)
- NFP Law | Income Tax Exemptions Reporting Requirements (website link)
- CPA Australia | New Tax Changes for NFPs (podcast)
Income Tax Exemptions
- NFP Law | Tax Landscape & Common tax concessions and rebates (webpage)
- NFP Law | What does not for profit mean? (webpage)
Self-Assess as Income Tax Exempt
- ATO | Reporting requirements to self-assess as income tax exempt (webpage)
- ATO | Self Assessment Categories (webpage)
- ATO | Guide to Prepare NFP Self Review Return (webpage)
- ATO | When to review your income tax exemption status (webpage)
- ATO | New reporting requirements for NFPs (webinar)
- ATO | Lodge via the ATO online service or via a self-help phone service (13 72 26)
ACNC Registration Information
- Future Learn | How to apply for charity registration with ACNC (online course)
- ACNC | One page handy guide to get registered and what happens once registered (PDF)
- ACNC | Who can apply to be registered? (webpage)
- ACNC | Registration application and check list (webpage)
- ACNC | Answering FAQs from Show Societies (webpage)
- ACNC | Charity Registration Self-Assessment tool (webpage)
- ACNC | Examples of Charitable Purposes (webpage)
- AFP Law | Top tips for applying for charity registration with the ACNC (webinar)
- ACNC Advice Line on 13 22 62
Not-for-Profit (NFP) Reporting Requirements Update (EDM) - 30/09/2024
*This information is provided as general guidance only. It is important to seek professional advice tailored to your specific circumstances to ensure compliance with all legal and tax requirements
Please Remember to lodge your Form A12
Form A12 needs to be completed annually and returned to the Department of Fair Trading by the Public Officer of the show society.
Definition of Tier 1 and Tier 2 Associations
Stamp Duty
Application for Exemption Form
Income Tax Assessment
General advice on the following topics as they relate to the organisation:
- Clarify requirements of members that are both Income Exempt due to ACNC registration and self-assessed.
- Confirm how section 50-1 ITAA 1997 relating to statutory andordinary income applies to members.
- Clarify how section 50-47 ITAA 1997 applies to and impacts members.
Income Exemption Status
Charities registered with the ACNC can apply for tax concessions from theAustralian Taxation Office, including income tax exemption. Being exempt from income tax means the organisation does not need to prepare IncomeTax Returns or pay income tax. These organisations are still eligible to claim refunds of franking credits.
There are two methods you can use to access the income tax exemption status.
- The first method is be registered with the ACNC, and when submitting your ACNC application completing the tax concession section of the form. The responsibilities of an organisation under this method are to comply with the reporting requirements laid out by the ACNC.
If you don’t complete this section at the time of application, you can still apply directly to the Australian Taxation Office at a later date.
- The second method is through a self-assessment process. This process is for organisations who have not registered as a charity with the ACNC.
To be eligible for this method, the organisation must meet the following criteria:
- Be not-for-profit
- Have an active ABN (Australian Business Number)
- Only have a charitable purpose which benefits the public
- Comply with ACNC standards and governance
- Not be an individual, a political party or government entity
- Must not have a disqualifying purpose (i.e represent or opposingpolitical parties or office)
Other requirements are that the organisation must comply with substantive requirements in its governing rules, apply its income and assets solely for the purpose for which they were established and pass one of the following tests:
- The organisation must be physically present in Australia
- Be a registered Deductible Gift Recipient (DGR)
- Prescribed by law to be tax exempt.
Under the self-assessment model, a review needs to be completed annually and report to the Australian Taxation Office to assess whether the organisation still meets the above criteria.
Income Exemption on Ordinary and Statutory Income
Section 50-1 of the Income Tax Assessment Act 1997 deals with exempt entities and the special conditions of exemption of income from income tax rules.
Ordinary and statutory income which is exempt from income tax is exempt income. Ordinary income is earned through the daily operations of a business such as providing goods or service. Statutory income is income other than ordinary income and includes income such as dividends and net capital gains.
Each organisation is different, with different core visions, governing constitutions and activities they undertake. As referenced above in the self assessment process, provided the organisation applies its income and assets solely for the purpose for which it was established, the means of obtaining that income isn’t material. This means revenue can maintain it’s tax emption status.
The expected member of the Agricultural Society Council of NSW would be organisations with core values of educating people of all ages about the significance of agriculture to the Australian economy and highlight the innovation and technology that supports the agriculture industry. Income which we would expect to see in an average show would usually include (but not exclusive to) revenue from activities such as:
- gate takings
- exhibition of animals
- stall holder fees
- food and beverage sales
- investment income such as interest and dividends
- animal racing (camels, pigs, etc)
These lines of revenue are all different in nature and in a normal business structure would be included as assessable income which is liable for income tax. However, as this organisation is completing these activities in pursuit of their core vision, they maintain their tax exemption status and can claim the income tax exemption on all ordinary and statutory income they generate.
For example, an organisation which has been established for the education of the chick agriculture industry can use income they have generated to invest in a portfolio of shares. This will not negate the income tax exemption status of an organisation as their operations are still in pursuit of that core vision (provided the income generated from these investments continue to support their core vision).
Entity’s Exemption from Income Tax as Per the ITAA 1997
Section 50-47 provides that an entity is not exempt from income tax unless it is registered under the ACNC.
