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The Tax Office has stressed that the main purpose of a community service organisation must be altruistic to be eligible for an income tax exemption.
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ATO offers further guidance on self-assessing for new NFP return
05 June 2024
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The ATO has told community service organisations that identifying the main purpose of their organisation is critical for self-assessing their organisation as being eligible for income tax exemption.
In a recent update, the Tax Office reminded non-charitable not-for-profits with an active ABN that they will need to lodge an annual NFP self-review return to notify their eligibility for income tax exemption.
“You need to lodge your first return for the 2023–24 income year, between 1 July and 31 October 2024,” said the ATO.
“It will guide you to self-assess your organisation's main purpose and activities against eligibility requirements of an income tax exempt entity.”
The ATO said that to be eligible to self-assess as income tax exempt, the main purpose of a community service organisation must be a community service purpose.
Any other purpose of the organisation must be incidental, ancillary or secondary, it explained.
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“Community service purposes are altruistic. This means your organisation must be established and operated for the wellbeing and benefit of others. It does not include political or lobbying purposes,” said the ATO.
The Tax Office gave an example of an NFP association set up to improve community welfare and provide its members with networking opportunities.
The club's main activity is providing co-ordinated support to a range of community activities, such as sporting fixtures, charity events, and emergency services. The club occasionally hosts social networking events and leadership development seminars that members and other non-members are invited to attend, the ATO said.
The ATO said this particular club would be deemed a community service organisation.
It gave another example of an organisation, the Young Leaders Association, which was established to enhance the professional development and leadership skills of its members.
“The association’s main activities are to hold monthly leadership-themed professional development events and fortnightly networking events for its members,” the ATO said.
“The Young Leaders Association’s main purpose is to advance the professional interests of its members. It is not a community service organisation.”
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