There have been changes to the administration of not-for-profit organisations that self-assess as income tax exempt.
Not-for-profits that have charitable purposes cannot self-assess as income tax exempt. Charitable organisations may need to register as a charity with the ACNC and be endorsed by the ATO as income tax exempt.
This webinar outlines the changes, and who is eligible to apply for charity registration.
Webinar transcript
Stewart McMillan
Hello, my name is Stewart and I'm from the Australian Charities and Not-for-profits Commission’s Education team, and joining me is Vladimir from our Registrations team.
We're really excited to talk to you about charities, not-for-profits and maintaining income tax exemption.
Before we start, I would like to acknowledge the Traditional Owners. We are presenting our webinar today from the lands of the Wurundjeri people and I would like to acknowledge them as the Traditional Owners. I would also like to acknowledge the Traditional Custodians of the various lands on which everyone is joining us from and pay my respects to elders both past, present and emerging.
Now on the agenda for today, we will be discussing the reporting requirements for not-for-profits. We'll explain what impact this may have on your organisation and the next steps you should consider. As part of that, we'll be discussing who can register as a charity and how to prepare your application.
We'll discuss some of the updates and changes you might need to make before you're ready to apply, and go through all the information you need to submit your application, as well as the ongoing obligations you'll have once registered.
To start off, let's have a look at what exactly has changed. The administration of not-for-profits, or NFPs as they might more commonly be called, that self assess as income tax exempt has recently changed. The change isn't a change to law, but it's about how those organisations report as eligible to self assess.
Not-for-profits that self assesses income tax exempt have always been required to review their entitlement for income tax exemption. But what has changed is that from the 1st of July, non charitable not-for-profits – specifically those who have a registered ABN – are required to lodge an annual return to the Australian Taxation Office confirming that they are income tax exempt. That is starting from the 2023-2024 financial year.
It's important to note that the new reporting requirements relate to non charitable not-for-profits.
To clarify those two groups of organisations – charitable and non charitable not-for-profits – some groups may consider themselves to be a not-for-profit, but may in fact meet the definition of a charity.
A not-for-profit is an organisation that does not operate for the profit or personal gain of particular people. That could be the members of that organisation, the people who run the organisation – they’re not profiting from the group.
A registered charity is type of not-for-profit. So all registered charities are not-for-profits, but they additionally have only charitable purposes that are for the public benefit. They also are not allowed to have disqualifying purposes. And there are a few groups that are not eligible. But the main difference is that a charity is a not-for-profit with solely charitable purposes.
But first, we're just going to discuss the changes in a little bit more detail.
I'll pass over to Vlad and he'll be able to discuss the different pathways that a not-for-profit might go down and who is eligible for them.
Vladimir Klendo
Thank you, Stewart. It is important to point out that there aren't options to pick from but rather there are three pathways that not-for-profits may need to go down.
One pathway is self assessing. That's a process for non charitable not-for-profits to lodge an income tax exempt self assessed return. You can access and lodge your NFP self review return now. The due date for the NFP self review is 31st of October but lodgement is allowed up to 31st of March 2025 for NFPS having difficulty accessing online services or the self help phone services, you don't need to connect the ATO to receive this extra time as it forms part of the ATO’s transitional arrangements.
It's a new process to report but as Stewart outlined, it is not actually a new requirement. It has always been the case that not-for-profits should be self assessing their eligibility to be exempt from income tax. It's only non charitable not-for-profits that can self assess their eligibility for the exemption.
Now there are 8 ATO categories which an entity needs to meet in order to be able to get the exemption. The categories are community, cultural, educational, employment, health, resource development, scientific and sporting organisations. These eight categories do not cover all types of non-profit organisations, so if your group doesn't fit into one of these categories, you cannot self assess as income tax exempt.
If your organisation has solely charitable purposes for the public benefit, you need to register as a charity with ACNC so you can be endorsed as being income tax exempt by the ATO. To register as a charity, you're required to have an active ABN – it cannot be an ABN that has been ceased or an ABN that is future dated. It has to be currently operational.
There are multiple aspects of the charity eligibility criteria, but the key focus is that an organisation needs to have solely charitable purposes, that is purposes that are recognised as charitable at law.
Stewart McMillan
Thanks Vlad. Do you mind explaining the option of being a taxable not-for-profit? Who falls into that group?
