ATO proactive on NFP tax issues

THE Australian Taxation Office has developed a telephone help-line initiative to assist the 5,000 new not-for-profit organisations expected to register this year better understand their tax obligations.

In coming months, the ATO will contact an undisclosed number of charities that have recently obtained an Australian business number, and do not use the services of a tax agent.

ATO assistant commissioner Michael Hardy said while the tax office had always offered assistance to inform taxpayers of their obligations, the phone initiative was a proactive step to engage with new registrants and to help them understand how the tax and superannuation systems worked.

The program comes after a crackdown by the ATO on the deliberate misuse of tax concessions in the not-for-profit sector.

Under that review, 200 charities and benevolent institutions are to be investigated by the end of the 2009-10 financial year to determine their continued eligibility for concessions, including deductible gift recipient status.

However, Mr Hardy said small or new not-for-profits mostly simply failed to understand what their tax requirements were and made mistakes when lodging returns.

“Our experience is that small not-for-profit organisations without access to professional advice want to do the right thing but are prone to make simple mistakes,” Mr Hardy told WA Business News.

“Once they realise they have made a mistake they can become very anxious if they don’t know how to correct it or where to get help.

“This initiative is designed to help small not-for-profit organisations understand the basics to meet their tax and super obligations, to give them confidence about getting things right and to let them know they can always ask the ATO for help.”

The ATO will make phone contact with a sample of new ABN applicants that indicate they are not-for-profit and not represented by a specified tax agent.

The exact number of organisations to be contacted depends upon how many organisations fall into the category of being not-for-profit and without a tax agent.

Mr Hardy said tax obligations varied based on the type of organisation, with some “simple” not-for-profit companies exempt from income tax if they had less than $416 of taxable income.

Other types of organisations need to apply to the ATO to be endorsed to be tax exempt under one of the categories within the law.

The phone contact service, which will run until June, will inform newly registered NFPs about these various categories and what other concessions or obligations are attached to them.

The initiative will cover topics tailored to the circumstances of the applicant and will include legal requirements of being not-for-profit, including: appropriate winding-up clauses for their enterprise; methods of good record keeping, bank accounts and tax file numbers; basic business accounting; and key dates for when forms or payments are due.

NFPs will also receive information about registration thresholds for GST registration, how to complete a business activity statement, , as well as information on superannuation and fringe benefits tax obligations for those with employees.

Accountants spoken to by WA Business News said common errors made by NFPs included incorrectly self-assessing as income-tax exempt, claiming an advertising entitlement to receive tax-deductible donations when not having DGR status, and incorrectly calculating taxable income.