ATO uses carrot and stick approach on self-review laggards

Posted on 08 Apr 2025

By Greg Thom and Matthew Schulz, journalists, Institue of Community Directors Australia

The Australian Taxation Office has signalled it will take a harder line on not-for-profits that ignore or overlook their obligation to lodge a self-review return.

Under the new system introduced last year, non-charities with an Australian Business Number (ABN) must lodge the annual return or face losing their tax-exempt status.

An estimated 155,000 organisations are affected by the tax changes, yet as few as 20,000 had submitted the required paperwork ahead of the (already previously extended) March 31 deadline.

Thousands of NFPs have instead applied to the Australian Charities and Not-for-profits Commission (ACNC) seeking charity registration to avoid the requirement.

The new rules have been described by the ATO as the biggest change to the sector since the creation of the ACNC.

In an update on its website, the ATO said it had suspended issuing any penalties for late lodgement of the 2023–24 NFP self-review return in a bid to help the sector transition to the new system.

However, the tax office said that from July 2025, it would “start to review NFPs that intentionally ignore their obligations”.

“We're committed to supporting NFPs who try to do the right thing,” the ATO said.

“We will take firmer action with NFPs who are intentionally ignoring their NFP self-review return obligation and who are unwilling to comply.”

Sledgehammer walnut — The tax office has vowed to come down hard on NFPs that ignore their obligation to lodge a self-review return.

“We will take firmer action with NFPs who are intentionally ignoring their NFP self-review return obligation and who are unwilling to comply.”

Australian Taxation Office

Charities Minister Andrew Leigh said the government was determined to ensure NFPs had the support they needed to adapt to the tax changes.

“While this reform originated under the former Liberal government, the Albanese Government has made sure the tax office is providing tailored support to help not-for-profits meet their new registration and reporting requirements,” said Mr Leigh.

He said any organisation that needed more time or had questions should contact the ATO to access that support.

“We’ve also asked the Australian Charities and Not-for-profits Commission to streamline the process for groups registering at scale, making compliance simpler and more consistent, and provided additional staff to manage new registrations.”

The ATO has repeatedly defended the self-review changes, saying that it has consulted the sector extensively, and that the changes are easy to navigate.

However, the rollout has been criticised by sector advocates and the Shadow Charities Minister, Senator Dean Smith, who instigated a Senate inquiry into the process.

That inquiry heard complaints about poor communication, a complex process, unnecessary red tape and higher costs for organisations seeking accounting and legal advice.