New return requirements and DGR reviews in the not-for-profit sector

New return requirements

Not for profit (NFP) organisations that are not charities, have a new requirement to lodge returns annually with the ATO regarding their self-review of their income tax exempt status. 

Organisations endorsed as charities by the ACNC, government organisations, including public authorities, and organisations who already lodge income tax returns are not required to lodge these returns. 

The new requirement will typically apply to organisations such as:

• Sporting clubs
• Community service organisations (unless they have a charitable purpose)
• Cultural organisations
• Certain education and health organisations (unless they have a charitable purpose)
• Various clubs and associations, such as those promoting music, art, the development of certain resources, aviation, etc.
• Employer groups and unions
• Scientific institutions (unless they have a charitable purpose)

Returns for the year ended 30 June 2024 must be lodged by 31 October 2024 and the ATO will issue a summary notice confirming receipt. In following years, the return will be pre-populated and can be confirmed or updated. 

The returns will need to be lodged either via the ATO’s Online Services (which will require organisations to have an active ABN, a myGovID and RAM), or through a Registered Tax Agent, such as Grant Thornton. Please reach out if you would like our assistance. 

The return is not numbers based (other than requiring an indication of the relevant income range for the organisation) but will include questions similar to the ATO’s current self-review worksheets. These questions are directed at confirming factors, which vary depending on the organisation. They may include whether the organisation operates solely in line with its constituted purposes, is not-for-profit, complies with the substantive requirements of its governing rules and operates solely in Australia.

DGR reviews

In line with recent announcements, the ATO has commenced reviewing entities specifically listed in the income tax legislation as having Deductible Gift Recipient (DGR) status. These reviews seek to ensure compliance with the criteria relevant to each DGR, in order for continued eligibility as a DGR. Such criteria under review include:

• Whether the DGR’s activities are in line with its purposes
• Whether the DGR applies its revenue solely in line with its purposes
• Whether the DGR complies with any relevant special criteria for that DGR

Based on our experience with these reviews, questions raised by the ATO can be extensive, and preparing a response takes time. If you would like support with this process, please let us know.  

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