Vladimir Klendo
Certainly. So unlike the common perception in the community that every single not-for-profit is instantly income tax exempt, that is not actually the case. For example, if an organisation that is charitable does not register as a charity with the ACNC, it will become a taxable not-for-profit. There may also be organisations that are not eligible to register as a charity and are not eligible to self assess. Those organisations will be taxable as well.
What this means in practise is that these organisations will have to either lodge an income tax return with the ATO or lodge what is known as a return not required, again with the ATO.
If the organisation is a non-profit sub entity, please do not submit a charity application or complete the NFP self review return. NFP sub entities only exist for GST purposes. They exist when a parent organisation decides to treat some of its individual branches or units as a separate entity for GST purposes. Because these sub entities only exist for GST purposes, they do not have any income tax reporting obligations. They do not need to apply for charity registration or complete the self review return.
To discuss if you sub entity should cancel its NFP self review reporting obligations, please contact the ATOs NFP advice line on 1300 130 248.
Stewart McMillan
If your organisation does meet the definition of a charity, the really important message is that you cannot self assess as income tax exempt. You must register as a charity with the ACNC and then be formally endorsed as income tax exempt by the ATO. And if you don't do that then you will be considered a taxable not-for-profit.
If you're not sure if you are a charity, we will go into a bit more detail about the eligibility criteria in this presentation. If you cannot resolve if you're charitable by the due date for lodging the not-for-profit self review to the ATO, please lodge the ATO self review return. In the self review question five will ask if you have any charitable purposes. You can select ‘unsure’ for this question and the ATO will contact you to provide guidance to help determine its charitable status.
If a group is already registered as a charity with the ACNC, the good news for you is that you are not affected by these changes. If you want to double check your registration or if you're not sure if you're already registered, you can head to the ACNC Charity Register. You'll be able to search by your organisation name or it's ABN and confirm if it's already registered.
If you are already registered and you want to check if you've been formally endorsed as income tax exempt or if you want to double check any of your charity tax concessions, you will also able to have a look at those on the Australian Business Register website. Again, they've got a search function where you'll be able to look up the name or ABN and you'll be able to confirm if you've already got income tax exemption endorsement.
So anyone who's already registered or you think might be registered, you can double check and if you're already registered already, you won't be affected.
For those of you who haven't registered already and think you may need to, we're now going to go through how to apply to register and break it down in a few simple steps for you. As an overview, the very first thing you'll need to do is ensure the organisation is actually eligible for charity registration. We'll go into the definition of what a charity is and who is eligible.
The next step you may need to do is review and update some of your information. We'll explain how to do that and what things you need to check for. Finally, before submitting your application, please make sure you've got all of your information handy. We'll outline what pieces of information you'll need for that application.
Then once you've got all those documents ready to go, you'll be able to submit an online application in the Charity Portal. Or if you're interested in submitting a bulk application, please contact us.
The first topic will be eligibility to register. I'm going to hand it back over to Vlad who's going to discuss the legal meaning of charity.
Vladimir Klendo
When we talk about charity we mean specifically the legal meaning of charity, not the dictionary meaning of charity. That is the meaning that has been established at law by the courts, as well as the statutory legislation such as the Charities Act.
So for an organisation to be registered as a charity it needs to be a not-for-profit entity. It needs to have only charitable purposes for the public benefit. It cannot operate for a secluded group of friends or members only. It needs to provide benefit to the public and charity cannot have any disqualifying purposes. This covers issues such as being opposed to public safety and public policy, promoting political candidates or political parties. A charity cannot be an individual political party or government entity.
But it can have multiple structures. So for example, the charity can be an unincorporated association, incorporated association or any other type of body corporate that will be acceptable, but not an individual, political party or a government entity.
Stewart McMillan
Now, as we've mentioned before, the key difference between a not-for-profit and a charity is having charitable purposes. To be registered as a charity, an organisation must have at least one charitable purpose. This is what your organisation has been set up to achieve. You may also think of it as your mission.
Again, a charitable purpose has a specific legal meaning that’s been developed over the years by courts in Parliament. There are a number of recognised charitable purposes and there are 12 specifically outlined in the Charities Act, such as advancing health, advancing social and public welfare and advancing education. You can find out more about the charitable purposes on our website.
To register, you will need to have a charitable purpose or purposes. You can have more than one. If people are not sure what their charitable purpose is or potentially if they fall into more than one category, what's the best way for people to assess which purpose they might fall into?
