ATO Targets Not For Profits - "Lodge Immediately to Avoid Penalties and Audit"
The Australian Taxation Office (ATO) has recently sent out a letter to many not for profit organisations advising that tax returns are due and that they need to "Lodge Immediately to Avoid Penalties and Audit". This appears to be a blanket mail out and not targeted at specific not for profit organisations.
Many charities and not for profit organisations are exempt from tax. With the exception of charities, most not for profit organisations are able to self assess whether they are exempt from tax. Charities on the other hand must generally apply to be specifically endorsed by the Commissioner for Taxation as a being exempt from income tax.
For those (non charity) Not For Profit organisations that fit within various ATO categories as being a not for profit entity, there should be no reason to lodge an income tax return. However, if the entity changes to the extent it falls outside certain ATO criteria, its income may no longer be exempt from tax. You should be aware that just because your organisation has a "No Distribution to Members" clause in its constitution does not automatically mean that it is exempt from tax.
The management committee of each non profit organisations should self assess on a yearly basis that they remain a not for profit entity and should be exempt from tax within ATO guidelines.
The ATO have developed a self-review worksheet to be completed and kept with an organisation's records (no requirement to lodge). We have included a link to this worksheet below.
The ATO website does have a lot of useful information for not for profit organisations and we have included a link below.
If your not for profit organisation has received a letter from the ATO, you should not ignore it. Often, a phone call to the ATO may solve problems. In certain circumstances you may need to lodge a 'no lodgement required' form.
If you would like formal assistance to assess whether your not for profit organisation is indeed exempt from tax, or need further assistance to lodge returns if you have self assessed that you no longer meet the criteria, please contact Jamie Towers, Michael Georghiou or your usual Hanrick Curran advisor.