Ensuring Income Tax Exemption: Key Points for Not-for-Profit Sporting Organisations

Starting from the previous financial year (2023-24), not-for-profit (NFP) organisations, including sporting clubs, societies, and associations with an active Australian Business Number (ABN), must lodge an annual NFP self-review return to maintain their income tax exemption status.

It’s time to ensure that, if this applies to you, you are aware of the key steps and considerations for sporting organisations to prepare for this new requirement.

Lodging the NFP Self-Review Return

The NFP self-review return is designed to help your sporting organisation evaluate its purpose and activities against the criteria for income tax exemption. Here are the essential points:

• Lodgment Period: The first NFP self-review return for the 2023-24 income year must be lodged between 1 July and 31 October 2024.
• Individual Lodgment: Each organisation with its own ABN must lodge its own self-review return, even if it is part of a larger sporting group.

Preparing for Annual Reporting

To ensure your organisation is ready to lodge the NFP self-review return, follow these steps:

1. Verify ABN Status:
   • Check that your organisation has an active ABN using the ABN Lookup.
2. Update Contact Information:
   • Notify the ATO if your organisation's address or responsible persons' details need updating. This ensures access to important tax information and the ability to lodge the return.
3. Review Main Purpose and Governing Documents:
   • Identify and document your organisation's main purpose, which must be the encouragement of a game, sport, or animal racing.
   • Ensure that any non-sporting activities are incidental, ancillary, or secondary to the primary purpose.
4. Early Self-Review:
   • Conduct an early self-review to confirm your organisation's eligibility for income tax exemption.
5. Set Up Digital Access:
   • Set up myGovID with either Standard or Strong identity strength.
   • Link myGovID to your organisation's ABN in the Relationship Authorisation Manager (RAM) to access Online Services for Business.
6. Stay Informed:
   • Subscribe to the ATO’s monthly Not-for-Profit news for the latest tax and super updates, tips, and advice.

Consequences of Not Lodging

Failure to lodge the NFP self-review return may make your organisation ineligible for income tax exemption, and penalties may apply. Ensuring timely and accurate lodgment is crucial to maintaining your tax-exempt status.

Identifying Your Sporting Organisation’s Main Purpose

Your organisation's main purpose must be encouraging a game, sport, or animal racing. Here’s how to determine and document this:

• Governing Documents: Review these documents to clarify the purpose for which your organisation was established.
• Activities Review: Ensure that your organisation's activities during the income year primarily support the encouragement of the game, sport, or animal racing.
• Non-Sporting Activities: Assess whether any non-sporting activities are merely incidental or ancillary to the primary purpose. Your organisation must be able to justify that its main purpose is the encouragement of a game, sport, or animal racing.

For many sporting organisations, the primary purpose will be evident through activities directly related to their game, sport, or animal racing.

Adhering to the new requirement of lodging an annual NFP self-review return is essential for not-for-profit sporting organisations to maintain their income tax exemption.

By following the outlined steps and ensuring that your organisation's purpose and activities align with the criteria for tax exemption, you can avoid penalties and continue to benefit from this status.

For more tailored support and guidance, why not speak with your trusted tax adviser?