Vladimir Klendo
Well, the organisation purpose is its mission, what it has been established to do. The best way to go about finding out what the purpose is, is starting with the governing document. That is the rules or the constitution that establishes the organisation. Generally, those governing documents would be required to have a statement of objects. That is what the entity has been established to do, what it is set up to pursue.
For example, if an organisation has a charitable purpose of advancing the natural environment, it likely would have objects that are focused on promoting the natural environment through various means. It can include promoting sustainability or raising awareness about the natural environment in the community. Such objects would be in furtherance of the charitable purpose of advancing the natural environment.
That is the first step. The organisation would then need to further those purposes through its activities, that is the programs that the organisation undertakes. It's not enough to write a statement of objects in the governing document, it is important to have programs that actually further those objects. So going back to my earlier example, bringing awareness about the environment in the community would mean having programs that educate the community about the environment, having specific work on the ground in this space.
An organisation can conduct many different activities, but all of the activities should be furthering the charitable purpose or purposes. An organisation can cannot go outside the scope of a charitable purpose. If an organisation starts to undertake purposes that are not charitable, it will become non charitable and hence would not be eligible for the ACNC charity registration.
Stewart McMillan
Now we have gone through a couple of these points already but just to reiterate a few notes about charitable and non charitable purposes. So as Vlad’s discussed, you can have more than one charitable purpose. So that could be, for example, advancing health and advancing education, or advancing religion and advancing social or public welfare. You could have two different purposes, but if you have more than one purpose, they just both need to be charitable. That's the main message.
You can also be a charity and engage in advocacy. The main thing is that if you're engaging in advocacy, it must further a charitable purpose.
There are some groups that are generally not considered charitable, so that would include things like social clubs, sporting organisations and professional bodies. There can be some exemptions in those groups if they do have a recognised charitable purpose, but generally speaking they are not charitable and are not eligible to register with the ACNC.
If you do have non charitable purposes and those purposes don't further a charitable purpose, then you're unlikely to be registered as a charity. And again, as we've mentioned before, there are some disqualifying purposes. So you can't be promoting any unlawful activities and you can't promote or oppose any political parties.
And now there are a couple of additional requirements. Vlad, do you want to speak to those quickly?
Vladimir Klendo
Certainly, having charitable purpose is one of the most important components, but it is not the only component. As I mentioned earlier, charities are required to have an active ABN. If you're planning to apply for ACNC charity registration, I suggest you check with the Australian Business Register that your ABN is current and that it is active. And it is also reflective of the current legal name of the entity and the legal structure. Please make sure there is a bit of housekeeping that you do before you submit the ACNC charity application.
It is important to comply with the ACNC Governance Standards. We'll briefly talk about those. For the entities that operate overseas, you are also required to additionally comply with the ACNC External Conduct Standards.
Stewart McMillan
We won't go into the External Conduct Standards in detail now, but we'll just briefly touch on the Governance Standards. There are 6 standards which you can see up on the screen. They are a set of core minimum standards relating to charity governance, essentially how your organisation is to run. They require your group to remain charitable, operate lawfully and be run in an accountable and responsible way.
The Governance Standards are a set of high level principles, so they're not precise rules. It's not prescriptive about how each organisation meets these standards, but you will need to consider what makes sense for your organisation when striving to meet these standards. We won't go into too much detail here, but we'll just have a look at a couple of them.
Standard one is about having a charitable purpose and a not-for-profit nature. We've already touched on that. Another standard that you should be aware of is accountability to members. That could happen in a few different ways depending on what's appropriate for your charity. For example, you might hold an AGM, an annual general meeting each year, but again, it would depend on the nature of the charity, what your requirements are and what makes sense for your group.
Another standard that it's good to draw your attention to is standard 5, which is duties of Responsible People. Your Responsible People will be your board or committee members or trustees. They're the people who are responsible for running the organisation. It's important to remember that all those Responsible People have duties to the charity. That includes managing finances responsibly, not misusing their position and disclosing conflicts of interest.
And now Vlad, is there anything else people need to be aware of when it comes to the standards here?
Vladimir Klendo
I want to again clarify that these are not necessarily prescriptive. There's no set formula about how to meet the Governance Standards. A lot of organisations choose to put a lot of this information into their governing document. Some organisations will choose to use standalone policies or procedures. That is also acceptable. You'll need to look at the details of your particular organisation to see what is the best way to go about meeting Governance Standards.
I would recommend the potential applicants to have a look at the ACNC website, which covers Governance Standards in more detail than we're able to do in this presentation.
