ATO assistant commissioner Jennifer Moltisanti tells not-for-profit players to prepare for new reporting rules

A Federal tax commissioner is calling on more than 155,000 not-for-profit organisations to brace for new reporting requirements to maintain their their tax-exempt status. Australian Taxation Office assistant commissioner Jennifer Moltisanti said thousands of sporting, cultural, educational and community organisations needed to review their governing and their various legal obligations. “Get ready now, don’t wait for tax time,” Ms Moltisanti on Friday told leaders of WA not-for-profits at an educational talk in Perth held by accounting firm HLB Mann Judd. She vowed to focus her team’s efforts on helping organisations come to grips with the new rules “unless there is evasion of fraud”. The new reporting requirements are expected to affect everything from small sporting clubs operating out of council change rooms to major sporting groups plus health and community service providers. The financial size of this tax-exempt part of the economy is not known, but the tax office sees some clues — about 12,800 are registered in the pay-as-you-go tax system and having 225,000 employees. About 24,200 organisation are registered under the GST system — indicating a turnover of at least $150,000 a year. The regulatory tightening covers almost 70 per cent of the 222,000-plus organisations across Australia who are registered as not-for-profit organisations. The rest of the not-for-profit sector is already covered by reporting requirements to the tax office or to the Australian Charities and Not-For-Profits Commission. About 58,000 registered charities must make detailed filings with commission. Almost 10,000 taxable not-for-profit organisations already file tax returns and pay tax at an effective rate of 30 per cent on profits derived from dealings with non-members. These taxable organisations include clubs whose main roles is to provide hospitality for members, political parties and some professional associations. Under an arcane division of tax laws, not-for-profit entities potentially qualify for income tax exemption if their primary function is one of eight broad activity categories. Those categories are community service, sporting, cultural, educational, health, employment, scientific or resource development. Resource development can include promoting tourism, agriculture, fishing, manufacturing, aviation, horticulture and tourism. But giving an example of the limitations, the tax office warns a horticulture group would likely not qualify if its main purpose is to buy supplies for members and carry out joint marketing of their businesses. From July 1, not-for-profits claiming exempt status will have to fill out an online questionnaire on the tax office website with questions based on the rules for the each of the eight categories of exemption. If an organisation cannot nominate a category or answer the questions, they would be contacted by the tax office. Ms Moltisanti said the tax office’s compliance efforts in the first couple of years would be focused on supporting organisations understand their reporting requirements and “get compliance right going forward”. “We want to take them on that journey,” she said. She said some not-for-profit groups had grown into big operations from “something set up in someone’s lounge room because there was a good cause”. HLB Mann Judd partner Gaurav Chitnis said organisations might have to amend their constitution and governing documents to bring them in line with their operations and the tax rules. “Think it through and make sure you’re eligible for tax exemption,” he said.