So, you’re looking to start a not-for-profit organisation. Congratulations on your philanthropic venture. Here is an overview of the essential elements for creating your charitable organisation and ensuring that it is eligible to register with the Australian Charities and Not-for-profits Commission (ACNC) and receive charity tax concessions from the ATO.
Step 1: Choose an appropriate legal structure
The ACNC does not register charities based on their legal structure but you will be required to register an entity type.
You may choose an incorporated structure: incorporated or unincorporated association, a public company limited by guarantee, a private company limited by shares or a trust. The advantage of this formal structure is doing 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.
Step 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. Profit can be made but 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 company under Corporations Act 2001: constitution.
- A trust: trust deed.
- An unincorporated association rules.
Step 3: Does your non-for-profit have a charitable purpose?
To be a charity, all of your activities must be toward charitable purposes, which is the reason for your not-for-profit set up, except purposes that are ‘incidental or ancillary’ to the charitable purposes.
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 will be the main activities conducted?
- Who is your target audience?
- Is there a need for your organisation?
The Charities Act 2013 (Cth) lists 12 charitable purposes:
- advancing health
- advancing education
- advancing social or public welfare
- advancing religion
- advancing culture
- promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia
- promoting or protecting human rights
- advancing the security or safety of Australia or the Australian public
- preventing or relieving the suffering of animals
- advancing the natural environment
- 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
- other similar purposes ‘beneficial to the general public’ (a general category)
Some examples of not-for-profits with charitable purposes include:
- Variety Charity: Working with Children with a disability
- St Vincent’s Health: Aged Care
- Steward House: Children’s respite care charity
- RSPCA: The Royal Society for the Prevention of Cruelty to Animal, providing animal, offering shelter, education, medical attention and love.
Step 4: Does your not-for-profit benefit the public?
This is a crucial element of your not-for-profit. You will need to establish how your organisation can provide goods, services, education, counselling or spiritual guidance, or improve the environment to benefit the public.
Step 5: Ensure your charity fits the rules of registration
Your charity must have an ABN, meet legal definition of a charity, meet governance standards and not be an organisation that cannot be registered.
Once you have completed these steps how does your organisation apply for tax concessions?
- Register with the ACNC
- 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).
- The ATO accepts the ACNC decision on charity status and decides which tax concessions your charity is entitled to.
You’re Charitable Organisation is ready to go.
Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.