Stewart McMillan
Yes, that's right. If you head to our website, you'll be able to find examples of how to meet those standards and a couple of case studies to help clarify what that might look like for different types of organisations.
Now that covers some of the eligibility criteria for who can register. If you've listened to that and you think you may be eligible, but potentially you need to make some changes to your organisation first, such as making sure you've got charitable purposes in your governing document, we'll now go into a bit more information about what that actually means and what you need to do.
As a quick reminder, if you do think you need to make some updates to your documents, please make sure you review all your information and make those updates before you apply to the ACNC. It's important just to make sure everything's in order and up to date before you start your application.
Now, first up, we'll look up, we'll look at the ABN. That's your Australian Business Number. You'll need to have an active ABN, as we mentioned before, to register as a charity. If you're not sure if your ABN is active or if you want to double check if you already have one, you can head to the ABR, that's the Australian Business Register. They have an ABN Look up function, the link’s up on the screen and you'll be able to search either by your name or ABN.
It's important to make sure that the name associated with your organisation ABN is the correct legal name. Things may have changed over the years, you may have slightly changed your name or you may have merged with another group and that's led to subsequent changes. Please make sure that it is your current legal name.
You also need to make sure that the entity type listed for your ABN matches your legal structure. Now we're going to entity type and what that means a bit more in just a minute. But again, it's just really important that all of the documents match and that everything is consistent. If you do notice that something's out of date or something's changed or is incorrect, please make sure you contact the ABR to update those details first.
Now on to legal structure. Vlad, are you able to explain a little bit more about what a legal structure is and what charities need to know?
Vladimir Klendo
Well, there are many different structures that charities can use. They can be unincorporated associations, incorporated associations, Indigenous corporations or companies limited by guarantee. You can choose the structure that suits the organisation as long as you have a specific governing document and specific procedures in place for your particular legal structure.
However, individuals cannot be a charity, so the organisation needs to be a body corporate or be an incorporated association or be a trust. It needs to have a legal structure in place.
If you're submitting information to us as part of your application to register as a charity, you will need to provide details about the legal structure of the organisation.
Stewart McMillan
That's right. As we mentioned before, it's really important that the entity type linked to your ABN corresponds with its legal structure. If you go into the ABR’s ABN Look up and type in your organisation, it will have an entity type listed.
We've got it up on the screen, the corresponding legal structure for some of the most common structures we see with charities.
If you go and look up your ABN and it says ‘other incorporated entity’, the legal structure associated with that would likely be a state or territory incorporated association. It can also include organisations that are registered with ORIC, that's the Office of the Registrar of Indigenous Corporations, and it can also include some P&C groups as well – that would be other incorporated entities.
Now if the entity type listed is ‘other unincorporated entity’, that will be an unincorporated association. ‘Public company’ would be a company limited by guarantee as the legal structure. And very simple one at the end – if the entity type is ‘co-operative’, the corresponding legal structure will also be co-operative.
As we've mentioned a few times before, your organisation needs to have a governing document. This is the formal document that sets out your organisation’s charitable purposes. It will set out that it's a not-for-profit organisation and it will outline how your governing body, that’s your board or committee, will make decisions and consult members.
One important thing to note is that if you are applying to register your own group as a charity, you need to have a governing document for your group. If your organisation is a member of a peak body, you still need to have a governing document specifically for your organisation. You cannot use the peak bodies governing document.
We've got a couple of notes up here about things that are important to include in your governing document. So again, your organisation name, your objects and a not-for-profit and winding up clause. And again, make sure that your governing document reflects your correct legal structure.
One of the main messages here when you're reviewing all of the pieces of information is making sure everything is consistent. So when you're doing your review of all your documents, please make sure your legal name is correct and it's the same in both your governing document and associated with your ABN, and your legal structure is the same for your governing document and matches your ABN entity type.
Now, Vlad, can you explain a little bit more about what objects are in your governing document?
Vladimir Klendo
Objects should be descriptive of the purposes for which the organisation has been set up. That is the mission of the organisation. So in terms of the governing document, it should have a clear statement of objects that is focused on the charitable purpose of the organisation, or charitable purposes if there are multiple purposes that the organisation is pursuing.
We do have templates available on the ACNC website, which we'll talk about more in a moment. If your entity does have a governing document or does not have a governing document, particularly if you are an unincorporated association, you can use one of the templates from the ACNC website. We also have a few templates for statements of objects that are applicable for various charitable purposes. That may be a benefit to you to have a browse of the ACNC website and figure out if there are statements of objects that you can utilise if you don't have one written up already.
