Non-profit organisations play a crucial role in society by supporting various causes and communities. In Australia, when you start a non-profit, you need to follow specific legal requirements. These requirements are designed to ensure transparency, accountability, and public benefit. This article will outline the key considerations and legal requirements for starting your non-profit in Australia.
Choosing a Legal Structure
When establishing a non-profit, the first step is to choose an appropriate legal structure. The structure you choose will affect your organisation’s legal identity, governance, liability, and compliance obligations. Your options include:
- unincorporated association;
- incorporated association;
- company limited by guarantee;
- cooperative;
- indigenous corporation; and
- trust.
Two of the most common structures are incorporated associations and companies. You should consider whether you will have a committee or board that can dedicate time and resources to ongoing compliance. For instance, if you run an organisation with limited resources and administrative skills, it might be wise to avoid a structure that requires too many mandatory reporting requirements.
Incorporated Associations
When you form an incorporated association, you create a legal entity that stands apart from its members. Each state and territory has its own rules for registering such associations. These rules can differ in several ways:
- the minimum number of members needed to establish the association;
- how the association is managed;
- procedures for conducting meetings; and
- obligations for financial reporting.
Incorporating as an association typically involves less regulatory hassle compared to forming a company due to fewer strict requirements. However, one drawback is that an association’s operations are generally confined to the jurisdiction of its state or territory.
Continue reading this article below the formCompanies Limited by Guarantee
A company functions as its own legal entity, registered according to the guidelines of the Corporations Act 2001 (Cth). You need to ensure compliance with ASIC rules, which might change periodically.
Opting for a company structure can expand your access to various funding avenues, as it allows for operations across Australia.
What is a Charity?
Once you establish the basic legal structure, you should register your organisation with the Australian Charities and Not-for-Profit Commission (ACNC) if it qualifies as a charity. A charity needs to show that it:
- operates on a not-for-profit basis, meaning any profits serve its purpose.
- pursues only charitable purposes that benefit the public.
- does not engage in disqualifying purposes, such as promoting unlawful activities.
- is not an individual, a political party, or a government entity.
Additionally, a charity must adhere to the ACNC Governance Standards and, if operating internationally, follow external conduct standards. Keeping accurate financial records and providing annual reports to the ACNC are also required.
The ACNC Governance Standards
The ACNC Governance Standards outline the minimum requirements for managing charities in Australia. They guide you in running your charity efficiently and responsibly. These standards touch on different areas of charity management, such as processes, activities, and relationships.
If charities do not follow these standards, the ACNC can take action against them. This can include giving warnings, providing directions, or cancelling charity registration.
The Benefits of Non-Profit Status
Charities enjoy several tax concessions, including:
- exemption from income tax;
- exemption or rebate from fringe benefits tax; and
- concessions on goods and services tax (GST).
Your charity might qualify to apply for deductible gift recipient (DGR) status. This status allows donors to claim their donations to your charity as tax-deductible gifts.
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Key Takeaways
Establishing a non-profit in Australia demands careful planning and following legal requirements. By choosing the right structure, registering with the ACNC for charitable status (if eligible), and sticking to best practice governance principles, not-for-profit organisations can operate efficiently, inspire trust among members, and contribute to the greater good.
If you have any questions about your legal requirements, our experienced charity and not-for-profit lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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