Types of tax concessions

All charities that register with the ACNC and some incorporated associations can apply for the following tax concessions.

Income tax exemptions

Income tax applies to any taxable income received by an organisation. All charities registered with the ACNC may apply for income tax exemption, which means your charity may not have to pay income tax.

Only certain types of not-for-profit organisations are exempt from paying income tax. Charities and PBIs are generally exempt from income tax, but this is not automatic. As already noted, both charities and PBIs are required to apply to the ATO for endorsement as a tax concession charity. Endorsement as a tax concession charity provides exemption from income tax, as well as several other tax concessions (referred to in the following pages).

Your association needs an Australian Business Number (ABN) to apply for endorsement. If it already has an ABN, then you can request an endorsement application pack from the ATO on 1300 130 248, or visit the ATO website.

If your association does not have an ABN, you will need to apply for one - details are provided at Registering with the ATO. On the ABN application, you can advise the ATO that your organisation wants to be endorsed and the Tax Office will forward the endorsement application pack.

An incorporated association that is not a charity or PBI may still be exempt from income tax under another category. In this case, the association does not need to apply to the ATO, but can conduct its own assessment (ie self-assess) to determine whether or not it is eligible for tax exemption.

For an exemption to apply, the association would need to fall within one of the following categories, each with its own further requirements:

  • community service organisations;
  • cultural organisations;
  • educational organisations;
  • employment organisations;
  • health organisations;
  • religious organisations;
  • resource development organisations;
  • scientific organisations; and
  • sporting organisations.

In addition, the association may also have to pass at least one of these three tests:

  • have a physical presence in Australia and conduct its activities "principally" in Australia;
  • qualify to be endorsed as a deductible gift recipient; or
  • be prescribed by law in the income tax regulations.

If an association is exempt under one of these categories, it will not have to pay income tax nor lodge income tax returns. If the association does not qualify for exemption, then it is taxable and must lodge tax returns each year. However, even taxable not-for-profit associations may be entitled to special rules for calculating taxable income, lodging their tax returns and special rates of tax.

The ATO website also has useful information about self-assessment.