New lodgement requirements for NFPs self-assessing as income tax exempt

New annual lodgement requirements for not-for-profits (NFPs) that self-assess as income tax exempt, such as sporting clubs and community associations, were due on 31 March 2025 in respect of the first year of lodgement, namely 30 June 2024.

All NFPs that self-assess as income tax exempt must lodge the new return via the Australian Taxation Office (ATO) Portal. The ATO set the requirement to lodge the return in the same regulations as the requirement to lodge for individuals, companies and trusts. 

NFPs impacted by new lodgement requirements

NFPs can be grouped as follows:

  • Charities registered with the ACNC 
  • Income tax exempt under Division 50 
  • Taxable under the principle of mutuality. 

Charities registered with the Australian Charities and Not-for-profits Commission (ACNC) and NFPs that are taxable under the principal of mutuality will not be impacted by these new lodgement requirements. 

Charities lodge an annual statement with the ACNC and are excluded from the requirement to lodge a tax return. Taxable NFPs, such as RSL clubs, lodge an income tax return generally using the mutuality principle, where they only pay tax on non-member income.

Division 50 of the income tax legislation sets out categories of NFPs whose income is exempt, provided they fit one of the categories under Division 50 and comply with the key requirements. 

Qualifying as an NFP 

To qualify as an NFP, there must be a prohibition clause on distributions to members both on winding up and day-to-day. Several NFPs only have the winding-up clause prohibition, and the ATO is allowing those to remedy this by 30 June 2025. 

Division 50 categories 

Division 50 contains sections that provide income tax exemption to various categories of entities, including: 

  • Education and science 
  • Society, association, or club established for community service 
  • Employee and employer associations, trade unions 
  • Funds contributing to other funds 
  • Government 
  • Health – Public hospitals, hospitals, and health insurers carried on by an NFP 
  • NFP to promote the development of aviation, tourism, manufacturing, agriculture, etc. 
  • Society/association for the encouragement of sport, art, literature, or music.  

Legislative requirements 

The legislative requirements for NFPs include: 

  • Complying with all the substantive requirements in its governing rules at all times 
  • Applying its income and assets solely for the purpose for which the entity is established 
  • Satisfying any requirements particular to the class of NFP. 

ATO return and assistance 

The ATO has developed a return that must be lodged each year by non-charity self-assessing as income tax exempt NFPs who have an ABN.

Key questions include: 

  • The range of turnover for the year ended 30 June 2024 
  • Confirmation of the prohibition of distributions to members 
  • Selection of the Division 50 category of exemption 
  • There is also a question of are you a charity? A yes or unsure answer will result in a response from the ATO.

The ATO sent a letter to the last known address for all NFPs with an ABN, where the ATO recorded the entity as an NFP. This letter contains the document number needed to do a lodgement over the phone. If an NFP that self-assesses as being income tax exempt did not receive a letter from the ATO, this may indicate that the ABR/ATO records need to be updated. 

There is a dedicated ATO hotline (1300 130 248, option 2) to get a document number, allowing the caller to lodge over the phone using option 1. 

If you need any further assistance or additional information in relation to the new lodgement requirements, please contact a member of our not-for-profit team.