The not-for-profit sector in Australia is booming, growing at 8% per year, as organisations and individuals see the potential for operating through a structure that receives significant tax and other concessions. With Australia’s charitable organisations generating over $200 billion a year it is easy to see why you might be tempted to look at setting up a not-for-profit for your business.

Here’s some information to get you thinking…

What is a not-for-profit?

Put simply, a not-for-profit, or charity, is an organisation that does not operate for the profit, personal gain or benefit of particular people. A not-for-profit can make a profit, but it must be used to fund the organisation’s purpose.

A not-for-profit can provide direct benefits (such as money or gifts) or indirect benefits. For example, organisations like self-help groups can be not-for-profits if the benefits provided to members are consistent with the purposes of the organisation. So, a self-help group for young disadvantaged parents can provide counselling services to a young parent who is a member of the organisation. The member is also a person in need who is helped by the organisation.

Staff members or responsible persons (such as board members or trustees) of the organisation can be paid for their work, but this figure cannot be unreasonable.

What are the benefits?

When you operate a registered charity, you can receive a number of benefits, including:

  • Charity tax concessions, such as income tax exemption or GST concessions from the ATO
  • Additional tax benefits as a public benevolent institution (PBI), health promotion charity (HPC) or charity for the advancement of religion
  • The ability to apply for certain categories of deductible gift recipient (DGR) status. Some categories of deductible gift recipient (DGR) status are only available to registered charities.
  • A range of other concessions, benefits or exemptions available to charities under Commonwealth law.

Who regulates the sector?

Charities are regulated by the Australian Charities and Not-for-profit Commission (ACNC) and you must be registered with this body before you can receive tax concessions like those listed above.

To remain eligible to be registered, charities must continue to be not-for-profit and pursue their charitable purpose or purposes. You will be required to prepare and provide audited accounts for the ACNC as well as undertaking other annual compliance activities.

Structuring your not-for-profit

Charities operate under a range of business structures, incorporated or unincorporated, and there may be more than one that works for your not-for-profit. Your not-for-profit’s legal structure will affect many things and will need to take into account:

  • The size of your charity and how complex its activities will be
  • Whether your charity will have employees or volunteers
  • The accountability your charity will have to its members and the community
  • The potential personal liability of members or office holders for things done by them on behalf of the not-for-profit
  • Whether your charity will be applying for government grants
  • Whether your not-for-profit will want to operate in more than one state or territory, or even overseas
  • Your charity’s eligibility for tax concessions.

Not-for-profit in practice

I have been involved in charities and not-for-profits at all different levels, first and foremost as a tax and business advisor, as well as serving as a board member and organiser of charity events.

For example, I have been involved in the running of a community event for the Shark Island Paddlers, for whom I am a Director and Treasurer of the club. The event is called the Tingira Challenge and it is a 15km race for surf skis, ocean skis, outriggers, SUP and other craft from Rose Bay in and around South Head.

To qualify for financial and other concessions granted to us from the council, we were required to donate all our surplus earnings to a charity. Shark Island Paddlers was eligible to qualify as a charity as it has the sole purpose of promoting paddling activities and providing support for participants and is a not-for-profit entity. Many sporting clubs both large (Penrith Panthers, for example) and small are registered charities and they qualify for this status because they provide a community service and are not-for-profit.

Is not-for-profit right for you?

If you’re thinking of starting a not-for-profit, I recommend you seek professional advice. The support provided by financial and legal experts will help you navigate the various structural and registration requirements when you first begin operations, as well as ensure your not-for-profit remains compliant over time. If you are interested in starting a not-for-profit or even just want to talk to someone about the benefits to your organisation, give me a call today.