Clubs – Update on new self-review requirement for income tax exemption
From 1 July 2023, clubs seeking to maintain their income tax exempt status will be required to lodge an online Annual Self-Review Form with the ATO (Australian Tax Office).
In the 2021 Federal Budget, the former Government announced that it was providing $1.9m to build an online system to enhance the transparency of income tax exemptions claimed by Not-for-profits (NFPs). From 1 July 2023, NFPs’ seeking to maintain their income tax exempt status will be required to lodge an online Annual Self-Review Form. This is part of the ATO’s recently revised guidance on the games and sports income tax exemption for not-for-profit clubs under Tax Ruling 2022/2.
SW has liaised with the ATO and can confirm that this announcement is still expected to be implemented.
Annual Self-Review Form
The ATO has confirmed the following details:
The first return will need to be lodged for the 2023–24 income year, with those clubs with a 30 June year end being the first required to lodge. This means the earliest anyone will be required to submit a return is 1 July 2024.
Who is required to lodge?
Only self-assessing income tax exempt entities (e.g. sporting clubs) with an active ABN are required to lodge a return under the new self-assessing reporting arrangements. For those clubs applying the principles of mutuality as to their income tax obligations, there is no change to existing income tax return lodgement processes.
Entities that do not hold an active ABN, will not be required to lodge a return or satisfy ongoing ABN registration requirements.
Are there additional obligations?
The two additional obligations for ongoing ABN registration are:
- the obligation to comply with income tax return lodgement requirements, and
- the obligation to update the accuracy of details on the Australian Business Register (ABR), annually.
It is intended that the return for self-assessing income tax exempt entities will collect the information required to satisfy the new ABN requirements, without the need for these entities to provide further information.
What information does the Annual Self-Review Form need to include?
The return is not an income tax return but rather a form containing the information that a club would ordinarily use for self-assessing eligibility for income tax exemption on a yearly basis.
The form needs to satisfy three elements:
- Entitlement to income tax exemption
- Basis for entitlement (category), and
- Whether all requirements are being met.
How to prepare for the new reporting regime
There are 3 things your club can do to prepare for the new reporting regime:
- Update your contact details with the ATO. It’s an ABN registration requirement to keep your contact details current and it also means you’ll receive important information about your tax and super obligations.
- Use the ATO worksheets to review your eligibility for an income tax exemption.
- Stay informed.
How can SW help?
If you would like to discuss how to best prepare for the new Annual Self-Review reporting regime and/or broader eligibility for income tax exemptions, please contact us.