Stewart McMillan
The other thing that's really important to include in your governing document is the not-for-profit clause which basically establishes that the organisation is run with a not-for-profit nature. The clause will explain how your organisation’s assets and income are used. They need to be used to further the charitable purpose and not for the profit of individual members or for anyone running the organisation.
The other important clause is the dissolution or winding up clause – that will outline what happens if your organisation does dissolve or wind up. So if it stops operating, what that clause will essentially outline is that if you are a registered charity and then you stop operating, you wind up your operations, any remaining assets that the charity has needs to go to another similar charity. If your organisation has been operating and then it decides to wind up, but you've still got some money in the bank, any of that money that you've got leftover or other resources need to go to another registered charity. Again, that can't be kept for any personal profit, it needs to be given to another charity.
After all that information about governing documents, you may need to make some updates. It's completely fine if you do need to make some changes, but before you're ready to apply, please make sure you're doing that before you start your application.
If you do have another regulator, for example, if you're an incorporated association and you have a state or territory regulator, you will need to make sure you're following any processes that they have. Generally, that will mean that if you make an update to your governing document, you will just need to also send them an updated version for their records.
Your own organisation’s governing document may also have some requirements that you need to follow up on if you're making updates or changes – please be mindful of those. That may look like having a notice period, so you may need to tell your members about a change, or to notify them of the meeting about the governing document changes before you are able to actually make any amendments to your governing document.
So again, you can make updates to prepare for charity registration, but just make sure you're following any governance or legislative requirements. And as we've mentioned before, we do have a lot of templates that are available for your use. We have sample charitable purpose or object clauses on our website. You can have a look through that list and see if there's something there is applicable for your group.
It may be that there's an example clause that perfectly represents your organisation, what your organisation does, in which case that's great. But you may just want to have a look at all those examples and use them as a bit of a guide. If your organisation does something a little bit different, you can use those examples to inform your group as you're writing your objects.
We also have example clauses for your not-for-profit and winding up clauses – those are on our website too. For companies limited by guarantee and unincorporated associations, there is also a full governing document template for both of those legal structures on our website for your use. Please review the document before you adopt it as your governing document, as there may be something specific to your organisation that you need to include in there. You also need to make sure you're putting in your own purposes or objects in your governing document if you use those templates.
Now, for anyone who's an incorporated association, all of the state and territory regulators will also have a model rules document. So again, you can use that as your template, making sure you're adding in your purposes and reviewing it to make sure it's appropriate for your specific group.
Vladimir Klendo
It is crucial to be mindful of the legal structure of your particular organisation. For example, if your legal structure is a public company limited by guarantee, please do not try to adopt the template for an unincorporated association because unfortunately, if we do receive an application with a governing document that does not reflect the actual structure of your entity, we will not be able to register the organisation until that is amended appropriately. Please review the structure and please make sure that when you are adopting one of the templates, it is reflective of the structure of the organisation.
Stewart McMillan
Yes, that's right. And it really comes back to reviewing all your information and making sure that everything matches up. So again, making sure you're using the right governing document for your legal structure, that your ABN entity type matches your legal structure, and just checking everything does match up before you apply. Please review all those documents and paces of information before you start your application.
And if you do notice that something does need to be updated, have a look at all of those resources. We've got information up on our website and all of these templates for your use, so please use those if you do need to make any changes.
Now let's say you've gotten to the point where you've updated your governing document, you've checked your ABN is active, everything is ready to go, and you want to prepare for your ACNC charity application. The really good news is that there is no fee to apply to register as a charity. It's free to apply and you can do it online in the Charity Portal, so it's a nice straightforward process.
There is also an option for a group of organisations to apply in bulk. This is limited to groups of non-complex organisations that are similar to each other. So peak bodies wishing to register 10 or more of their member groups can submit a bulk application. This is done in a simplified Excel spreadsheet rather than online in the Charity Portal. A dedicated ACNC contact will support the peak body through its registration process. If you want to know if your peak body is eligible to lodge in bulk on behalf of its member organisations, please contact our Registration team by emailing them at registration@acnc.gov.au.
Up on the screen, you'll be able to see information you need to provide. This information is similar in both the online individual form and the bulk form, although the bulk form is shorter and has a different submission process.
