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How To Start a Not-for-Profit Organisation (2021 Update)

How To Start a Not-for-Profit Organisation (2021 Update)

Want to give back to the community or contribute to a cause you care about? Find out how to start a Not-for-Profit Organisation here.

17th March 2021
Reading Time: 3 minutes

A not-for-profit organisation is one which operates not to earn a profit, but to benefit society. Examples of well-known NFPs include Beyond Blue, The Smith Family and World Vision. Not-for-profit organisations are a a great way to start a business venture and give back to the community. However, there are particular obligations you have to meet when running a NFP. In this article, we’ll provide an overview of the essential elements you’ll need to start your organisation. If you’re also wondering what other businesses you could start, you can check out our comprehensive list of business ideas.

Not-for-profit organisations

A not-for-profit organisation exists for a purpose and not for commercial gain. They include both charities and other organisations such as sporting clubs and professional associations. Charities are regulated by the Australian Charities and Not-for-profits Commission (ACNC), which serves to ensure charities are complying with the law.

1. Choose an appropriate legal structure

After applying to the ACNC, you will need to choose your structure. You can choose to operate as an unincorporated association, incorporated association, company, cooperative, indigenous corporation or also a trust.

You can choose any incorporated structure: incorporated or unincorporated association, a public company limited by guarantee, a private company limited by shares or also a trust. The advantage of having a formal structure is having the ability to do things such as rent an office, borrow money, apply for government grants or take out insurance in the name of the organisation instead of a person’s name.

2. Is your organisation not for profit?

To register with the ACNC your organisation must be not-for-profit.  This can be shown in the governing documents of the company with a non-for-profit clause and by ensuring the organisation acts consistently with this policy. You should also be familiar with the ACNC’s rules for operating a charity. Further, you can make a profit but it must be used for a charitable purpose.

How would your governing documents look?

  • An incorporated association – articles of association
  • A company limited by guarantee or also a company under the Corporations Act 2001 (Cth) – A company constitution (you can also use the replaceable rules in the Corporations Act.
  • A trust – trust deed.
  • An unincorporated association – rules.

3. Does your non-for-profit have a charitable purpose?

To be a charity, all of your activities must be toward charitable purposes however, this does not mean your charity cannot turn a profit. This must align with the reason for your not-for-profit set up, except purposes that are ‘incidental or ancillary’ to the overarching charitable purpose.

This a vital step in setting up your charity, answer the following questions to outline your purpose.

  • Who will benefit from your activities?
  • What is your charitable organisation trying to achieve?
  • What activities will you conduct?
  • Who is your target audience?
  • Is there a need for your organisation, or similarly, is there an organisation that already operates with the the purpose of your NFP?

The Charities Act 2013 (Cth) lists 12 charitable purposes:

  1. Advancing health
  2. Advancing education
  3. Promoting social or public welfare
  4. Advancing religion
  5. Advancing culture
  6. Promoting reconciliation, mutual respect and also tolerance between groups of individuals that are in Australia
  7. Promoting or protecting human rights
  8. Advancing the security or safety of Australia or the Australian public
  9. preventing or relieving the suffering of animals
  10. Advancing the natural environment
  11. Promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country, (where that change furthers or opposes one or more of the purposes above) and
  12. Other similar purposes ‘beneficial to the general public’ (a general category)

There are at present approximately 56,000 charities operating in Australia, for example:

  • St Vincent’s Aged Care: Providing a holistic approach to aged care
  • Steward House: Children’s respite care charity
  • RSPCA: The Royal Society for the Prevention of Cruelty to Animals: Providing animals with care, shelter, education, medical attention and love

4. Does your not-for-profit benefit the public?

Above all, your not-for-profit must benefit the public. You will need to establish how your organisation can provide goods, services, education, counselling or spiritual guidance, or also improve the environment to benefit the public.

5. Ensure your charity complies with the rules of registration

Your charity must have an ABN, meet the legal definition of a charity, meet governance standards and not be an organisation that cannot be registered. If your organisation is registered as a company, you must also appoint directors and ensure they uphold their duties.

Once you have completed these steps how does your organisation apply for tax concessions?

  1. Register with the ACNC
  2. Once the ACNC has deemed your charity status, your application will be passed on to the ATO for charity tax benefits including deductible gift recipient (DGR).
  3. The ATO accepts the ACNC decision on charity status and decides which tax concessions your charity is entitled to.

Don’t know where to start?
Contact a Lawpath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Author
Dominic Woolrych

Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.