Taxable NFP organisations

Taxable or exempt organisations

Not all not-for-profit (NFP) organisations are exempt from income tax. NFPs can be either exempt or taxable.

To be exempt from income tax, an NFP must meet the requirements to self-assess as income tax exempt or be a registered charity that is endorsed by us as income tax exempt.

NFP organisations that seek to advance the common interest of their members and do not benefit the broader community won't generally 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.

Income tax for taxable NFPs

Some NFP organisations are taxable and may have to lodge income tax returns and pay income tax. If you are a taxable NFP, find out if you can apply the mutuality principle when calculating your taxable income.

To work out if you need to lodge an income tax return or if you should notify us of a non-lodgment advice also known as a 'return not necessary', check if your organisation is a:

• NFP company – includes incorporated and unincorporated associations
• Other taxable company – includes incorporated and unincorporated associations
• taxable trust or partnership.

Incorporated associations and unincorporated associations are treated as a company for income tax purposes under tax law.

NFP companies

NFP companies are organisations, incorporated and unincorporated, that operate for its purpose and not for the profit or gain (direct or indirect) of its individual members. Their governing documents must prohibit them from making any distributions to their members, whether in money, property or otherwise.

NFP companies have special arrangements for lodging tax returns and special rates of income tax. An NFP company with taxable income of:

• $416 or less, can notify us of a non-lodgment advice. You do not need to lodge a company tax return unless we specifically request you to.
• more than $416, must lodge a company tax return for that year.

Income tax rates for the 2023–24 income year

Your reporting requirements and specific rates depend on if your NFP company is a base rate entity.

NFP company that is a base rate entity

Taxable income range	Rate of tax	How to report
$0–$416	Nil	Submit a non-lodgment advice, also known as a return not necessary, to avoid receiving a reminder to lodge letter.
$417–$762	55% for every dollar over $416	Lodge a company tax return. For help with lodging, see Not-for-profit guide to company tax return.
From $763 and above	25% on the whole amount of your taxable income	Lodge a company tax return. For help with lodging, see Not-for-profit guide to company tax return.

NFP company that is not a base rate entity

Taxable income range	Rate of tax	How to report
$0–$416	Nil	Submit a non-lodgment advice, also known as a return not necessary, to avoid receiving a reminder to lodge letter.
$417–$915	55% for every dollar over $416	Lodge a company tax return. For help with lodging, see Not-for-profit guide to company tax return.
$916 and above	30% on the whole amount of taxable income	Lodge a company tax return. For help with lodging, see Not-for-profit guide to company tax return.

 

 

Other taxable companies

Clubs, societies, and associations whose constituent documents don't prohibit them from making distributions to their members are treated as other taxable companies.

Incorporated associations and unincorporated associations are treated as a company for income tax purposes under tax law.

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 as other companies.

For the 2023–24 income year, the rate of tax is:

• 25% if the company is a base rate entity
• 30% if the company isn't a base rate entity.

The taxable income of a club, society or association is calculated in the same way as a company for tax purposes.

Income tax rates for the 2023–24 income year – other taxable companies

Income category	Rate of tax
Base rate entity	25%
Not a base rate entity	30%

For help completing your tax return, see Not-for-profit guide to company tax return.

Taxable trusts and partnerships

Taxable trusts and partnerships must lodge a return every year regardless of net income.

For help completing your tax return, see income tax return for partnerships and trusts.

Mutuality principle

To work out your NFPs taxable income, you must know how amounts received from members are treated. Under the mutuality principle:

• receipts derived from mutual dealings with members are not assessable income (these are called mutual receipts)
• expenses incurred to get mutual receipts are not deductible.

Notify a non-lodgment advice

A taxable NFP company can notify of a non-lodgment advice, also known as a return not necessary, if they are not required to lodge an income tax return. All other taxable NFPs including partnerships and trusts must lodge an income tax return, regardless of their taxable income.

An NFP company can notify us of a non-lodgment advice for an income year using one of these methods:

• Phone
• Written request
• Registered tax agent

To make the request, you must be listed as an authorised contact on ATO records to act on behalf of the organisation. If you need to update your authorised contacts, see Notify us of changes to your not-for-profit.

Phone

Phone our Lodge and Pay enquiry line. Due to privacy reasons, you must be an authorised contact already listed on ATO records. We'll ask you to confirm your identity and authorisation to access the account.

Written request

Write us a letter that includes the:

• title at the top of the letter: 'NFP non-lodgment advice'
• organisation ABN
• organisation name
• organisation postal address
• income year for the non-lodgment advice to apply to. For example, '2023-24 income year'
• reason for requesting the non-lodgment advice. For example, 'My organisation is an NFP company with less than $416 of taxable income and is not required to lodge an income tax return.'
• first and last name of an authorised contact listed on ATO records, to act on behalf of the organisation.
• phone number for the authorised contact
• signature of the authorised contact
• date of signing.

Post your completed NFP non-lodgment advice letter to:

Australian Taxation Office
PO Box 327
ALBURY  NSW  2640

Registered tax agent

A registered tax agent can submit the non-lodgment advice on your behalf, using Online services for agents.

Capital gains tax

Capital gains tax (CGT) applies to NFP clubs, societies and associations that are treated as companies for income tax purposes, in the same way as it does for other companies that pay income tax.

Pay as you go instalments

Pay as you go (PAYG) instalments is a system for paying amounts towards the expected tax liability on your business and investment income for the financial year.

Consolidations

Wholly-owned corporate groups may have the option of consolidating for income tax. Consolidation is optional but cannot be reversed. The consolidated group operates as a single entity for income tax purposes, lodging a single tax return and paying a single set of PAYG instalments.

When a group consolidates, it is a 'one in, all in' situation, where all of the head company's eligible wholly-owned subsidiary members become part of the group.

There are specific rules about the types of entities that can be a head company or a subsidiary member of a consolidated group.