Not-for-profit centre
General update
The Australian Taxation Office (ATO) shared highlights from the keynote presentation Helping not-for-profits get it right, which will be refreshed in 2025.
The ATO also provided an overview of the 2024–25 year to date and areas of focus for 2025. In 2024, the administration of 4 deductible gift recipient (DGR) categories moved to the ATO from other government departments, and the not-for-profit (NFP) self-review return was introduced. The ATO anticipates another busy year in 2025 with the NFP self-review return and the introduction of a new DGR category for community charities.
Member comments
Members expressed interest in insights and data from the specific listing review. The ATO advised some listed by name changes have already been announced, mostly due to the entity no longer operating. The review didn’t discover any significant issues with listed by name DGRs. Analysis of DGR trends is expected to be available towards the end of the financial year. Members also acknowledged the ATO's work to address DGR and tax concession charity application backlogs.
Technical update
Public advice and guidance
The ATO acknowledged member feedback on Taxation Determination TD 93/190 Income tax: what is the scope of the exemption from income tax provided by subparagraph 23(g)(v) of the Income Tax Assessment Act 1936? The ATO will establish a sub-working group to review TD 93/190 and is seeking feedback on whether members prefer a Taxation Ruling over a Taxation Determination.
The ATO has refreshed guidance on the authorities who can approve selected types of organisations as approved research institutes. Minor updates have also been made to Taxation Ruling TR 92/2 Income tax: scientific research – the application of section 73A to remove outdated references and make miscellaneous editorial updates.
A review of Practice Statement Law Administration PSLA 2014/1 Administration of penalties for failure to comply with Ancillary Fund Guidelines is in progress. All ancillary funds endorsed as DGRs must comply with the mandatory guidelines to obtain and maintain DGR endorsement.
Community charities
Legislation to create the new DGR category for community charities, and to require a Treasury minister to make guidelines in respect of those categories, passed in June 2024. Initially the new framework will only apply to the 28 community foundations listed on the Treasury website.
Treasury released the exposure draft of the guidelines and accompanying explanatory material for public consultation in November 2024. See Building Community – ministerial guidelines for community foundationsExternal Link. Once the guidelines have been finalised, the ATO will proceed to implement the measure.
GloBE rules
Domestic legislation to implement the Pillar 2 reforms has not yet passed parliament. Interested NFPs and advisers should read the Organisation for Economic Co-operation and Development (OECD) model rules and accompanying administrative guidance to understand how the Pillar 2 regime will operate. Jurisdictions generally cannot deviate from the model rules in any substantial manner, as it would mean their domestic legislation ‘unqualifies’ preventing them from collecting top-up tax.
The ATO is undertaking population sizing work to understand how many NFPs could be impacted by the measure. The ATO is also interested in understanding some of the interpretational challenges for NFPs to inform its view on the administration of the measure. The ATO will establish a sub-working group to progress discussions.
NFPs and advisers who have queries, submissions or comments can email the project team at Pillar2Project@ato.gov.au. The ATO is limited to responding to matters relating to implementation of the measure and will refer any policy matters to Treasury.
Compliance
The ATO is focused on the refund of franking credits and eligibility to claim, noting reviews have highlighted some confusion about eligibility. The ATO has provided education on eligibility and how to self-amend if a claiming error is identified. The ATO also delivered cases looking at DGR endorsement and operating for purpose, or a DGR endorsement not being used correctly. When looking at risk, drivers and potential risk events, the ATO considers the impact of changes in environment for the NFP, which includes workforce changes and the loss of expertise.
Member comments
A member asked if the ATO has a specific focus for DGRs. The ATO takes a risk-based approach and does not have a specific focus. Community feedback and referrals when a DGR is potentially not operating for purpose is reviewed and further action taken where appropriate. NFPs who are unsure or have made a mistake should engage with the ATO to address any concerns.
GST
The group discussed GST risks in the NFP population. By focusing on these risks, the ATO gains a better understanding of how NFPs interact with the GST system, the challenges they encounter, areas where mistakes may occur, and aspects of the law that are considered complex. This helps provide tailored support and guidance.
NFPs have a GST concession under the law. This means they only need to register when their GST turnover is $150,000 or more. However, some NFPs choose to register when their turnover is below the threshold amount. If an NFP is registered for GST, they can claim credits for GST paid on purchases, but must also remit GST on sales. Most NFPs who are registered for GST use Simpler BAS to report GST. This means they only report G1 Total sales, 1A GST on sales, and 1B GST on purchases, usually on a quarterly basis.
The primary GST risks in the NFP population relate to registration and correct reporting. Key questions NFPs should consider as part of a regular review of their GST obligations include:
- What is the NFPs GST turnover?
- Does the NFP have a GST registration requirement?
