Andrew Lam, Director, Taxation at Hill Rogers explains, “The fact is that NFPs need to make money in order to assist them in achieving their objectives. That’s why tax concessions are obviously very important in the NFP space. By accessing the tax concessions available to them, they can boost their financial performance, which in turn gives them the resources needed to employ more people to achieve their charitable objectives.”
So, which types of organisations are able to qualify for tax concessions?
- Any charity that is registered with the Australian Charities and Not-for-Profits Commission (ACNC), and then endorsed by the Australian Taxation Office (ATO)
- Other categories of NFP organisations specified in the Income Tax Assessment Act, for example:
- employer/employee associations;
- public hospitals, not-for-profit hospitals, not-for-profit societies or associations established to promote the development of primary and secondary resources and tourism; and
- societies, associations or clubs established for the encouragement of animal racing, art, a game or sport, literature, or music.
There are a number of NFP tax concessions available depending on the type of NFP organisation. These include:
Goods and services tax concessions – An NFP may not only be able to claim a GST credit for the GST included on goods and services that have been purchased, more importantly there are a range of other concessions available such as higher registration thresholds and exemption for fundraising events.
Fringe benefits tax rebates – If your organisation is a registered charity or other type of NFP, it may qualify for the FBT rebate or FBT exemption on non-cash benefits provided to employees. For example, a work car or a mobile phone.
Deductible gift recipient (DGR) status – Generally charities can apply for deductible gift recipient (DGR) status which gives them the benefit of being able to raise donations and allow their donors to claim a tax deduction. It’s important to remember that in most cases you will need to be registered with the ACNC before applying for DGR status.
Tax concessions from state, territory and local governments – There are a number of different tax concessions available to charities from state, territory and local governments. These include taxes such as stamp duty (a tax on some financial and property transactions), payroll tax (a tax on wages that exceed a certain threshold paid by employers) and land tax (a tax on landowners).
“With all the concessions available to NFPs, it’s important to seek advice to find out exactly what you are entitled to. Discovering that your organisation may not have to pay certain taxes could make a big difference to a NFPs bottom line”, Andrew explains.
He also recommends that NFPs review their tax concessions situation regularly. “In my experience, NFPs tend to look at their tax concessions maybe once, then once it’s been set, probably forgotten about. The revenue authorities require NFPs to review their status annually or when its objectives or activities change, something we highly recommend so that they continue to access the relevant concessions. Also, there may be further concessions the NFPs may not know they are entitled to and undertaking a review can bring those concessions to their attention. A trusted accountant will be able to assess your situation and do any paperwork that’s required.”
Checking your tax concession entitlements regularly is an important part of operating your NFP successfully.