We're not going into all the information in a lot of detail, and some of these such as legal structure and governing document, we've already touched on, but we will just elaborate on a couple of these topics that are in the application. Vlad, are you able to explain what charity subtypes are for us?
Vladimir Klendo
Subtypes are basically reflective of the purposes of the entity. If your organisation pursues the charitable purposes of advancing health or advancing education for example, then it would be registered the charity subtypes of advancing health or advancing education. It is not actually obligatory for the charity to actually apply for a subtype, however it is obligatory to have a charitable purpose.
The charity subtype is basically a reflection of what the entity has been set up to do. Your entity can apply for multiple charity subtypes, but I would discourage anyone from applying for charity subtypes that don't actually reflect the purposes of the organisation. Whichever subtypes you choose, please make sure that they're reflective of the purposes for which the organisation has been set up, which is reflective of the objects as we discussed, and also the activities support the purposes the organisation has been set up for.
This leads me to the next important point. The activities that the organisation undertakes should be in furtherance of the charitable purpose. An organisation can conduct various activities. You can have dozens or hundreds of programs if you like, but all of those activities should be furthering the charitable purpose.
To give an example of fundraising, it is totally acceptable for organisations to have some sort of a commercial activity or an operation like an op shop or some other fundraiser to gain funds for the organisation to support its charitable purpose. Operating an op shop in itself or having a fundraiser in itself is not a charitable purpose, but if you're using that activity solely to get funds for the organisation that you then input into charitable purposes, then those activities would be in furtherance of the charitable purpose.
Stewart McMillan
Another section of the application form will be about your Responsible People. As we mentioned before, those will be your board or committee members or trustees. In your application, you'll be asked to provide details for all of your Responsible People. You'll be asked for their name and date of birth and contact information, as well as their position and when they started as a Responsible Person with your charity. We do ask for all of that information in the form, but the only piece of information that will be published on the Register is the person's name and their position.
When you're filling out the section of the form, it's important that your organisation is meeting the minimum required number of Responsible People. Now, for certain legal structures, there is a minimum number required by legislation and there may also be a minimum required in your governing document. It's really important that you're meeting those requirements, so please double check your legal structure and your governing document for any specific requirements.
We have some information on our Responsible People fact sheet up on the website. We've got the link on the screen right now. You'll be able to see the legislative minimum number and if you're using the model rules in your state or territory, you'll be able to see what is listed as the minimum number in the rules. There is a table where you can see how many Responsible People you are required to have.
Another question that you'll have in the form is your date of registration. You can request to backdate your registration, so that would be to apply for charity registration from an earlier date. Please keep in mind you can only register on or after the latest of the dates up on the screen. It needs to be after your organisation was established, your ABN was made active and you met the requirements to register as a charity. The last date listed up there is the 3rd of December 2012. That's when the ACNC was established. You can't register as a charity with the ACNC before then because we didn't exist yet.
When it comes to these recent changes that we've been discussing today, the ATO has informed us that they intend to take a practical compliance approach. That means that they are focusing their resources on ensuring that organisations are assessing their income tax exemption correctly from the 1st of July 2023, so for the 2023-2024 financial year. The ATO may take compliance action if they have identified deliberate tax evasion or fraudulent behaviour prior to that financial year. But they have informed us that their focus is on the correct assessment of income tax from the 1st of July 2023.
If your organisation was previously registered as a charity with the ACNC, but its registration was revoked, you can apply to register again. If this is the case, you should consider applying to register from the date that the charity was revoked. Before you register again, you must address any issues that led to revocation. For example, if any charity registration was revoked for not meeting reporting obligations, you need to submit any overdue reporting first.
Vladimir Klendo
An important thing to note when you're considering your charity application is that you can apply for charity tax concessions, including income tax exemption, in your ACNC charity registration application. The ACNC does not endorse organisations with charity tax concessions, but how it works is you report that information to us in the charity application and, if your organisation is registered as a charity, we'll pass on the information to the ATO.
The ATO will then be able to assess that information and endorse your charity as income tax exempt. There are a few different charity tax concessions, although not all of them will be available or appropriate for all types of charities. You can find some information about the different concessions on our website and the ATO website, but the main one that is relevant for this webinar is income tax exemption.
So again, when you fill in out your charity application form, make sure you select that you want to apply for income tax exemption in that section of the form. Then, once registered, the ATO will receive that information and they'll be able to formally endorse you as income tax exempt.
