Key terms

30 Jan

Written By For Good Digital

‘Not-for-profit’ and ‘non-profit’ are terms used in relation to organisations in which any profit made must be used to benefit or further the aims of the organisation. These terms do not mean the organisation cannot make a profit; all groups need to at least break even or make a small profit to remain solvent (i.e. viable).
Instead, ‘not-for-profit’ refers to a restriction on what the profit can be used for; namely, the profit cannot be distributed to certain people, including to the organisation’s members, directors, or their associates. In other words, the difference between a business (for profit) and a not-for-profit organisation is what happens with the profit they make.
For more information, see Not-for-profit Law’s website: www.nfplaw.org.au/free-resources/getting-started/what-does-not-for-profit-mean.
All charities have to be not-for-profit organisations, but not all not-for-profit organisations are charities. It has been estimated that there are around 600 000 not-for-profit organisations in Australia. By contrast, there are approximately 60 000 charities registered with the Australian Charities and Not-for-profits Commission (ACNC).
‘Charity’ and ‘charitable purpose’ are defined in the Charities Act.
It is important to know whether your group is eligible to be registered as a charity with the ACNC. For more information see the ACNC’s website: www.acnc.gov.au/for-charities/start-charity/role-acnc-deciding-charity-status/legal-meaning-charity.
Registering with the ACNC can provide access to charity tax concessions and other benefits (see ‘Tax concessions’, below).
A not-for-profit organisation’s rules (sometimes called a ‘constitution’) govern the internal affairs of the organisation. This is a written document covering how the organisation operates – including an organisation’s purpose, membership, meetings, governance, use of funds and winding up. Most ‘types’ of community organisations (see below) have minimum legislative requirements that must be implemented within an organisation’s rules.