Charitable fundraising activities are regulated at the state level, and accordingly different rules apply in each jurisdiction. Most states and territories in Australia require organisations that intend to fundraise to abide by certain compliance standards and to hold valid fundraising licences or registrations with a regulating body. These licenses or registrations are generally only valid in the state or territory where they are issued. This article explores the difference between fundraising and crowdfunding.
What is Fundraising?
While the definition of “fundraising” varies from state to state, all definitions have a singular underlining point commonality. They all, in one form or another, refer to public appeals by which individuals or entities seek to solicit money or benefits for a particular cause. For example, in the state of Victoria, section 5 of the Fundraising Act 1998 (Vic) holds that a fundraising appeal occurs where a person receives money or a benefit that is not for profit or commercial benefit. In NSW, the Charitable Fundraising Act 1991 (NSW) applies.
The Fundraising Act 1998 (Vic) does not define charitable crowdfunding. However, a crowdfunding bill is currently presented before the Senate that sets out upcoming reforms to crowdfunding regulations in Australia. The Corporations Amendment (Crowd-sourced Funding) Bill 2015 will set out how businesses will be able to obtain funds from the public, including investors, in return for an equity share in the business. Notably, crowdfunding will only be available to unlisted public companies, which prevents non-profit organisations from obtaining funding through this channel due to their registered non-for-profit status and structure.
Fundraise v Crowdfunding
Note that there are clear differences between traditional fundraising (such as online fundraising) and crowdfunding. These differences include:
- Fundraising raises money for organisations where crowdfunding raises money exclusively for projects
- When you fundraise, donors give to a cause or organisation that already exists. With crowdfunding, donors give based on an outcome of or the aligned values with a project.
- Fundraising donors do not expect to receive (unless explicitly requested or consent is received) updates on the project or organisation. Crowdfunding donors expect frequent updates on the project throughout the entire process.
For organisations that opt to engage in national fundraising online it is recommended that to comply with the laws around Australia they:
- apply to each state or territory for a fundraising licence and/or register their organisation details onto the fundraising register;
- be aware of the compliance rules;
- ensure that the fundraising platform is secure if it is to process funds and receive sensitive donor information; and
- keep adequate accounting records of the funds collected and the funds disbursed.
If you would like to know more about online fundraising or crowdfunding in Australia, get in touch with LegalVision. Our lawyers can assist with registering a charity as well as ensuring your organisation is complying with the regulations concerning raising money through online channels.