The Australian Taxation Office (ATO) have recently directed their audit attention to the non-profit sector. The organisations that the ATO have been targeting are predominantly those who have not lodged an income tax return for a number of financial years, on the premise that they are not required to do so, due to their non-profit organisation status.
Generally, the ATO accept a non-profit organisation to be “an organisation that is not operating for the profit or gain of its individual members, whether these gains would have been direct or indirect. This applies both while the organisation is operating and when it winds up”.
Whilst on the surface, an organisation may appear to be a non-profit organisation, the ATO places strict guidelines in determining whether an organisation can be treated as such for tax purposes. These guidelines take into consideration the clauses contained within the organisation’s constituent or governing documents, and the organisation’s adherence to such rules through their actions.
Where your organisation has previously not lodged a tax return on the basis that you are a non-profit organisation, you may or may not have received a letter from the ATO demanding lodgement of your outstanding income tax returns. Regardless of this fact, it is suggested that you contact your LBW representative to determine the preferred approach in dealing with this recent ATO focus.
