Bookkeeping for Not-for-Profits in Australia: Key Rules and Compliance

Last reviewed against current ATO guidance: 26 Jan 2027. Always confirm current thresholds, rates, and dates at ato.gov.au.

Not-for-profit (NFP) organisations represent a significant proportion of the Australian bookkeeping market, and they come with compliance requirements that differ meaningfully from commercial entities. A bookkeeper moving into NFP work for the first time — or a practice taking on an NFP client — needs to understand the distinct regulatory framework before diving into the chart of accounts.

The Australian Charities and Not-for-profits Commission (ACNC)

The ACNC is the national regulator for charities. NFPs that are registered charities must:

• Maintain the ACNC register entry (annual information statement)
• Meet ongoing governance standards
• Lodge annual financial reports (for medium and large charities)

Size thresholds for financial reporting:

• Small charities (annual revenue under $500,000): No external audit required; simplified reporting
• Medium charities ($500,000–$3M): Must provide financial statements; audit or review required
• Large charities (over $3M): Full financial statements; independent audit required

Revenue includes grants, donations, membership fees, and trading income. The ACNC definition of revenue can differ from the accounting definition.

Tax-exempt status

Most charities are exempt from income tax under subdivision 50-B of the ITAA 1997. The exemption is not automatic — the entity must be endorsed by the ATO as a tax-exempt entity.

However, tax exemption does not mean:

• Exemption from GST (most charities are still GST-registered and must lodge BAS)
• Exemption from payroll tax (state-specific exemptions exist, but registration and annual reporting still applies)
• Exemption from FBT (some NFP-specific FBT concessions exist, including the FBT rebate and salary packaging caps)

DGR status: the bookkeeping implications

Deductible Gift Recipient (DGR) status allows donors to claim a tax deduction for gifts. Not all charities have DGR status — it must be specifically applied for.

DGR status has direct bookkeeping implications:

• Gifts vs. payments: Only genuine gifts (no benefit received in return) are tax-deductible for the donor. Payments where the donor receives something of value (event tickets, goods) must be accounted for separately — the deductible portion is the gift minus the market value of the benefit received.
• Separate fund accounts: Many DGR categories require a separate fund to be maintained. The fund must be kept separate from general operating funds, and grants from the fund must be tracked against the fund purposes.
• Annual fund reporting: ACNC and ATO may require reporting on the deductible gift fund separately from the broader organisation.

The chart of accounts for NFPs

NFP accounting uses fund accounting — the concept that different pools of funds are restricted to specific purposes. A charity may have:

• Unrestricted funds: Available for any purpose the board approves
• Restricted funds: Donated or granted for a specific purpose (e.g., a bequest for equipment, a grant for a specific program)
• Endowment funds: Capital must be preserved; only income is available for expenditure

The chart of accounts should reflect these fund distinctions. In practice, this means separate revenue and expense codes for each program or fund, so the financial statements show accountability by fund rather than just a consolidated P&L.

Grants management and acquittal reporting

Many NFP organisations receive government or foundation grants that require acquittal reporting — a report demonstrating that the grant funds were spent in accordance with the grant agreement.

Bookkeeping for grants must:

1. Separate grant income from other income
2. Track expenditure against each grant using project codes or cost centre allocation
3. Capture any unspent grant funds (which may need to be returned or held in deferred revenue)
4. Produce a grant expenditure report at acquittal time

Mixing grant funds with general operating funds makes acquittal reporting extremely difficult and can create compliance risk if the grant agreement requires separation.

GST concessions for NFPs

NFPs have access to several GST concessions:

• Reduced input tax credit: Some NFP financial supplies attract a 75% reduced ITC rather than zero
• Gifts of goods: NFPs can receive donated goods without those donations being taxable supplies
• Fundraising events: NFPs can declare up to 15 fundraising events per year as input-taxed supplies (no GST collected, no ITC on costs)
• Non-commercial activities: Supplies made for less than 50% of their market value by endorsed charities are treated as input-taxed (no GST)

FBT concessions for NFPs

Public benevolent institutions (PBIs) and health promotion charities are entitled to an FBT exemption cap of $30,000 per employee per year. Other registered charities receive a 48% FBT rebate (effectively reducing the FBT rate to approximately 24.4%).

This means NFP employees can receive salary packaging benefits (novated leases, living expenses) with significantly lower FBT consequences than a commercial employer. Salary packaging is a major attraction for NFP employees and is an important part of the total compensation conversation.

Practical workflow for bookkeepers

1. Confirm the entity type (charity, NFP company, unincorporated association, trust)
2. Check ACNC registration and size category
3. Confirm DGR status and any separate fund requirements
4. Set up fund-based chart of accounts
5. Establish grant project codes before the first grant is received
6. Confirm GST and FBT treatment with the client
7. Diarise ACNC annual information statement deadline (31 January for charities with a 30 June year end)