There are two types of NFPs. These are charities and other NFPs. Depending on the type of NFP, your organisation may be eligible for a range of tax concessions.
NFP organisations (including charities) operate in many areas of society. They can include:
- church schools
- community child care centres
- cultural organisations
- environmental protection organisations
- neighbourhood associations
- public museums and libraries
- scholarship funds
- scientific organisations
- sports clubs
- surf lifesaving clubs
- traditional service clubs.
First, you should work out whether your organisation qualifies as an NFP.
It is expected that organisations seeking access to tax concessions (by endorsement or self-assessment) will have governing documents.
An NFP’s governing documents are the formal documents that set out:
- the organisation’s purpose
- the organisations not-for-profit character
- the way the organisation is governed, operates and makes decisions.
Your organisation’s governing documents may be called its:
- rules or articles of association
- rule book
- deed of trust.
We will accept your organisation as an NFP if these governing documents prevent you from distributing profits or assets for the benefit of specific people – both while it operates and when it winds up.
Your organisation should have sufficient controls in place to ensure that members and other private persons do not receive the property or assets of the organisation (other than as reimbursement for services they have provided or for expenses incurred on behalf of the organisation)
These documents should contain clauses that are acceptable to us as showing the organisation’s NFP character.
The following example would be acceptable:
‘The assets and income of the organisation shall be applied solely in furtherance of its above-mentioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.’
‘In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.’
End of example
Generally, charities are eligible for more concessions than other NFPs.
To be a charity, your organisation must:
- be a not-for-profit
- have a charitable purpose
- be for the public benefit (other than where the charitable purpose is the relief of poverty).
Examples of charities include:
- religious groups
- not-for-profit aged care homes
- homeless shelters
- disability service organisations
- universities and colleges
- animal welfare organisations and
- artistic or cultural groups.
Charities can be further broken down into the following types:
- public benevolent institutions (PBIs)
- health promotion charities (HPCs)
- other charities.
PBIs and HPCs receive wider tax concessions than other charities.
NFP organisations that are not charities are able to self-assess whether they are entitled to certain tax concessions, such as income tax exemption.
Examples NFP organisations that are not charities are:
- most sporting and recreational clubs
- community service organisations
- professional and business associations
- social organisations.
If your organisation is able to self-assess, it does not need to be endorsed by us to access the concession.
Many NFP organisations are taxable, but may be entitled to special rules for calculating taxable income, lodging income tax returns and special rates of tax.
Australian Taxation Office