Government entities
- A government entity that is exempt by definition in section 50-25 of the Income Tax Assessment Act 1997. This includes a:
- municipal corporation
- local governing body
- public authority constituted under an Australian law
- constitutionally protected fund.
- A State or Territory body that is exempt under Division 1AB of Part III of the Income Tax Assessment Act 1936.
If your organisation is a government entity or State or Territory body, you may be able to request that it to be removed from the list of NFPs required to lodge an NFP self-review return. Phone 1300 130 248 for NFP advice between 8:00 am and 6:00 pm, Monday to Friday.
Taxable not-for-profits
Not all NFPs are exempt from income tax.
Organisations that seek to advance the common interest of their members and do not benefit the broader community will generally not meet the requirements for income tax exemption. Examples of taxable NFPs include:
- social clubs and fraternal organisations
- some business and professional associations
- clubs whose main purpose is providing hospitality services for members
- political parties.
NFPs that are not an eligible type of income tax exempt entity are taxable and may have to lodge tax returns and pay income tax. Understanding mutuality and taxable income is important as it affects lodgment and what you pay tax on.
To work out if you need to lodge a tax return and what rate of tax you pay, you'll need to work out if your organisation is an NFP company or other taxable company. This distinction is important because NFP companies have special arrangements for lodging tax returns and special rates of income tax.
Not-for-profit companies
If your organisation's governing documents prohibit it from making any distributions (money, property or otherwise) to its members, your organisation is treated as an NFP company.
An NFP company with taxable income of:
- $416 or less a year is not required to lodge a tax return and will need to notify the ATO of a Return Not Necessary
- more than $416 a year is required to lodge a tax return for that year.
When determining your NFP’s taxable income, you are not required to include mutual receipts from members.
Other taxable companies
Clubs, societies and associations whose governing documents don't prohibit them from making distributions to their members are treated as other taxable companies.
Other taxable companies must lodge a tax return each year, regardless of their taxable income. There is no tax-free threshold and they have the same rates of tax applied as other companies but may be able to apply the mutuality principle to calculate assessable income.
Taxable trusts and partnerships
Taxable trusts and partnerships are required to lodge a return every year regardless of net income.
NFPs with only charitable purposes
NFPs with only charitable purposes that meet the legal definition of a charity must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and be endorsed by the ATO to be income tax exempt.
NFPs that are registered with the ACNC and endorsed by the Australian Taxation Office (ATO) as income tax exempt, are not required to lodge a NFP self-review return.
Charitable NFPs that do not register as a charity or take the necessary steps to meet ACNC requirements, are not eligible to self-assess as income tax exempt. They are taxable and may be required to lodge an annual income tax return.
Charities registered with the ACNC are required to submit an annual information statement to the ACNC.
To consider if your NFP has only charitable purposes and meets the legal definition of a charity, use the guidance at acnc.gov.au/selfassessingExternal Link.
You can find out more information at Is my organisation eligible for charity tax concessions?.
Non-profit sub-entities for GST purposes
A non-profit sub-entity is set up by a parent organisation to have its branches or units treated as separate entities for GST purposes. These branches or units exist for GST purposes only and do not have any income tax obligations.
- Non-profit sub-entities are not required to lodge an NFP self-review return, as their parent is the entity recognised for income tax purposes.
- The parent organisation must complete an NFP self-review return and must include the purposes and activities along with their own when lodging.
If you’re unsure about your structure for tax purposes, contact your parent entity.
If your organisation is a non-profit sub-entity, you can request it to be removed from the list of NFPs required to lodge an NFP self-review return. Phone 1300 130 248 for NFP advice between 8:00 am and 6:00 pm, Monday to Friday.