ATO denies NFP self-review changes not worth the effort

Posted on 14 Oct 2024

By Greg Thom, journalist, Institute of Community Directors Australia

Tax

The Australian Tax Office has acknowledged resistance to controversial changes to self-reporting rules for non-charitable not-for-profits, but insists the changes are needed.

The new rules introduced in July, require NFPs with an Australian Business Number (ABN) to lodge an annual “self-review” tax return or risk losing their income tax exemption, unless they register as a charity.

However, Moltisanti rejected suggestions the new rules, which sparked widespread anxiety throughout the sector and are now the subject of a Senate inquiry, are not worthwhile.

“I’ve also read some media articles that suggest ‘this measure is creating a lot of extra work and raising concerns for many while providing very limited if any tangible benefit.’

“This is simply untrue, as the return is only asking NFPs to notify us of their eligibility to self-assess as income tax exempt,” said Moltisanti.

“NFPs have always had to undertake this review, however, this year marks the first year of an annual reporting cycle.”

Moltisanti’s comments fly in the face of submissions to the Senate inquiry into the tax changes which express deep reservations about the new rules impact.

The Charities and Not-for-profits Committee of the Law Council of Australia in its submission, said it was “very concerned” about the implementation of the changes.


The Community Council for Australia (CCA) in its submission also criticised the ATO’s policy, which it said “makes no policy or practical sense.”


“The new NFP self-review return has been implemented to obtain appropriate sector transparency and integrity.”
ATO assistant commissioner Jennifer Moltisanti.

Contrary to reports of widespread sector frustration and uncertainty, Moltisanti maintained that many organisations have embraced the new reporting requirements.

She also doubled down on the reasons why the changes were introduced.

“The new NFP self-review return has been implemented to obtain appropriate sector transparency and integrity,” elements Moltisanti said were essential in a democratic society.

ATO assistant commissioner Jennifer Moltisanti.

“As the key revenue agency for Australia, it’s imperative we the [ATO] can confidently assure the government and the Australian community that the NFP sector are meeting all their tax and super obligations.

“This should be no surprise and I’ve consistently shared our role with the sector.”

Moltisanti said that the ATO would not hesitate to revoke an NFP’s entitlement to tax concessions, such as deductible gift recipient (DGR) status or income tax exemptions if an organisation was found ineligible.

She highlighted several benefits of the changes, including:

  • getting NFPs to update their details in the Australian Business Register (ABR) and ATO systems, an obligation many organisations had neglected
  • cancelling ABNs cancellations where NFPs ceased operations
  • driving an increase in charities endorsed by the ATO to access tax concessions, resulting in the appropriate level of transparency and integrity intended by law.

“I’ve regularly reminded the sector that the NFP self-review return should be seen as an opportunity to review and reset.

“Many NFPs agree, and I know many more are engaging," Moltisanti said.

The ATO said more than 10,000 self-review returns have been lodged so far, with that number continuing to climb.

Moltisanti said hundreds more NFPs had clarified whether they were charitable or taxable organisations.

Many NFPs rushed to seek charity status to avoid the new forms, sparking a three-month backlog with the Australian Charities and Not-for-profits Commission (ACNC) earlier this year.

It is a situation the ATO says it is working with the ACNC to address.

Despite the angst about the changes, particularly among smaller organisations, the ATO said it had no plans to simplify the changes, which will affect more than 155,000 NFPs.

The implementation of the new rules is the subject of a public inquiry instigated by shadow charities minister Senator Dean Smith, who said he was responding to reports by sector organisations of a chaotic rollout process, characterised by vagueness and poor communication.

“This motion is the result of growing concerns raised with me by anxious, sometimes angry, not-for-profits across Australia,” said Senator Smith said.

The inquiry by the Senate Economics References Committee is due to report on its findings by October 31.

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