Therefore, if the members of the society are registered with the ACNC and they have approached the tax office for income tax exemption status and been approved, they are exempt from income tax. If a member of the society is not registered with the ACNC then they are not exempt from income tax unless they suit a special condition laid out in Sections 50-50 to 50-72
Section 50-50 lays out a special condition 50-47 whereby it states an entity is not exempt from income tax unless it suits the criteria laid out for a self assessed exemption status.
This section will affect those members who are not registered with the ACNC and have elected to self-assess their income tax exemption status through the method laid out above.
Not being registered with the ACNC does not prevent these members from being able to claim income tax exemption, and this process would be worth pursuing for those members.
Scenarios of how these rules may apply to a member
Scenario 1
An organisation has been created to promote and educate on the agriculture industry and does so mainly through a local show and being active in their local communities.This organisation is a ACNC registered charity and has obtained a tax exemption status from the Australian Tax Office.Its normal operations are planning an annual show for their local community to showcase the local agricultural industry. Normal income items for this show are gatetakings, entry fees for competitions like pig racing, interest from term deposits and membership fees.The organisations normal expenses include items such as payment of stall holdersand rides, insurance, wages and superannuation, financial advisor fees, rent andadvertising.The organisations operations are similar to that of a normal business, but they have obtained an income tax exempt status due to the following factors:
- It is a not-for-profit and registered with the ACNC.Even though it has normal operations, their goal is not to profit but to support their core vision.
- The normal operations and assets and expenses are purchases in the pursuit of the goal in which the organisation was created.
Scenario 2
An organisation has been created to promote and educate on the agricultural industry and does so mainly through its annual fair and being active in their local community. This organisation is not an ACNC Registered charity but has self assessed their organisation as Tax Exempt and reported that status to the AustralianTax Office using the annual assessment report. This report has been approved by the ATO.Its normal operations are planning an annual fair for their local community which show cases their agriculture industry. Normal income items are gate takings, entry fees for woodchopping and pig racing, dividends from an investment portfolio and membership fees.The organisations normal expenses included items such as payment of stall holders,insurance, wages and superannuation, financial advisor fees, rent and advertising.Because this organisation was approved by the ATO to be tax exempt and they meet all the relevant criteria, all their revenue generated is exempt for tax purposes. They will need to reapply for this concession in the following years to continue accessing the concession.
Scenario 3
An organisation has been created to promote and educate on the agriculture industry and does so mainly through an annual show and being active in their local community. This organisation is not an ACNC registered charity but has self assessed their organisation as tax exempt and reported that status to the AustralianTax Office using the annual assessment report.Its normal operations are planning shows for their local communities to show case the agriculture industry. Normal income items are gate takings, entry fees for competitions, interest from various financial institutions as well as membership fees.The organisations normal expenses included items such as payment of stall holders, insurance, wages and superannuation, financial advisor fees, rent and political party donations to support their local member.When completing a self-assessment of this organisation, as the organisation hasused their funds to represent a local member of parliament, they are no longer eligible as stated in point above. This organisation will lose its income tax exemption and therefore they will be liable for income tax on all their income.
Other Items which may benefit members.
There is other tax concessions available to members who are registered with the ACNC as a registered charity stipulated below.
There are several Goods and Services Tax (GST) concessions available to an ACNC registered organisation such as:
- The threshold for GST registration increases from $75,000 turnover to $150,000 turnover
- Volunteer reimbursements can be subject to GST for expenses the volunteer incurred in pursuit of activities for the charity – these would provide claimable GST credits for those members who are registered for GST
- Donated goods which are then re-sold are regarded as GST-free income
Some ACNC registered charities are also able to register for a Fringe Benefit Tax Exemption or rebates if they meet one of the following criteria:
- Is a Public Benevolent Institution (other than a public or not-for-profit hospital).
- Is a health promotion charity such as a community health care provider, medical research organisation or an organisation that seeks to preventhuman diseases.
- Is a public or not-for-profit hospital.
- Is a public ambulance service.
A fringe benefit is any benefit outside of salary and wages provided to employees or their associates and includes things such as motor vehicle use, entertainment, childcare costs, discounted loans, and housing. Fringe benefits tax is a tax paid by employers on these benefits provided and can be quite costly. The employer is liable to pay the tax on any benefits provided to employees that are not exempt.
Fringe benefits are usually offered to employees to attract and retain them, and usually are provided in lieu of cash payments. To be able to provide benefits that are exempt can mean you save on employments costs, and you don’t need to pay the fringe benefits tax. The benefit to the employees is an attractive salary package.
An ACNC registered charity has the option to be endorsed as a Deductible Gift Recipient (DGR). This would allow donations received for an approved cause to be tax deductible for those who donate.
This could be of benefit in a situation where a member wants to raise funds for a local community group or local community individual and want to set upa separate booth to collect donations. Having the DGR status encourages people to make donations as they can receive a tax benefit.There are additonal regulatory and operational rules that would follow this endorsement such as:
- providing a receipt with the DGR details for all donations over $2.00
- separate bank account for funds donated to be banked into
- meet specific criteria and fit in an accepted category
The two ways you can register as a Deductible Gift Recipient:
1. Apply as part of the process when applying with the ACNC to be aregistered charity.
2. If you have an ABN and already registered with the ACNC as a charity, you can complete a separate application form with the AustralianTaxation Office.
Being aware of all the concessions available could provide a lot of advantages to a member, financially and/or otherwise.
