What type of NFP is your organisation?

What type of NFP is your organisation?

What type of NFP is your organisation?

There are two types of NFPs. These are charities and other NFPs. Depending on the type of NFP, your organisation may be eligible for a range of tax concessions.

NFP organisations (including charities) operate in many areas of society. They can include:

church schools
churches
community child care centres
cultural organisations
environmental protection organisations
neighbourhood associations
public museums and libraries
scholarship funds
scientific organisations
scouts
sports clubs
surf lifesaving clubs
traditional service clubs.

First, you should work out whether your organisation qualifies as an NFP.

 

Is your organisation an NFP?

It is expected that organisations seeking access to tax concessions (by endorsement or self-assessment) will have governing documents.

An NFP’s governing documents are the formal documents that set out:

the organisation’s purpose
the organisations not-for-profit character
the way the organisation is governed, operates and makes decisions.

Your organisation’s governing documents may be called its:

rules or articles of association
constitution
rule book
deed of trust.

We will accept your organisation as an NFP if these governing documents prevent you from distributing profits or assets for the benefit of specific people – both while it operates and when it winds up.

Your organisation should have sufficient controls in place to ensure that members and other private persons do not receive the property or assets of the organisation (other than as reimbursement for services they have provided or for expenses incurred on behalf of the organisation)

These documents should contain clauses that are acceptable to us as showing the organisation’s NFP character.

Example

The following example would be acceptable:

Not-for-profit clause

‘The assets and income of the organisation shall be applied solely in furtherance of its above-mentioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.’

Dissolution clause

‘In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.’

End of example

Is your organisation a charity?

Generally, charities are eligible for more concessions than other NFPs.

To be a charity, your organisation must:

be a not-for-profit
have a charitable purpose
be for the public benefit (other than where the charitable purpose is the relief of poverty).

Examples of charities include:

religious groups
not-for-profit aged care homes
homeless shelters
disability service organisations
universities and colleges
animal welfare organisations and
artistic or cultural groups.

Charities can be further broken down into the following types:

public benevolent institutions (PBIs)
health promotion charities (HPCs)
other charities.

PBIs and HPCs receive wider tax concessions than other charities.

 

Other NFPs that are not charities

NFP organisations that are not charities are able to self-assess whether they are entitled to certain tax concessions, such as income tax exemption.

Examples NFP organisations that are not charities are:

most sporting and recreational clubs
community service organisations
professional and business associations
social organisations.

If your organisation is able to self-assess, it does not need to be endorsed by us to access the concession.

Many NFP organisations are taxable, but may be entitled to special rules for calculating taxable income, lodging income tax returns and special rates of tax.

Australian Taxation Office
(ATO)