Stewart McMillan
I know that's obviously a lot of information to go through, but we do have a couple of quick tips for your application. It's important that your application is completed correctly so we're able to assess it and determine if you're eligible to register as a charity. In the thousands of applications we get each year, there are some common things that we see applications get rejected for, or that requires us to contact organisations to provide us with some further information. Vlad, are you able to explain some of the common errors that you see, or the common mistakes that people are making?
Vladimir Klendo
Certainly, as we have already covered, it is important to have a governing document. This covers unincorporated associations – even if you have an unincorporated association structure, for purposes of the ACNC charity registration, we do require the organisation to submit a governing document that will contain all the factors that we've outlined previously, such as the governance structure, the statement of objects not-for-profit and dissolution clauses.
This needs to be a finalised governing document, so please don't submit a draft version of the document. It needs to be a document that the organisation has actually formally adopted. The governing document should contain those areas that we've covered, so please don't send in a document that has sections missing, particularly the not-for-profit clause and the statement of objects. If you do submit the governing document that does not contain the relevant sections, we will not be able to proceed with the registration. In order for the process to be the most efficient and effective, it is best to have everything in place before you submit your ACNC application.
It is very important to submit the correct number of Responsible People. Please provide the correct number as outlined in the governing document. For some organisations, there are statutory obligations to have a certain number of committee members or directors. Your governing document may also list the minimum number of committee members or directors that your organisation is required to have, so please list that number and provide the details of those committee members or the directors. Again, if your governing document, for example, requires a minimum of five committee members and you only provide details of one or two, we won't be able to proceed with the application until we get at least the minimum number. All of your committee members should be listed on the application and the details for them, such as the name and the contact details.
As I alluded to earlier, please only select subtypes that actually represent the charitable purposes that your entity actively pursues. In terms of the Governance Standards assessment, again, we're not going to cover too much detail about the Governance Standards, but it is important for the Responsible People of the charity to have a good process in place to manage conflicts of interest and have a process for managing finances, that is reporting, bookkeeping, accountability in terms of your financial statements.
Stewart McMillan
Once you are registered as a charity, there are some ongoing obligations. What are a few things that charities need to do on an ongoing basis to maintain their registration?
Vladimir Klendo
Well, first and foremost, it is important for the charity to keep pursuing their charitable purposes that are for the public benefit. It is important in terms of activities that the organisation takes, they should solely be focused on the charitable purposes that it is actually set up to do.
If there has been a change in the operations, if an entity decided to pursue other purposes, it should notify the ACNC about a change in the objects after amending the governing document formally. You may also consider changing the subtypes that organisation is registered with. Subtypes don't have to be locked in stone, they're reflective of the charitable purposes of the organisation at the moment. If in the future your purposes change, the organisation can apply to add or remove the charity subtypes.
It is really important to lodge Annual Information Statements, which includes information about the charity’s programs and finances. The financial reporting obligations depend on the size of the organisation. We consider organisations that have an annual revenue of $500,000 a year or less to be small. These organisations are not required to have verified reviews or audited financial statements. However, small charities are still required to lodge Annual Information Statements since this provides information about their yearly activities.
It is important to continue to comply with the Governance Standards and the External Conduct Standards, if they're applicable, and of course, making sure that the ABN remains active and current. Those are the kinds of things that charities need to keep an eye out for to make sure that the charity registration entitlement is not affected.
Stewart McMillan
That's right. It's really important that if you do register with us, make sure you are keeping up with all these ongoing obligations to ensure you maintain your registration. By maintaining your registration as a charity, you'll also maintain your entitlement to charity tax concessions and income tax exemption.
Now, that was a lot of information to get through, and we really do appreciate everyone listening in to all of this guidance about registering as a charity, but what exactly do you need to be doing right now? The very first thing to be doing is checking your eligibility to register. We've gone through a lot of details in this webinar, or you can also visit our website for more information about who's eligible to register. Once you've assessed your eligibility, again, as we discussed, please make sure you're reviewing and updating all of your documents. Please make sure you've checked everything first before you apply, just in case you do need to make any changes.
Once you've done all of that, you'll be ready to apply for charity registration. That's done online in the ACNC Charity Portal, or if you're a peak body interested in submitting a bulk application on behalf of your member organisations, please reach out to our Registration team.
Now that brings us to the end of the main content for our presentation. Thank you so much for listening and if you need any further assistance, please don't hesitate to get in contact with us. Thank you.