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.
To consider if your NFP has only charitable purposes and meets the legal definition of a charity, you can use the guidance at acnc.gov.au/selfassessingExternal Link.
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 NFPs and may be required to lodge an annual income tax return.
Self-assessing eligibility to income tax exemption
The other type of exempt entity is an organisation that meets the requirements to self-assess as income tax exempt.
If your NFP is not a charity, it can self-assess its eligibility for income tax exemption. It does not need to be registered with the ACNC or be endorsed by us to be exempt.
From 1 July 2023, non-charitable NFPs with an active Australian business number (ABN) self-assessing as income tax exempt, need to lodge an annual NFP self-review return.
Steps to self-assess
- Check the types of income tax exempt organisations.
Check the types of income tax exempt organisations that can self-assess to see if your NFP fits any of the entity categories listed. Entities that can self-assess their income tax status come from these broad groups:
- community service organisations
- cultural organisations
- educational organisations
- employment organisations
- health organisations
- resource development organisations
- scientific organisations
- sporting organisations.
- Check your organisation meets all the requirements.
If you think your organisation fits within any of the types of exempt entities, check the requirements for self-assessing organisations to make sure your organisation meets all the requirements.
For many of the exempt entity types, your organisation must be 'not-for-profit' and meet the following conditions:
- pass one of 3 tests
- comply with all the substantive requirements in its governing rules
- apply its income and assets solely for the purpose for which it is established.
From 1 July 2023, non-charitable NFPs with an active Australian business number (ABN) self-assessing as income tax exempt need to lodge an annual NFP self-review return.
The first NFP self-review return must be lodged is for the 2023–24. Following this, a new return must be lodged for each subsequent income year.
NFPs can use the questions in our self-review guide to review the organisation's tax status, and prepare their answers before lodging the NFP-self-review return.
- Understand the outcome of the NFP self-review return.
Understand what the outcome from lodging the NFP self-return means for your organisation and what to do next:
Income tax exempt
When you submit your NFP self-review return and your organisation is income tax exempt:
- you will receive confirmation on the screen that it is income tax exempt. You can print this confirmation and keep it for your records
- your organisation does not need to pay income tax or lodge income tax returns – unless we specifically ask it to
- your organisation is required to lodge an NFP self-review return in the following income year
- you should carry out a review of your tax status annually, or when there are major changes to your organisation's structure or activities.
For more information, see Reporting requirements to self-assess income tax exemption.
Taxable NFP
When you submit your NFP self-review return, and your organisation is taxable:
- your organisation may have to lodge an income tax return or notify of a non-lodgment advice
- your organisation may have the benefit of special rules for working out its taxable income and have special rates of tax
- there is transitional support if you need more time to meet lodgment obligations.
For more information, see Taxable NFP organisations.