ATO to take firmer action on late lodgments by NFPs from July
The Tax Office has warned that from July it will begin reviewing NFPs that have failed to lodge their self-review return.
The ATO is urging not-for-profits yet to lodge their self-review return to do so as soon as possible, with the ATO planning to undertake tougher action from July.
Non-charitable NFPs with an active Australian business number were required to lodge a NFP self-review return by 31 March 2025. This is part of new requirements for NFPs to annually notify of their eligibility to self-assess as income tax exempt.
In a recent update, the Tax Office said that while NFPs that have missed the deadline don't need to contact the Tax Office to request an extension, they should lodge as soon as possible.
"We've suspended penalty application for late lodgment of the 2023–24 NFP self-review return as part of the transitional support arrangements for the sector," the ATO said.
However, the ATO warned NFPs that from July this year, it would start to review NFPs that "intentionally ignore their obligations".
"We will take firmer action with NFPs who are intentionally ignoring their NFP self-review return obligation and who are unwilling to comply. From July 2025, these NFPs may be subject to review."
"Act now to avoid a review. It's important to demonstrate that your NFP has taken steps to meet its lodgment obligation."
The ATO said actions that demonstrate the NFP has taken steps towards meeting its obligations include:
- Attempting to lodge the return online or via the self-help phone service on 13 72 26
- Engaging a registered tax agent to lodge the return on your behalf
- Setting up your myID to access Online services for business
- Updating your NFP's ABN details via:
- The Australian Business Register
- Online services for business
- Change of registration details form.
"If you are waiting for your change of registration details form to be processed before you lodge your return, you don't need to contact us. We can see this on your records," the ATO said.
"We will also accept late lodgment of your NFP self-review return as demonstration that you have been actively taking steps to meet your obligations."
The Tax Office is also urging NFPs to check that their governing documents are up to date, as this could impact their eligibility to self-assess as income tax exempt.
NFPs are required to maintain governing documents that demonstrate they operate on an NFP basis, including organisations that self-assess their income tax exemption.
These governing documents must include clauses that prevent the NFP from distributing income or assets to members, both while it operates and when it winds up.
Where an NFP doesn't have these government document clauses, the ATO said there is a transitional arrangement in place where NFPs can self-assess as income tax exempt in their first self-review return for the 2023–24 income year, provided they've not distributed any assets or income to their members.
"[These] NFPs must update their governing documents by 30 June 2025 to continue self-assessing as income tax exempt for the 2024–25 income year," the ATO said.
The ATO warned that if the NFP doesn’t have clauses that prohibit distributions to members in its governing documents by 30 June 2025, it cannot self-assess as income tax exempt for the 2024–25 income year and onwards.
"This may result in your NFP needing to lodge an income tax return."
The Tax Office also reminded NFPs that updates to governing documents cannot be backdated.
"It can take time to update your governing documents, as you may need to hold an annual general meeting (AGM) to note any amendments. So be sure to get started as soon as possible so you don’t run out of time."
