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As described by the Australian Tax Office (ATO), a not-for-profit organisation exists to serve its community and not to generate a profit.
To explain not-for-profit organisations, we need to unpack what they are, why they exist, how they’re governed in Australia, how they work and how to set up an NFP with the tax concessions made available by the Australian Government.
The definition provided by the ATO about a not-for-profit organisation is “an organisation that provides services to the community and does not operate to make a profit for its members (or shareholders, if applicable).”
NFPs can be education, healthcare, sport, arts and culture, social, professional or animal welfare based. They use funding supplied through government grants and corporate donations to operate their day-to-day business operations. Any generated profits must go back into the services the business provides to the community it serves.
The ACNC is the Australian Charities and Not-for-profits Commission. It is the national regulator for charities across Australia.
The role of the ACNC, per their website, is to:
A large part of the ACNC’s role is to assist charities, NFPs and the public in understanding an NFP’s obligations and their work within the community. The ACNC offers guidance, support and resources for not-for-profit organisations and works closely with state and territory government departments to create a reporting framework.
The ACNC also maintains a charity and not-for-profit register.
A not-for-profit organisation must fall within the framework of two categories in order to be eligible for tax concessions:
A charity must be not-for-profit, have a clear, charitable purpose and be for public benefit (except for the relief of poverty). Charities can be further broken down into public benevolent institutions (PBIs) or health promotion charities (HPCs) and include religious groups, NFP aged care homes, education facilities, animal welfare groups or arts, culture or social-based organisations.
Other NFP organisations are those seeking access to tax concessions. NFPs must be endorsed or self-assessed based on the submission of clearly defined, formal governing documents that outline the organisation’s purpose, its not-for-profit character, the way it is governed and operated and how decisions are made.
Firstly, any not-for-profit organisation must register with the ACNC before becoming eligible for tax concessions or deductible gift recipient (DGR) status.
Every NFP must define a purpose that is charitable or regarded as ancillary to a charitable purpose.
Questions to ask whilst defining this purpose as recommended by the Australian Tax Office are:
Your NFP organisation must also identify its legal structure and NFP type in order to apply for the relevant tax concessions. You will then need to register your organisation with the Australian Government to obtain an ABN (Australian business number) and determine whether you need a director identification number.
NFPs qualify for tax concessions depending on the type of not-for-profit organisation you have registered as, either a PBI, HPC, Charity or other NFP. Tax concessions available to not-for-profit organisations are as follows:
To know which tax concessions you are eligible for, it is best to consult our team of expert accountants, who specialise in NFP accounting. To find out more about registering your not-for-profit organisation, contact us.
We are backed by years of experience in compliance and audit preparations, taxation and accounting, and bookkeeping and business operations.
Our deep understanding of complex tax requirements for SMEs and compliance for not-for-profit organisations and Aboriginal Land Councils means we can sort out any numbers problem and streamline your business operations.
We help you by streamlining financials, managing your accounts and submitting tax returns.
We know what reports you need and how to keep you compliant, so that your organisation can flourish.
We manage all your community grant receipts in reporting to funding bodies, and we file your milestones correctly.
In the spirit of reconciliation, Unity Accounting acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today.
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