Governance Guru: Do we need to lodge a self-review return with the ATO?

The new self-review return is one such requirement, and the sector has made its concerns about it known in recent ICDA reports such as ATO urged to redesign NFP self-review return and How the tax office is wasting the not-for-profit sector’s time, effort, and money.

We’ve also heard from organisations that have had trouble with the mechanics of compliance. Let’s unpack what the new self-review return is and whether your organisation must comply.

What is the new self-review return?

The ATO has introduced a new annual reporting requirement for non-charitable not-for-profit organisations with an active ABN who self-assess their eligibility for an exemption from paying income tax.

To put it very simply, some organisations now need to fill out an ATO form online each year saying, in effect, ‘Hi, it’s us again. We’ve checked whether we need to pay income tax, and we don’t. Here’s why. See you next year.’

The annual self-review return requirement was introduced to increase integrity and transparency in the system by ensuring that only eligible organisations access income tax exemptions.

The deadline for the self-review is 31 October each year. However, for the 2023–24 income year, organisations have until 31 March 2025. For more information on how to lodge, see the ATO’s website: NFP self-review return.

Does my organisation need to lodge the new self-review return?

If your not-for-profit organisation ticks all the following boxes, then yes, you need to lodge a self-review return:

• You have an active ABN
• You are not a registered charity
• You fall under one of eight categories and meet the conditions outlined in Division 50 of the Income Tax Assessment Act 1997, detailed here: Do you need to lodge?

What’s an example

An example of a non-charitable not-for-profit that has to lodge the new self-review return is the fictional Biglake Community Football Club.

• It has an active ABN
• It is not a registered charity
• It is a sporting club, which is one of the eight categories mentioned above.
• It meets the conditions detailed here; in particular, it:
  • is a not-for-profit (profits go back into the club, not to members)
  • exists to encourage community participation in sport rather than to make a profit
  • meets the ATO’s definition of a "society, association, or club established for the encouragement of a game or sport"
  • primarily operates in Australia and benefits the local community.

What organisations don’t need to a lodge a self-review return?

If your organisation is a charity registered with the Australian Charities and Not-for-profits Commission (ACNC), you do not need to lodge a self-review or self-assessment.

The key word here is “charity”.

• A charitable NFP (e.g. a homelessness service) must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and apply for an income tax exemption.
• A non-charitable NFP (e.g. a sporting club or professional association) can self-assess its tax exemption without ACNC registration.

To ensure your new reporting obligations are incorporated into your annual compliance framework, take the time to review the requirements and keep all relevant information and previous returns somewhere easily accessible so you don’t have to redo all your hard work each year.

Add October 31 to your compliance calendar to help you stay up to date with all your reporting requirements.