Tax office rules out simplifying new self-reporting rules

Despite reports that many smaller organisations were struggling to comply with the new regime, ATO assistant commissioner Jennifer Moltisanti insisted the new rules were “not that hard.”

Commenting in her latest newsletter update, Ms Moltisanti ruled out simplifying the new requirements for non-charitable NFPs, despite acknowledging sector disquiet with the changes and the way they have been communicated.

“I’ve heard rumblings of ‘pockets of confusion’ which are exacerbated by misunderstandings,” said Ms Moltisanti.

Ms Moltisanti said a return should take only “a few minutes to complete.”

“There’s not much more we can simplify,” she said.

“As a former NFP volunteer in the past, I empathise with all volunteers who may be questioning whether it’s all worth it … my advice is don’t get caught in the rhetoric. It’s not that hard and we’re here to help.”

The new rules, which came into effect in July, require NFPs with an Australian business number (ABN) to lodge an annual “self-review” return or risk losing their income tax exemption, unless they become a charity.

According to ATO figures, just 4% of registered NFPs – or about 9,300 organisations, mainly social clubs and some professional associations – are liable for tax. Until now, organisations could simply declare themselves tax exempt.

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

The sector’s concerns have attracted the attention of the shadow Charities Minister, Senator Dean Smith, who recently called on the Albanese government and its agencies to hand over documents relating to the rollout.

The government is not expected to provide a trove of documents related to the ATO self-assessment process for at least another month, after a parliamentary order to produce the materials.

Senator Smith issued the demand in the Senate late last month, setting a September 10 deadline for release of materials on the matter involving the ATO, Charities Minister Andrew Leigh, the ACNC, and Treasury.

The demand called for the release of correspondence, briefing notes, file notes, meeting notes, meeting agendas or minutes and other records “of interaction” since January.

But in a letter of response lodged with the Senate this week, Charities Minister Andrew Leigh said the Treasury department was still “coordinating searches” across the ATO and ACNC.

Dr Leigh said he expected the government would be able to comply with the order by the middle of October.

Mixed response from sector

Ms Moltisanti acknowledged that feedback from the sector had been mixed, with the ATO both praised and criticised for its efforts to implement and communicate the new tax rules.

“The feedback has ranged from ‘Jennifer, you couldn’t have put more information out there if you tried … and anyone that wanted to get ahead has had ample information to do so’ to ‘I am a small charitable organisation, and I don’t understand why I’m not automatically tax exempt,’” she said.

The ATO has previously outlined its communication efforts, which have included regular newsletter updates and “how-to” webinars.

The Tax Office also extended its deadline for lodging the self-review return by five months to March 31, 2025.

In her latest newsletter column, Ms Moltisanti once again attempted to clarify the changes and offered tips for affected NFPs on complying with the new tax rules.

More information

NFP tax shift under the microscope

Tax changes for NFPs causing confusion

ATO not-for-profit tax change strategy questioned