Setting up a charity or not-for-profit? Here’s what you need to know
If you’re in the process of setting up and registering a not-for-profit or charity, there are a few things you should keep in mind to make sure you are appropriately protected, registerable and meeting your regulatory obligations. These include:
1. Understanding your regulatory obligations through the Australian Charities and Not-for-profits Commission (‘the ACNC’);
2. Appropriately defining your charitable purpose;
3. Working out the best legal structure for your charity/not-for-profit; and
4. Having a water tight ‘Governing Document’.
The ACNC
The ACNC is the regulatory body for all registered charities and not-for-profits. There are a number of benefits for registering your charity/not-for-profit, which include:
• you can apply for tax concessions and tax benefits,
• you can apply for deductible gift recipient (DGR) status; and
• you can showcase the ‘Tick of Charity Registration’ on documents.
Once registered with the ACNC, there are several ongoing obligations that you need to adhere to. These include complying with the ACNC Governance Standards, notifying of specific changes to your organisation, keeping records and reporting information annually. It is vital to understand what your obligations are and when you need to meet these obligations, so as to remain as a registered not-for-profit/charity.
Charitable Purpose
In order to register with the ACNC, you must have an approved charitable purpose, or purposes. The Charities Act 2013 (Cth) defines a charitable purpose being any of the following 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; and
• any other purpose beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of, the above purposes.
Once you have selected your charitable purpose(s), you can then consider whether you can apply for tax benefits/concessions or other categories such as DGR status. There are also particular additional tax benefits available if your charity is a public benevolent institution (PBI), health promotion charity (HPC) or charity for the advancement of religion.
Legal Structure
The legal structure of your charity/not-for-profit is very important, as it governs whether you can be sued, who is liable for debts and who can make the decisions on behalf of the organisation.
There are a few different options for how you can set up your charity/not-for-profit. According to the ACNC, the most common structures are:
• Company limited by guarantee;
• Incorporated Association;
• Trust; and
• Unincorporated.
When deciding on what legal structure is best for your charity/not-for-profit there are certain things which will impact your decision, such as size, employees and/or volunteers, whether applying for government grants and possible personal liability of people doing things on behalf of the charity.
There are benefits and drawbacks to all legal structures depending on what you want to achieve, so it is important that you get advice to help you weigh them up and make an informed decision.
Governing Document
The governing document of your charity/not-for-profit is highly important as it sets out your charitable purpose, who can make decisions, how decisions are made and any other ‘rules’ of your organisation. Often, the governing document takes its form as a ‘Constitution’, which records all the rules your organization must abide by. The way in which you describe your charitable purpose in your governing document is particularly important, as it will determine whether tax concessions/benefits, such as those associated with being a PBI or DGR status are available to you.
Whether you’re in the business of helping people, animals, the environment or anything in between, we can assist in helping you navigate the ACNC, setting up your charity or not-for-profit, drafting your governing document and providing you with general advice from the start and throughout the life of your charity. Please contact a member of our commercial team on (08) 8212 1077 if you would like further information.