To work out whether your not-for-profit (NFP) organisation needs to lodge a Company tax return, you need to:
- determine whether your organisation is a non-profit company or other taxable company
- know your organisation’s taxable threshold for lodgment
- calculate your organisation’s taxable income
Non-profit company or other taxable company
For income tax purposes, taxable non-profit organisations are treated as either:
An NFP organisation does not need to be incorporated to be treated as a company for income tax purposes. NFP companies and other taxable companies use the Company tax return.
Taxable threshold for lodgment
If your organisation is a 'non-profit company' that is an Australian resident and its taxable income is over $416 for the 2021–22 income year, it will need to lodge a Company tax return. If its taxable income is below the threshold, it is not required to lodge a tax return for that year. However, we may notify a particular company that it is required to lodge a return.
If your organisation is an ‘other taxable company’ and its taxable income is greater than $0 for the 2021–22 income year, it also needs to lodge a Company tax return.
Taxable income is rounded down to the nearest dollar.
Calculate your organisation’s taxable income
Taxable income is calculated as the difference between an organisation’s assessable income and allowable deductions.
- Taxable income = assessable income − allowable deductions.
The taxable income of a club, society or association is calculated in the same way as a company for income tax purposes.
Mutuality principle
One particular issue that affects many clubs, societies and associations is the taxation treatment of mutual dealings with members.
As a result of 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.
Mutual receipts are not subject to income tax because they are not income.
Four steps to calculate taxable income
Because of the mutuality principle, revenue and expenses of an organisation fall within one of 3 categories for income tax purposes.
Category |
Revenue |
Expenses |
|---|---|---|
1 |
Non-assessable |
Non-deductible |
2 |
Assessable |
Deductible |
3 |
Apportionable |
Apportionable |
These categories are used in the following 4 steps to calculate an organisation’s taxable income:
- Step 1: Classify revenue into non-assessable, assessable and apportionable
- Step 2: Classify expenses into non-deductible, deductible and apportionable.
- Step 3: Separate the apportionable items by appropriate methods
- Step 4: Calculate the taxable income