After our last few blog posts about self-management and hiring workers as well as the discussion this has opened up, we’re now up to the fifth post in our confusion-clearing and myth-busting series about the NDIS. As the title suggests, this post debunks the myth that if you self-manage your NDIS funds, you need an ABN and to register as a not-for-profit organisation to avoid paying tax.
First of all, it’s super important to know this: If an NDIA representative or Local Area Coordinator (LAC) tells you that you need an ABN or to register as a not-for-profit to avoid paying tax, ask questions!
In our Mixed Messages post on LinkedIn, we suggested that if you’re given advice that doesn’t sound right, you can and should ask: “Can you check the latest guidelines?” You could add that “My understanding is that I can self-manage without getting an ABN or registering as a not-for-profit to avoid paying tax.”
When you self-manage your funds (as a Participant) or the funds of another person (as a Nominee), you do not need to get an ABN. All ‘self-management’ is, is a way for an individual to manage their own or someone else’s NDIS funds. This means that you can instead submit claims to the NDIA through the portal and the $$$ will be deposited into your nominated NDIA bank account (which you’ll need to set up separately from other accounts you hold). More information about this process can be found here.
Again: self-managers are not business owners, nor do they need an ABN. If you are a self-manager, all you need is to be an NDIS Participant or a Nominee.
Remember also that once you receive your NDIS funds and decide to self-manage these, there are many different ways you can source supports and services. When you self-manage your NDIS funds, you can use registered or unregistered support providers. Also, you do not need an ABN to engage these providers.
We also mentioned in our previous blog that there are different ways to engage support workers. So we’ll add here that you would ONLY need an ABN or a Withholding Payer Number (WPN) if you chose to directly employ your support workers. That is because, in this instance, you will have effectively chosen to become an employer yourself. If you are looking at doing this, it is best to contact the Australian Tax Office to figure out whether you need an ABN or WPN. Again, we explain all the ins and outs of how to find support workers in this blog.
As for registering as a not-for-profit organisation to avoid paying tax, here is what the NDIA has said in their ‘Self-managing budgets in my NDIS plan’ document (emphases added):
“The account holder is exempt from paying income tax on any funds received directly from the NDIA and held in this bank account. For more information visit the Australian Tax Office website.
Your NDIS support funding is not treated as income if you are receiving Centrelink payments or for the purposes of Child Support Benefit.
Any interest earned on NDIS funds is treated as income and must be reported to the ATO.”
SUMMARY: You can be a self manager without an ABN! When you self-manage your NDIS funds, you can use registered or unregistered support providers. In addition, you do not need an ABN to engage these providers – you only need an ABN or a WPN if you decide to employ support workers yourself. You don’t pay tax on NDIS funds, but you do pay tax on any interest earned on NDIS funds. You do not have to register as a not-for-profit to avoid paying tax.
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