What Are the Tax Benefits and Concessions Available for Not-for-Profits?

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Table of Contents

• Registered Charities: ATO Endorsement 
• Income Tax
• Fringe Benefits Tax (FBT)
• Goods and Services Tax (GST)
• Deductible Gift Recipient Endorsement 
• State/Territory Taxes 
• Key Takeaways 
• Frequently Asked Questions

There are a number of tax concessions available to not-for-profit organisations from both the Australian Taxation Office (ATO) and state and territory revenue offices. There are requirements for each concession, and not every type of not-for-profit will be eligible for each concession. This article will discuss some tax benefits and concessions available for not-for-profits and their eligibility criteria.

Registered Charities: ATO Endorsement 

Generally, if an organisation is a registered charity with the Australian Charities and Not-for-profits Commission (ACNC), it will need to obtain ATO endorsement to obtain the federal tax concessions. To obtain ATO endorsement, the organisation must apply to the ATO. 

Where an organisation plans to register as a charity with the ACNC but has not done so, it can apply for endorsement from the ATO while applying for registered charity status. The effect is that the ACNC will pass on the organisation’s endorsement application to the ATO. 

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Income Tax

Several not-for-profit organisations can be exempt from income tax. Your not-for-profit organisation might receive assessable income but is considered an income tax exempt entity. In that case, it will not have to pay income tax or lodge income tax returns. An exception is if the ATO specifically requires that organisation to do so. 

If an organisation is a registered charity, it must apply for ATO endorsement to become income tax exempt. Other not-for-profits can self-assess against the ATO’s criteria to determine whether they are eligible for this concession. If the organisation considers itself eligible, it will not have to pay income tax or notify the ATO. An organisation relying on this self-assessment should self-assess regularly to determine whether it is still eligible. 

Fringe Benefits Tax (FBT)

FBT-Exempt Organisations

There are four broad categories of organisations that can be exempt from paying FBT, up to certain caps:

1. public benevolent institutions (other than a public or not-for-profit hospital) that have been registered as a charity with the ACNC and endorsed by the ATO;
2. health promotion charities that have been registered as a charity with the ACNC and endorsed by the ATO;
3. public or not-for-profit hospitals; and 
4. public ambulance services.

An organisation listed above will only be exempt from FBT regarding fringe benefits provided to an employee during a FBT year if the total grossed-up value of those fringe benefits are below a “capping threshold”. At the time of writing, the capping thresholds are:

• $30,000 for public benevolent institutions and health promotion charities; and
• $17,000 for hospitals and ambulance services.

If the total grossed-up value of fringe benefits provided to an employee exceeds the capping threshold, the organisation will:

• pay FBT on any excess; and
• report details of all fringe benefits provided in the FBT year, not just those provided to an employee that exceeded the capping threshold.

FBT-Rebatable Employers

Your not-for-profit might not be eligible for the FBT exemption. However, you may still be eligible for a FBT rebate. This broadly means your organisation is entitled to a refund of its FBT liability. 

The FBT rebate is 47% of the organisation’s gross FBT payable, up to a “capping threshold”. At the time of writing, the capping threshold is $30,000 of the grossed-up value of fringe benefits provided to an employee.

The following types of organisations can be eligible for the FBT rebate:

1. charities that are institutions (but not a public benevolent institution) registered with the ACNC and endorsed by the ATO;
2. religious institutions registered by the ACNC and endorsed by the ATO;
3. certain scientific or public educational institutions;
4. trade unions or employer associations; and
5. Certain other types of not-for-profits established to achieve certain outcomes.

The following employers are not eligible for the FBT rebate:

1. charities that are not institutions;
2. charities that are institutions established by a law of the Australian, State or Territory Government; and
3. public benevolent institutions and health promotion charities which are eligible for the FBT exemption.

Goods and Services Tax (GST)

The ATO provides several GST concessions to not-for-profit organisations. Whether these concessions are available to you will depend on what type of not-for-profit your organisation runs. 

Some key GST concessions available are as follows:

• gifts – if there are no conditions attached to a gift, it will not be considered a payment for a sale and will not attract GST;
• GST registration threshold – generally, a business must register for GST when its GST threshold reaches $75,000 in a given year. This threshold is increased to $150,000 for not-for-profits; and
• fundraising events – registered charities the ATO endorses can choose to treat sales it makes in connection with fundraising activities as input-taxed supplies, meaning it will not have to charge GST on those sales. 

Where a registered charity successfully applies for ATO endorsement for the GST concessions, it will be eligible for all of them and does not need to choose which ones to apply for. 

Deductible Gift Recipient Endorsement 

Registered charities may be eligible to become a deductible gift recipient (DGR). If an organisation successfully obtains DGR endorsement from the ATO, most gifts and donations they receive will be income tax deductible for the donor. This can increase an organisation’s possible donations given the favourable tax treatment for the donor.

State/Territory Taxes 

Each state and territory provides certain concessions or relief for not-for-profits. If your not-for-profit meets certain conditions, you might receive concessions around paying:

• local taxes;
• payroll tax;
• land tax; and
• stamp duty.

Generally, there is a requirement that:

• the relevant organisation has an entirely charitable purpose and that any non-charitable activities are only incidental to the charitable activities; and 
• the relevant taxing event (such as employing people, triggering payroll tax) has a connection with that charitable purpose or activity.

Key Takeaways 

Not-for-profits can access certain tax concessions from the ATO and state or territory revenue offices. The available concessions will depend on the type of not-for-profit. Generally, a registered charity must first apply to the ATO for endorsement to receive federal tax concessions. They must also meet additional requirements relevant to the specific concession. Each state and territory has its own requirements, so it is important to check the laws to access the particular exemption or concession.

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Frequently Asked Questions