Government Senators' Additional Comments

1.1Government Senators thank the Not-for-Profit (NFP) organisations that took time to contribute to and participate in this inquiry, and would like to acknowledge the benefit these organisations provide to their community and the economy more broadly.

1.2NFP organisations range from some of our smallest organisations to some of our largest, and deliver real benefits and assistance for the Australian people and community.

1.3It is for these reasons that some NFPs appropriately receive income tax-exemptions. Government Senators welcome that under these administrative changes, eligibility for being tax-exempt will not change.

1.4Mr Will Day, Deputy Commissioner, Small Business, Australian Taxation Office, summarised this approach saying:

Importantly, eligibility requirements for income tax exemption under the law haven't changed, including the obligation to self-assess annually. Nevertheless, since the [previous] government announcement of the new reporting requirement, the ATO has undertaken extensive consultation, engagement and communication to raise awareness and to develop tailored support. [1]

1.5The establishment of the self-assessment return by the ATO is an important modernisation for our tax system, and an improvement on the former system of NFPs self-assessing against a guideline only without oversight by the ATO.

1.6This former process was broadly recognised in the review of ACNC legislation in 2018 and the former Coalition Government’s response to that review as being in need of improvement, and was addressed by this new self-assessment return requirement in the 2021/22 Federal Budget delivered by the Coalition Government.

1.7Government Senators note the thorough consultation process that has contributed to the development of this return, including via the ATO’s NFP Stewardship Group represented at the Public Hearing by Mr Timothy Stokes who noted:

the fundamental point for me in this process is that this return doesn't, in my view, impose on these entities any new obligation apart from lodging the return. It merely reflects the current legal position these entities are subject to, so on that basis I've always considered it reasonable. [2]

1.8Government Senators appreciate there is a necessary administration hurdle for some NFPs being able to lodge their self-assessment return.These include, in the first year in particular, organisations confirming their ABN and ABR details and the creation of a secure myGovID to access the ATO portal.

1.9Government Senators note the additional and welcomed resourcing that has been provided to the ATO and ACNC, as well as transitional measures and support that have been made available to make the lodgement of a self-assessment return faster and simpler. These include:

Extending the due date to 31 March 2025 from 31 October 2024, and ATO commitments to work with entities who have not lodged beyond that date.

The creation of a self-help phone service to lodge a return with the ATO over the phone.

Future returns being prefilled with answers based on previous lodgements.

ACNC’s tailored approaches to assist large groupings in the NFP population adopt a template approach supported by peak bodies.

Additional contact authorisation change processes to reduce the administrative burden of NFPs who have changed personnel.

Concessions for entities without suitable constitutional terms regarding the distribution of assets, including extended time to update their governing documents and constitution.

An additional ~25 ACNC staff and resourcing funded by the ATO and ACNC.

Dedicated guidance material from the ATO and ACNC.

1.10Government Senators also draw attention to the avenues available to some NFPs, including registering as a charity with the ACNC to secure tax-exempt status, and notes commitments from the ATO to assist with endorsing NFPs for income tax exemptions where relevant.

1.11Government Senators note that any consideration given to changing NFP reporting would need to weigh administrative simplicity for NFPs, the burden to NFPs and agencies of creating another variation in a process now underway, and ensuring oversight and transparency in the system.

Senator Jess Walsh

Deputy Chair

Labor Senator for Victoria

Footnotes

[1]Mr Will Day, Australian Taxation Office (ATO), Committee Hansard, 22 October 2024, p. 26

[2]Mr Timothy Stokes, Committee Hansard, 22 October 2024, p. 26.