Charities and not-for-profits

Not-for-profit or charity?

• A not-for-profit doesn’t operate for the profit or gain of its members. Any surplus goes back into its purpose. Sporting clubs, community groups, associations and many social enterprises are not-for-profits.
• A charity is a not-for-profit with only charitable purposes that are for the public benefit, such as relieving poverty, advancing education or health, or protecting the environment.

Not every not-for-profit is a charity, and not every charity has the same tax concessions. Registering with the ACNC is separate from tax concessions, which the ATO decides.

Step 1: Choose a legal structure

Most small community organisations use an incorporated association, which gives the organisation its own legal identity. Get advice if you’re unsure, and adopt a constitution with clear rules, including a not-for-profit clause. See Sole trader, partnership, company or trust?.

Then get an ABN with the right entity type.

Step 2: Register as a charity (if eligible)

To register with the Australian Charities and Not-for-profits Commission (ACNC), an organisation must, according to the ACNC:

• be not-for-profit
• have only charitable purposes that are for the public benefit
• comply with the ACNC Governance Standards (and the External Conduct Standards if operating overseas)
• not have disqualifying purposes, such as promoting or opposing a political party or candidate
• not be an individual, political party or government entity
• have an ABN with the right entity type.

You apply online through the ACNC Charity Portal, and the ACNC doesn’t charge a fee. Use its self-assessment tool and registration checklist first. Sporting and recreation clubs generally aren’t eligible unless they have a charitable purpose.

Step 3: Governance

Good governance keeps an organisation trustworthy and legally compliant.

• A board or committee that understands its role: setting direction, overseeing finances and managing risk, not running every detail.
• Duties: board members must act honestly, in the organisation’s interests, with reasonable care, and manage conflicts of interest. The ACNC’s Governance Standards set minimum standards for registered charities.
• Meetings and records: regular meetings, minutes, an up-to-date register of members and records of decisions.
• Policies: finances and delegations, conflicts of interest, complaints, privacy, and child safety where relevant.
• Insurance: check with an insurance broker what cover your activities, volunteers, events and board need.

See Leadership for small business owners for practical leadership habits.

Step 4: Reporting

Registered charities must lodge an Annual Information Statement with the ACNC each year, usually within six months of the end of their reporting period. The ACNC doesn’t charge a fee for reporting.

According to the ACNC, small charities (annual revenue under $500,000) don’t need to submit a financial report, though they can choose to. Medium and large charities submit financial reports, with review or audit requirements depending on their size. Check the ACNC’s reporting guidance for your organisation.

Incorporated associations also have reporting obligations to their state regulator. Keep good financial records from the start. See Bookkeeping basics.

Fundraising

• Rules vary by state and territory. Some require registration or a licence to fundraise from the public. Check with your state’s fair trading or consumer affairs agency.
• Raffles and prize draws can need a lottery permit depending on the value and the state.
• Be honest: say clearly what the money is for, and don’t overstate results. Claims in fundraising materials must not mislead; the ACCC says claims must be accurate and based on reasonable grounds.
• Thank and report back to donors on what their money achieved.
• Diversify income: donations, grants, events, sponsorship, memberships and, for some, selling goods or services.

See Government grants and free support.

Volunteers

• Give volunteers a clear role, induction and a named contact.
• Provide safe work: work health and safety duties can extend to volunteers. See Workplace health and safety.
• Arrange checks where needed, such as Working with Children Checks.
• Recognise and thank volunteers often.

Running it sustainably

• Budget and track cash flow as carefully as any business. See Financial planning and cash flow.
• Build a reserve for lean times.
• Plan for succession on the board and in key volunteer roles.
• Tell your story well. See PR and free publicity.

Common questions

What's the difference between a not-for-profit and a charity?

A not-for-profit doesn’t operate for the profit or gain of its members, and reinvests any surplus in its purpose. A charity is a not-for-profit with only charitable purposes that are for the public benefit. Not all not-for-profits are charities.

Who can register as a charity with the ACNC?

The ACNC says an organisation must be not-for-profit, have only charitable purposes for the public benefit, comply with its Governance Standards, have no disqualifying purposes, not be an individual, political party or government entity, and have an ABN. Registration is free.

What reporting does a registered charity have to do?

Registered charities lodge an Annual Information Statement with the ACNC each year, usually within six months of the end of their reporting period. Small charities, with annual revenue under $500,000, don’t need to submit a financial report, but larger ones do.

Do I need a permit to fundraise?

It depends on your state or territory, because fundraising rules vary. Check with your state’s fair trading or consumer affairs agency before you start, and keep fundraising claims honest about where the money goes.