At Cotchy, we understand the unique challenges faced by not-for-profit (NFP) organisations when it comes to staying on top of tax obligations. That’s why we’re sharing these essential Not-For-Profit updates to help your organisation remain compliant and informed. Now that January 2025 is here, it’s essential to revisit some important updates from the Australian Taxation Office (ATO) that were first announced in 2024. These changes impact how NFPs operate, report, and maintain compliance with ATO requirements.
In this article, we’ll provide a summary of the ATO’s latest updates and explain how your organisation can stay compliant and focused on its mission.
Key ATO Not-for-Profit Updates
In 2024, the ATO introduced several measures designed to improve transparency and compliance for NFPs. These updates aim to make tax reporting more straightforward while ensuring organisations meet their obligations.
Key Updates Include:
- Enhanced Reporting Requirements: NFPs must now provide more detailed financial and operational reports to the ATO.
- Review of Tax Concessions: The ATO has updated its guidelines for tax exemptions and concessions available to NFPs, with stricter eligibility criteria.
- Digital Record-Keeping Standards: Organisations are encouraged to adopt digital systems to ensure accurate and secure record-keeping.
- Volunteer Reimbursements: Revised rules clarify how to handle reimbursements to volunteers without breaching tax laws.
Lodging Your Self-Review Return
Not-for-profits (NFPs) can now lodge their returns for the 2023–24 income year and beyond through the ATO’s Online services for business. If you prefer, a registered tax agent can submit your return using Online services for agents. Cotchy are here to help!
Important Details to Know:
- Lodgement Requirements: Only returns for the 2023–24 and future income years need to be lodged. Past years’ returns are not required.
- Support for Lodgement: If you’re having trouble lodging online yourself, assistance is available. Use the ATO’s self-help phone service by calling 13 72 26. Additionally, NFPs have until 31 March 2025 to lodge their returns without needing to request an extension. Lodgements after this date may incur failure-to-lodge penalties.
- Update Your Details: Ensure your organisation’s address, associate, and contact details are accurate. This is crucial for accessing Online services for business. To make updates, complete and submit the Change of Registration Details Form (NAT 2943).
Enhanced Reporting Requirements
One of the significant changes for NFPs is the requirement to submit more comprehensive reports detailing their financial activities. This change is aimed at increasing transparency and ensuring that tax-exempt funds are used appropriately.
What Does This Involve?
- Financial Statements: Ensure your organisation’s income and expenses are accurately recorded and categorised.
- Activity Statements: Include detailed reports of operational activities that align with your organisation’s mission.
- Timely Submissions: Late reporting can result in penalties, so ensure all reports are submitted by their due dates.
If your organisation needs support with reporting, Cotchy’s team can guide you through the process to ensure accuracy and compliance.
Not-For-Profit Updates to Tax Concessions
The ATO has revised its guidelines for tax concessions available to NFPs. These include:
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Income Tax Exemptions
- Eligibility Criteria: Your organisation must demonstrate that its primary purpose aligns with ATO guidelines for charitable or NFP activities.
- Annual Self-Review: NFPs are required to conduct an annual self-review to confirm ongoing eligibility for income tax exemptions.
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Fringe Benefits Tax (FBT) Concessions
- FBT Cap Limits: Ensure your organisation is aware of the capped limits for benefits provided to employees.
- Record-Keeping: Maintain clear documentation of all fringe benefits to avoid penalties during audits.
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GST Concessions
- GST-Free Sales: Verify that your organisation qualifies for GST-free sales on certain goods and services.
- GST Registration: Ensure your organisation is registered for GST if its annual turnover exceeds the threshold.
Adopting Digital Record-Keeping Standards
The ATO strongly encourages NFPs to transition to digital record-keeping systems. This ensures compliance with audit requirements and improves the accuracy of financial reporting.
Benefits of Digital Systems:
- Efficiency: Streamline your accounting processes and reduce manual errors.
- Secure Storage: Protect sensitive financial and operational data.
- Audit Readiness: Quickly retrieve records if the ATO requests them during an audit.
If your organisation hasn’t yet adopted digital tools, Cotchy can recommend software solutions tailored to NFP needs.
Volunteer Reimbursements: What You Need to Know
Reimbursements to volunteers can be tricky to navigate. The ATO has clarified its guidelines to help NFPs handle these payments correctly.
Key Points:
- Genuine Reimbursements: Ensure payments to volunteers are for actual expenses incurred (e.g., travel or materials) and are not disguised wages.
- Record-Keeping: Maintain receipts and records of all reimbursements.
- Avoid Taxable Payments: Payments that go beyond genuine reimbursements may be considered taxable income and could trigger compliance issues.
Common Mistakes to Avoid
NFPs often face unique challenges in maintaining compliance. Here are some common pitfalls to watch out for:
- Incomplete Reporting: Ensure all required financial and operational reports are submitted to the ATO.
- Misusing Tax Concessions: Regularly review eligibility criteria for income tax and GST exemptions.
- Poor Record-Keeping: Transition to digital systems to avoid missing crucial data during audits.
- Incorrect Volunteer Payments: Follow the ATO’s guidelines to avoid issues with reimbursements.
How Cotchy Can Help Your NFP Thrive
At Cotchy, we’re passionate about supporting not-for-profits in achieving their goals while staying compliant with ATO requirements. Our team specialises in simplifying tax and bookkeeping processes for NFPs, so you can focus on making a difference in your community.
Our Services Include:
- Tax Compliance Reviews: Ensure your organisation meets all ATO requirements for reporting and concessions.
- Record-Keeping Solutions: We’ll help you transition to efficient digital systems.
- Financial Reporting Assistance: From BAS to annual statements, we’ve got you covered.
- ATO Liaison: Let us handle communications with the ATO, saving you time and stress.
Final Thoughts on the Not-For-Profit Updates: Stay Compliant
January 2025 is a great time to review your organisation’s compliance with the latest ATO Not-For-Profit updates. By staying informed and proactive, you can ensure your not-for-profit continues to thrive while meeting its tax obligations.
Need Help Navigating ATO Changes?
Contact the Cotchy team today to ensure your NFP is compliant with the latest ATO requirements. Whether it’s tax concessions, reporting, or record-keeping, we’re here to support you every step of the way.