- If registered for GST, are business activity statements (BAS) being correctly completed and lodged?
- Is the NFP correctly reporting GST on sales made?
- Is the NFP claiming eligible credits for GST paid?
- Is the NFP paying any net GST amounts outstanding on the BAS?
- Is the NFP correctly cancelling their GST registration in the event of winding up?
The ATO is developing tailored support and guidance to help NFPs better meet their GST obligations. This includes a governance guide incorporating GST content. The ATO is also focused on improving targeted communications and publicly available information.
Member comments
The NFP self-review return has generated questions about the GST turnover threshold for NFPs, and whether it is still appropriate. The ATO advised the annual gross revenue question in the self-review return gives added visibility of an entity's size and potential GST turnover. This allows the ATO to tailor education and support. The ATO noted that any review of the GST turnover threshold is a policy question and a matter for Treasury.
It was noted that approximately 50% of sporting clubs likely have a requirement to be registered for GST but are not registered. Team costs have gone up since the COVID-19 pandemic making it easy to go over the $150,000 threshold.
Payday Super
On 2 May 2023, the government announced that from 1 July 2026, employers will be required to pay their employees’ super guarantee (SG) at the same time as their salary and wages. On 18 September 2024, the government announced further details, including that the ATO’s Small Business Superannuation Clearing House (SBSCH) will be closed from 1 July 2026. See Payday superannuation design details to ensure super is paid on timeExternal Link.
Treasury has published a Payday Super fact sheetExternal Link with further details about the implementation of the measure. Treasury and the ATO will engage with industry and stakeholders on the changes.
Member comments
Members noted NFPs lodge SG using a spreadsheet and most use digital service providers (DSP) like MYOB or Xero. The ATO confirmed it is considering these issues and working with DSPs. Several DSP products offer the ability to report ordinary time earnings (OTE).
The ATO has established the Payday Super Working Group to consult on the implementation of the Payday Super program. A member of the Not-for-profit Stewardship Group has been nominated for membership.
The ATO noted that guidance on honorariums will soon be refreshed, and it will work with members on this topic.
Commissioner of Taxation’s address
Commissioner of Taxation Rob Heferen reflected on valuable contributions of stewardship groups and the important role the NFP sector plays in supporting the community and building social cohesion.
The Commissioner thanked members for their input on the design of the NFP self-review return, noting that together we have created a return that is simple to complete. The purpose of the measure is to bring increased transparency and integrity the system. The ATO appreciates this is drawing out challenges, particularly for smaller organisations that are not income tax exempt. The ATO will continue to support the sector and work with NFPs.
Member comments
Members highlighted there are a large number of NFP regulators, meaning NFPs are required to submit the same information more than once causing regulatory burden. The Commissioner raised confidentiality provisions and noted the ATO will continue to explore opportunities to 'report once, use often'. This topic will be raised at the joint regulators' meeting early next year.
The group discussed the many opportunities and challenges for NFPs to balance budgets in the current environment.
Members also expressed difficulties with updating information held on the Australian Business Register (ABR) and noted there are lengthy delays in receiving a response to requests. This has a flow on impact as ABR information is relied upon by other entities, such as the Australian Charities and Not-for-profits Commission (ACNC) and banks. Additionally, if an entity has outdated details listed on the ABR, they must submit a paper form to change their associate details which is a lengthy process. The Commissioner acknowledged the matters raised and the need for the ATO to consider how processes can become more seamless digital transactions.
Treasury
Treasury opened public consultation on the exposure draft guidelines and accompanying explanatory material for the community charities new measure in November 2024. The consultation period closes on 3 December 2024.
As part of the 2024–25 Budget announcement, the government progressed legislation to amend the tax law to specifically list approximately 10 organisations as DGRs.
The government is continuing to consider the recommendations made in the Productivity Commission’s Future foundations for givingExternal Link report released in July 2024. The government will also consider the NFP Sector Development Blueprint once it is released by the Blueprint Expert Reference Group and the Economics References Committee's report on the implementation of the NFP self-review return.
Member comments
Members asked if the government is intending to expand eligibility for the new community charity DGR categories, beyond the 28 community foundations named on Treasury’s website. Treasury advised that only the 28 community foundations listed on its website will be the subject of a ministerial declaration; however, the government may consider bringing other community foundations into scope in the future.
Members enquired about the specific process a prospective DGR applicant would need to follow to be listed as a community charity. Treasury expects that the process will operate, at least in part, in a similar fashion to the specific listing process. Treasury welcomed member feedback on how the application process should operate, via the public consultation process.
ACNC
The ACNC has experienced an increased level of registration activity throughout the year. This is expected to peak between February and March 2025 and longer wait times may arise throughout this period, depending on an application's complexity.
