Non-profits and charities can avoid penalties with annual self-reviews
It is common place for most non-profit and charity organisations that along with the end of the calendar year comes a change of office bearers. It is at this point that it is necessary to be reminded of the importance of undertaking regular self-reviews. These reviews should be predominantly focused on the endorsement status of the charity as even the slightest change in circumstances can affect eligibility and consequently result in unwanted penalties.
It is strongly encouraged that non-profit and charity organisations not only commit to these regular reviews but that each review is accurately recorded in order to allow for reference and referral should it become necessary at any point in the future. The recording of reviews also helps to provide an accurate illustration of where the business is situated at this point in time and can help to identify areas that are performing well along with any areas that may require some extra attention. Regular reviews can help to ensure that any problems can be swiftly identified and action taken to remedy them before it gets worse or is too late to be rectified at all.
Apart from using the reviews to report on the performance of the business, there are legal and compliance obligations that need to be constantly checked. Penalties can be applied to organisations that are found to be non-compliant with their charity status obligations or are misusing their concessions.
The main reasons that non-profit and charity organisations should undertake regular self-reviews are:
- To avoid unnecessary and unforseen tax problems. It is not widely known that a charity organisation’s tax exemption is not a permanent arrangement. An organisation’s eligibility for endorsement and subsequent income tax exemption can be affected by any changes to its purpose or operations.
- Organisations are legally obliged to inform the tax office if their conditions warrant that they are no longer entitled to the endorsement status.
- The tax office conducts annual reviews of selected organisations to ascertain whether they are still eligible for their entitlement and may impose penalties on any organisations that are found to be operating non-compliantly.
If a non-profit or charity organisation becomes no longer entitled to their endorsement they should let the tax office know in writing. It is important to conduct reviews annually and at any other time that the organisation experiences a major change in its structure or operations.
At The Quinn Group, as lawyers and accountants we are able to assist non-profit and charity organisations with all of their compliance obligations and optimal review procedures. We are also able to conduct external audits, which is another legal requirement of non-profit and charity organisations. If we can assist you with any area of your organisation please contact us on 1300 QUINNS or click here to submit an online enquiry.