What are the consequences of not having lodged a self-assessing income tax exemption annual review by 31 October?

Question

Our organisation has historically operated as a (‘NFP’) income tax exempt sporting club.

We recently learned about the ATO’s new requirement for us to undertake an annual self-assessment review of our income tax exemption eligibility. Our financial year ends on 30 June and we understand the assessment in relation to the year ended 30 June 2024 was due by 31 October 2024.

We have not completed the review.

What are the consequences of not completing the self-assessment by 31 October?

Answer

Good news – due to this being a new requirement, the ATO has granted a concession extending the deadline in relation to year ending 30 June 2024 from 31 October 2024 to 31 March 2025 (refer ATO website here for extension) .

As a NFP sporting club, your organisation is subject to the new self-assessment rules along with other income tax exempt self-assessing NFP organisations such as community service organisations.

The new self-assessment obligation arises under the Taxation Laws (Requirement to Lodge a Return for the 2024 Year) Instrument 2024 and Legislative Instrument LI 2024/15.

Under the law, the new self-assessments are treated as ‘annual returns’ with obligations similar to other annual returns (such as income tax annual returns). The likely consequences of failing to lodge the new self-assessment are penalties under the Taxation Administration Act 1953. The base penalty for failure to lodge the new self-assessment (if imposed) is determined in penalty units (currently a penalty unit is $330). The number of penalty units will vary based on how long the return is outstanding (with a maximum of 5 penalty units applicable).

However, failure to lodge the self-review does not mean that your organisation is not eligible for income tax exemption in a particular year. Provided your organisation meets the eligibility criteria for a particular self-assessing income tax exemption category (such as the sports exemption) you will remain exempt even where you do not lodge the annual review.  

We recommend you complete the self-assessment review for the year ended June 2024 before the extended deadline of 31 March 2025.

For future years, the lodgement deadline will likely be 31 October (for a taxpayer with a 30 June year-end).

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