The ACNC has engaged with peak bodies to provide information on the bulk application process, encourage early applications, distribute educational resources, and provide general assistance in navigating the registration process. The ACNC's relationships with these peak bodies have been crucial to ensuring that NFPs are educated on applicable obligations and the benefits of ACNC registration.
The ACNC will continue to review its processes and will work closely with the ATO to identify trends and mitigate issues as they arise.
Member comments
Members asked if any concerns have been raised about the new charity application question, which asks if the NFP is applying because of the NFP self-review return. The ACNC noted this question does not impact how the application is assessed and advised is included to help the identify:
- groups of related entities the ACNC should consider engaging with, to provide education and support on the registration process
- efficiencies it may introduce in handling registration applications.
Members observed some peak bodies are facing resourcing issues helping their members navigate the ACNC’s registration process. At times, peak bodies have had to employ additional staff to provide this assistance.
The ACNC has endeavoured to ease the transition for NFPs as far as possible but observed it will generally depend on how well an NFP is organised and if any technical issues need to be resolved.
NFP self-review return
The ATO gave an update on NFP self-review return lodgments. The top 3 categories that have lodged to date are community service, cultural and sporting. Most lodgments have been made by small and medium NFPs. Where an NFP has self-assessed as taxable, it is primarily due to not falling into one of the self-assessing categories under Division 50 of Income Tax Assessment Act 1997.
A new advertising campaign commenced in November, in addition to approved key messages disseminated to peak bodies and government departments (local, state and national) through a public relations campaign.
The dedicated NFP self-review return web page has been refreshed. See Reporting requirements to self-assess income tax exemption. The page has been updated to assist with navigation, including a link to access the NFP self-review return guide.
The new NFP company non-lodgment advice form is designed to help NFP companies with notifying the ATO of a non-lodgment for their income tax return. A new NFP tax, super and registry responsibilities checklist will assist NFPs to stay on top of their tax, super and registry obligations.
Roundtable
The group discussed areas of focus for 2025. Members emphasised continued difficulties with navigating the change of registration details process. The development of the fillable and downloadable NAT 2943 form for NFPs, and accompanying website guidance is a welcome improvement. Notwithstanding this, members stressed the need for improved communication avenues between the ABR and NFPs and their advisers.
Additionally, members highlighted the importance of improving and consolidating educational resources and public advice and guidance products for NFPs on the following topics:
- GST, particularly in regard to non-commercial activities, determining market value and record keeping
- gifts and donations, particularly with respect to conditionality and the valuation of non-cash donations
- eligibility requirements and application processes for DGR endorsement, particularly for the 4 DGR categories recently transferred to ATO administration, and the new community charity DGR category
- mutuality
- eInvoicing
- ancillary funds
- employer obligations (in particular, FBT and payday superannuation).
Members noted that the NFP roadmap and the NFP self-review return presents an opportunity to ensure NFPs have a holistic understanding of their obligations.
Attendees
Organisation | Member |
---|---|
ATO | Will Day (Co-chair), Small Business |
ATO | Jennifer Moltisanti, Small Business |
Arnold Bloch Leibler | Jessica Wills |
Charitas Law | Jae Yang |
Charities and Not-for-profits Committee, Law Council of Australia | Seak-King Huang |
Community Foundations Australia | Jane Hawthorne |
HWL Ebsworth | Timothy Stokes (Co-chair) |
Institute of Certified Bookkeepers | Rob Marshall |
Justice Connect | Geraldine Menere |
KPMG | Kaylene Hubbard |
NFPAS | Ellie Patterson |
Philanthropy Australia | Krystian Seibert |
Queensland Muslims Inc | Habib Jamal |
Saward Dawson | Cathy Braun |
SW Accountants and Advisors | Stephen O’Flynn |
The Dreaming Foundation | Michael Manikas |
The Salvation Army Australia | John McIntosh |
The Tax Institute | Morag Ingham |
Treasury | Peter Robjent |
University of South Australia | Kristian Thoroughgood |
World Vision Australia | Ben Scuteri |
Guest attendees
Organisation | Attendee |
---|---|
ATO | Dora Jain, Small Business |
ATO | George Grespos, Small Business |
ATO | Joy Tillman, Small Business |
ATO | Marisa Hewitt, Small Business |
ATO | Matthew Faltas, Small Business |
ATO | Michelle Allen, Superannuation and Employer Obligations |
ATO | Richard Robinson, Small Business |
Australian Charities and Not-for-profits Commission | Carina Mitsinikos |
Community Council for Australia | David Crosbie |
Apologies list
Organisation | Member |
---|---|
Australian Charities and Not-for-profits Commission | Natasha Sekulic |
Clubs Australia | Simon Sawday |
Giuntabell | Nunzio Giunta |