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NFP tax crackdown adds to EOFY workload

A new NFP self-review return this EOFY is a key part of the ATO approach in clawing background from a growing number of NFPs incorrectly claiming tax exempt status. BAS Agents will have a role in easing the reporting burden, but care is needed to act

While Tax Agents will at this stage be the only agents lodging the newly introduced NFP self-review return on OSfA, BAS Agents can expect to be guiding the set-up. Why? BAS Agents and bookkeepers are more likely than tax agents to be involved with the majority of the affected NFP sector (particularly the smaller ones) as their bookkeepers and office bearers.

The ATO hopes the new self-review return will weed out those NFPs incorrectly claiming tax exemption. By having NFPs describe their activities and purpose, this is said will help assure NFPs are correctly being assigned to the right tax category.

Self-review asks a few extra questions to check tax exemption status

The self-review return can be lodged online or via telephone (as an interim measure). It seeks annual gross income and assigns the NFP into the category that best reflects their purpose. Further ‘yes or no’ questions vary based on the category, but can include asking whether income is earned entirely in Australia, whether the NFP is a Deductible Gift Recipient and has a critical question concerning the presence of a distribution clause in the NFP’s governing document.

The Australian Bookkeepers Network (ABN) Director, Kelvin Deer, says the TPB have yet to confirm if lodgement and advice re the NFP self-review return will be a “BAS Service” pursuant to TASA. If there is no guidance from the TPB then BAS Agents should not charge a fee to lodge or provide advice re lodgement. Irrespective, BAS Agents can help to get their NFP ready for the return and this starts with awareness of the process.  

“The TPB is reviewing whether the NFP return is to be a BAS Service and can be dealt with by BAS Agents, not just Tax Agents. This should be announced publicly before the end of June given the 1 July operative date and the 2024 FY impact,” said Kelvin. “If Tax Agents or the NFP remain the only ones that can lodge, the BAS Agent can help by raising awareness of the process with an NFP.

The ATO is expected to be lenient as NFPs become familiar with the process, and no penalties will be applied until March 2025.”

BAS Agents help to set NFP clients up, but caution is warned

“Upfront the NFP must have a current copy of constituent documents to check its objects and for the presence of an appropriate distribution clause. If in doubt it may need to be checked by a solicitor. The NFP needs to check it has an up-to-date record on the Australian Business Register,” said Kelvin. “An NFP also needs to have in place a nominated office bearer for the NFP to deal with the ATO. The ATO is encouraging self-lodging NFP’s to do so electronically which means the nominated office bearer will need a MyGovID, then link to Online Services for Business for lodgement. Alternatively, there is the telephone service for year # 1 as a minimum.

“As with every new addition to tax regulations, I urge all BAS Agents to be careful when providing guidance,” continued Kelvin. “It’s never been more important to know when it’s time to refer to other experts when uncertainty exists.”

You can visit the ATO website for more information about NFP reporting requirements.

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