Federal Budget 2021-22: Government announces new reporting regime for not-for-profit sporting organisations

By Martin Ross and Frank Hinoporos

In the 2021-22 Federal Budget, the Government announced reforms that will apply to the administration of non-charitable not-for-profit organisations that rely on a self-assessed income tax exemption (‘self-assessors’). This reform will apply to sporting organisations that are income tax exempt and eligible to self-assess.

From 1 July 2023, self-assessors with an active ABN will be subjected to greater scrutiny and more onerous reporting obligations, including an obligation to lodge an annual self-review return in order to access an income tax exemption.

Currently, self-assessors are under no obligation to report to the ATO or the ACNC on operational or financial matters. This is different to ACNC registered charities. There is a general obligation on these self-assessors to monitor and document the basis on which they rely on a self-assessed category of income tax exemption. In our experience, the level of rigour applied to this self-assessment and evaluation process can be varied.

From 2022-23, the ATO has been funded to build an online portal for self-assessors with an active ABN to submit their annual self-review form. We anticipate the self-review form will require self-assessors to report on qualitative and quantitative factors that support their ongoing eligibility to self-assess for income tax exemption.

Failure to lodge a self-review form may result in the self-assessor being ineligible for an income tax exemption and liable for penalties under the ATO’s penalty framework.

The information gathered and analysed through the reporting regime will allow the ATO to target and potentially challenge the continued eligibility for income tax exemption for some organisations, including through audit, review and ‘show cause’ processes.

We recommend that any sporting organisation that is a self-assessor start preparing for the new compliance and reporting regime now by evaluating their eligibility for ongoing self-assessed income tax exemption, gathering and testing their qualitative and quantitative data and seeking specialist compliance advice.