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Around one in 10 have already lodged a self-review return ahead of the March deadline, according to an assistant commissioner.
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ATO defends NFP reporting rules amid sector concerns
20 December 2024
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The Tax Office has defended its implementation of new reporting rules for non-charitable not-for-profits and says around one in 10 have successfully lodged a return already.
The new self-review return requires around 157,000 non-charitable NFPs self-assessing as income tax exempt to lodge an annual self-review by March to obtain or retain their status.
In the lead-up to the deadline, assistant commissioner Jennifer Moltisanti said she had seen commentary and opinions expressed around the requirements that were “not factually correct”.
“I feel it important to set the record straight,” she said in a recent blog post.
She rejected claims that the measure was intended to target only larger organisations, stressing that it applies broadly.
“When the NFP self-review measure was announced by the then coalition government at federal budget 2021–22, it was announced as applying to all non-charitable NFPs with an ABN,” she said.
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“It was never announced as applying to larger NFPs only,” she said.
Moltisanti also addressed criticism suggesting the ATO ignored recommendations from the 2018 Australian Charities and Not-for-Profits Commission legislation review.
“We administer the law in an impartial and apolitical manner and work with the government of the day to achieve policy outcomes,” she said, noting that the government had determined the ATO was best placed to regulate eligibility for income tax exemptions and other tax concessions for non-charitable NFPs.
In response to claims of insufficient consultation with the sector, Moltisanti defended the ATO's "extensive" engagement efforts.
“There has also been some commentary that suggested we have not consulted with the sector, which is simply untrue,” she said.
“Since the measure was announced, we have undertaken extensive consultation with respect to the design, development, and testing of the return, public advice and guidance, and transitional arrangements.”
“This has included NFPs who are eligible to self-assess as income tax exempt, as well as those who were never eligible.”
Moltisanti thanked the NFPs that had already lodged the self-review return and said the bulk of the 15,000 returns the ATO received were from smaller organisations.
“Some early observations are that most lodgments are submitted on the first attempt and the overwhelming majority of returns received to date are from small NFPs with turnover below or up to $150,000,” she said.
She added that the ATO had fielded a significant rise in inquiries via its dedicated NFP phone service, with call volumes doubling over the past year.
Common questions included updates to governing documents and clarification of reporting obligations.
In July, the ATO pushed back the 31 October 2024 deadline for self-review returns to 31 March 2025 amid concerns over NFPs’ ability to meet the new requirements in time.
Sector advocates such as Liberal senator Dean Smith noted the rules affected “volunteers … people who have held positions for a very long time in their organisation and might not even hold positions anymore”.
NFPs had also previously described the obligations as a “ticking time bomb” threatening their tax-exempt status and viability.
Moltisanti said the ATO was committed to “helping NFPs get it right”.
“The lodgment of the annual NFP self-review is not optional. Non-charitable NFPs with an active ABN are required to lodge an annual self-review return to confirm their eligibility to self-assess as income tax exempt.”
“The first self-review return is not due until 31 March 2025 - the race has not finished yet.”
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