ATO rules out simplifying NFP rules despite ‘pockets of confusion’
The Tax Office insists the process for lodging annual self-reviews is “basic” and “not that hard”.
The Tax Office has ruled out simplifying new reporting requirements for not-for-profit organisations despite reports that there are still “pockets of confusion” and “misunderstandings” among those hoping to obtain a tax exemption.
Assistant commissioner Jennifer Moltisanti insisted the rules were already “basic in nature” and had no further scope for improvement.
“I’ve heard rumblings of ‘pockets of confusion’ which are exacerbated by misunderstandings,” she said in a recent blog post.
She said a return should only take “a few minutes to complete”, adding “there’s not much more we can simplify”.
“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 reporting rules, announced in 2021, apply to an estimated 157,000 non-charitable organisations nationwide with ABNs.
It requires NFPs self-assessing as income tax exempt to lodge an annual self-review between 1 July 2024 and 31 October 2024 for the past financial year to obtain or retain their status.
The measure aims to ensure only organisations entitled to tax concessions are accessing them and is part of a broader effort to maintain integrity in the tax system, according to the ATO.
However, feedback from the sector has been mixed, with some organisations praising the ATO’s communication efforts while others – particularly smaller NFPs – expressing concern about their tax status and compliance.
“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' or ‘I’m not eligible for income tax exemption, but because I’m small, the law shouldn’t apply to me’,” Moltisanti said.
She assured NFPs the new self-review return was essentially just an informational income tax return with only three requirements: organisational details, the income tax exemption category and the declaration.
The ATO had also implemented transitional support measures, she said, including an alternative lodgment channel over the phone and providing an extended deadline to 31 March 2025.
But it meant NFPs’ questions over their tax-exempt status were “dominating” the ATO’s time and were delaying the processing of other matters including tax charity concession applications and deductible gift recipient endorsements.
“We’re experiencing an increased workload … I’m aware there are applications that exceed our 28-day service window, especially where the information provided to us is incorrect or needs to be verified. Notwithstanding, we remain committed to improving our process,” she said.
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