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Income tax

Tax-exempt status

The income tax law provides that certain types of charities and non-profit clubs, societies and associations are exempt from paying income tax. Generally, this exemption is not automatic.  There is an endorsement process for charities and certain tax-exempt funds. There is also the option for some non-profit organisations to self-assess their income tax exemption, but in practice it is always desirable that you seek ATO approval for your exemption so as to minimise the risk of penalties etc.

Generally exemptions apply to:

  • Charities, which need to be registered with the Australian Charities and Not-for-Profit Commission, and then endorsed by the ATO
  • Community service organisations
  • Other categories of organisations specified in the Income Tax Assessment Act, for example:
  • employer/employee associations and trade unions;
  • public hospitals, not-for-profit hospitals and not-for-profit medical and hospital benefit entities;
  • not-for-profit societies or associations established to promote the development of primary and secondary resources and tourism; and
  • societies, associations or clubs established for the encouragement of animal racing, art, a game or sport, literature, or music.

If you are income tax exempt you do not need to pay income tax or lodge income tax returns (unless specifically requested).

To find out more about income tax exemption or the processes for being exempt, contact the Australian Charities and Not-for-profit Commission on 1322 62 or the ATO on 1300 130 248.