Not-for-profit (NFP) entities that are not ACNC-registered charities are now required to lodge an annual self-review return, re-affirming their eligibility to self-assess as income tax exempt.
In Part 1 of this article, we previously explained which NFPs are required to lodge the self-review return, and which are not. In Part 2, we now take you through the set-up process and return preparation.
Completing the return itself might be relatively straightforward for many NFPs. However, before you can do that, you must first set up your return access. The set-up process is fraught with possible complications, as it requires working through and connecting four different interactive platforms across two different government bodies in the correct order.
Getting started on the set-up process as soon as possible is the key.
NFPs that must lodge a self-review return
In Part 1, we set out that the following NFPs are required to lodge a self-review return with the ATO:
- The NFP is not an ACNC-registered charity; and
- It has an active ABN; and
- It falls into one of eight named categories, thus being eligible to self-assess as income tax exempt.
The 2023-24 income year is the first year for which the above NFPs must lodge a self-review return, which you can do from 1 July 2024 and is due by 31 October 2024.
Having determined that your NFP is required to lodge a self-review return, the next step is to work through the process to set up your access to the return.
Set-up process
Before you can prepare and lodge your NFP’s self-review return, you will need to attend to several registration and authorisation processes to access the return. You will need to attend to the following, in this order:
Step 1: Principal authority
Decide which of the NFP’s “principal authority” persons will be designated as responsible for preparing and lodging the self-review return. An entity’s principal authority persons includes a director, trustee, public officer, and an office holder of an unincorporated association (e.g., President, Secretary, Treasurer).
Step 2: Authorised contact with the ATO
The responsible principal authority must be a recorded authorised contact with the ATO. If the NFP has an existing authorised contact who is authorised to make changes, they can do this through the Australian Business Register process at step 5 below.
If you're unsure whether there's an authorised ATO contact, or if you know someone is but can't get in touch with them, what should you do? To register yourself as an authorised ATO contact, please refer to the section below titled "Recorded authorised contact with the ATO – 'Associate'.
Step 3: myGovID account
The responsible principal authority will need to have an up-to-date myGovID account with an identity strength of either Standard or Strong.
Step 4: Link your myGovID to the NFP’s ABN
The principal authority then goes to the ATO’s Relationship Authorisation Manager (RAM) portal and logs in using their myGovID. From there, you then link your myGovID to the NFP’s ABN. (You can do this only after you are recorded as an authorised ATO contact per step 2 above (and have done step 3). This is how the ATO’s RAM platform knows that you have the required connection with the NFP entity.)
Step 5: Update the Australian Business Register
The principal authority must then ensure that their role with the NFP is recorded in the Australian Business Register. To do this, go to the Australian Business Register site and click “Update your ABN details” under Online services. You will need to log in with your myGovID. It is because of having done the RAM linking under step 4 above that you will be permitted to do this.
Check that the NFP’s ABN details on ABN Lookup are up to date. If not, update the details through the same process above.
Step 6: Governing documents
Review the NFP’s governing documents and continue to review its purpose, objectives and activities.
The above processes have the potential for technical roadblocks that will require resolution. For example, if you haven’t accessed your existing myGovID for a while, you might need to re-verify your identity – which doesn’t always go smoothly, so don’t wait until the last minute. In fact, don’t wait until the last fortnight, because it can take up to 14 days to receive a return call to help with any problems.
Recorded authorised contact with the ATO – “Associate”
As per step 2 above, if you are the principal authority person responsible for lodging a NFP’s self-review return, you will need to be recorded with the ATO as an authorised contact. Different sources of ATO information use different terms interchangeably for contact persons, such as “Authorised contact”, “Associate” and “Authorised user”. For this purpose, the principal authority person must be recorded with the ATO as an “Associate”.
Many NFPs might not know who, or if anyone, is a recorded contact with the ATO. The only option is to go low-tech and submit a “Change of registration details” form. This is a paper form only, submitted with an original signature and accompanying supporting documentation. Instructions can be found here (scroll down to “Downloadable paper form”).
Section E in the form updates the contact person, and importantly, Section F names the “Associate”. (Note that this requests your Tax File Number, which you don’t have to disclose, but will make the process quicker. As you’ll be sending the form to the ATO, you’re not disclosing your TFN to anyone who doesn’t already have it.)
The Declaration in Section H states that only a currently recorded authorised contact person can sign the form. This can be a challenge if you are resorting to this paper form because you don’t know if your NFP has an existing authorised contact, or if you do, but you can’t contact them. The ATO is taking a pragmatic approach, stating in the abovementioned instructions page that they will accept the form signed off by you as a newly appointed contact if you provide evidence of your approved nomination. This can include meeting minutes that reflect your nomination approval, or a notification from the Board stating your approved role.
Perhaps the best option is to include a letter from the NFP organisation, addressed to the ATO address on page 6 of the form, stating that you are nominated as an Associate and Authorised contact with the ATO, and signed by each member of the Board or executive body – just to be sure. A further tip from the ATO is to ensure that this accompanying document is attached behind the ATO form, as attaching it to the front may cause processing delays.
Mail the original signed form and accompanying document to:
Australian Taxation Office
PO Box 3373
PENRITH NSW 2740
Although the ATO aims to process the form within 28 days, it may take up to 12 weeks. You and/or the NFP will likely be notified once the processing is complete. You can also wait a month and then try step 4 above – if it works, you’ll know the form has been processed. If not, you may need to wait a bit longer and then try again.
Preparing and lodging the self-review return
Once you have attended to the above, now you can proceed to preparing and lodging your NFP’s self-review return. This is done through the ATO’s Online Services for Business (OSfB), from 1 July 2024. The return has three sections to complete:
- The NFP’s details, authorised contact, and its revenue band.
- A series of questions that test the NFP’s eligibility to self-assess as income tax exempt. These include nominating which of those eight self-assessing categories the NFP falls into, whether its governing documents contain a clause prohibiting distributions to members, and if it has any charitable purposes.
- Summary and declaration, and submission.
The return can also be lodged by a tax agent through Online Services for Agents (OSfA). However, if your NFP does not already have an appointed tax agent, the client-to-agent linking process to appoint one is very similar to the set-up steps above in any case. There is no extension to the 31 October due date by the return being lodged through a tax agent.
Next steps – Lodge from 1 July
It important to start the set-up requirements as soon as possible – authorisation, linking and updating. This way you will be ready to lodge the self-review return on 1 July. October will be here before you know it.
Talk to your trusted local Nexia advisor about how we can help you with your NFP’s self-review return.
