Other issues to consider

Registering as a charity

• What is a registered charity?

  According to the Charities Act, a charity can register as a charity with the ACNC if it:

  • is a not-for-profit entity; 

  • has only: charitable purposes that are for the public benefit; or 

  • purposes that are incidental or ancillary to, and in furtherance or in aid of, charitable purposes that are for the public benefit;

  • does not have any disqualifying purposes; and

  • is not an individual, political party, or government entity.

  Registration as a charity with the ACNC does not bind state and territory governments. So, an organisation may be considered a charity under the Charities Act, but might not meet the definition of charity under a state or territory law. This may have implications for an organisation – for example, in relation to state or territory laws on stamp duty, payroll tax or land tax.

• Who regulates charities?

  The ACNC regulates charities and is responsible for determining whether an organisation’s purposes are charitable and for the public benefit prior to registration.

• What are charitable purposes?

  A list of charitable purposes is set out in the Charities Act. These include advancing health, education, social or public welfare, religion, culture; promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia; promoting and protecting human rights; advancing the security and safety of Australia or the Australian public; preventing or relieving the suffering of animals; and advancing the natural environment. A purpose beneficial to the general public that may be regarded as analogous to (i.e. corresponding to), or within the spirit of, one of the charitable purposes listed in the Charities Act is also considered a charitable purpose. A purpose of promoting or opposing a change to any matter established by law, policy or practice (i.e. advocacy) in the Commonwealth, a state or territory, or another country, where that promotion or opposition furthers one of the charitable purposes listed in the Charities Act, is also considered a charitable purpose. 

• Registering with the Australian Charities and Not-for-profits Commission

  The ACNC registers charities in Australia. Registering as a charity is free and the ACNC does not charge charities annual fees. To register as a charity, an organisation must have an Australian Business Number (ABN) (see ‘Australian Business Number’, below).

  The main advantages of registering as a charity are:

  • A charity can apply for charity tax concession from the Australian Taxation Office (ATO) and other benefits (discussed further below).

  • There is increased public trust in a charity as it will be listed on a public register of charities maintained by the ACNC. Through the register, the public (including potential donors, members and volunteers) can access information about a charity, including its activities, finances, the places it operates, and the people on the governing body.

  • Companies limited by guarantee that are registered as a charity with the ACNC do not have to comply with several requirements in the Corporations Act. Instead, these charities must comply with similar (but often simpler) ACNC requirements. 

• Charities: Reporting and other requirements

  In order to maintain its registration, a charity must report to the ACNC annually. 

  A charity’s annual reporting requirements are determined by the total annual revenue arising in the course of the charity’s ordinary activities and includes donations, government grants and income from the sale of goods or services. 

  The annual revenue thresholds reporting requirements for reporting periods from the 2022 Annual Information Statement onwards are:

  • Small charities (annual revenue of less than $500 000) must submit an annual information statement and an optional annual financial report. 

  • Medium charities (annual revenue of $500 000 or more, but less than $3 million) must submit an annual information statement and an annual financial report that is either reviewed or audited. 

  • Large charities (annual revenue of $3 million or more) must submit an annual information statement and an audited annual financial report. 

  For more information about reporting requirements, see www.acnc.gov.au/for-charities/manage-your-charity/obligations-acnc/reporting-annually-acnc.

  Charities also need to notify the ACNC when certain things change, such as the charity’s legal name, address, governing documents (e.g. the constitution) or ‘responsible persons’ (e.g. board members).

  Charities also have obligations regarding record-keeping, compliance with governance standards, and compliance with external conduct standards. For more information about these obligations, see www.acnc.gov.au/for-charities/manage-your-charity/obligations-acnc.

Tax concessions

• Income tax

  Under the tax law in Australia, a community organisation must pay tax on its ‘taxable income’, unless it qualifies for an exemption.

  A community organisation may not be required to pay income tax if the organisation:

  • is a registered charity with the ACNC and endorsed by the ATO as income tax exempt; 

  • is not eligible to register as a charity, but falls into a self-assessment category specified in the tax law and therefore ‘self-assesses’ as income tax exempt; or

  • has an annual income below the taxable income threshold (currently $417). 

  For more information about what is and what is not ‘taxable income’ see the ATOs website: www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/your-organisation/in-detail/income-tax/mutuality-and-taxable-income-for-not-for-profits/taxable-income-and-mutuality.

  For more information on being eligible to ‘self-assess’ as income tax exempt see the ATOs website: www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/your-organisation/does-your-not-for-profit-need-to-pay-income-tax/types-of-income-tax-exempt-organisations#ato-Selfassessingeligibilitytoincometaxexemption.

• Deductible gift recipient status

  A DGR is an organisation with a special tax status. An organisation may be endorsed as a DGR by the ATO because the organisation falls within a DGR category specified in the Income Tax Assessment Act 1997 (Cth) or, in exceptional cases, because the organisation is listed by name in the Act. There are 52 DGR categories, which include:

  • public benevolent institutions (PBIs);

  • health promotion charities;

  • harm prevention charities;

  • environmental charities; and

  • animal welfare charities.

  Organisations that are endorsed as DGRs are entitled to receive donations that are deductible from the donor’s income tax. This means when a donor donates to a DGR endorsed charity, the donor may be able to claim a tax deduction for their donation. They are also entitled to receive funds from certain grant makers and philanthropic bodies, which are only able to give money to organisations that have DGR status. Each DGR category has specific requirements.

  For more information about the DGR categories and the specific requirements see the ATO’s website: www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/getting-started/in-detail/types-of-dgrs.

  For help with determining whether an organisation is eligible for DGR endorsement see Not-for-profit Law’s DGR Tool: www.nfplaw.org.au/free-resources/tax-landscape/deductible-gift-recipient-status.

• Other state-based tax concessions

  Organisations may be eligible for tax concessions under state laws (e.g. on stamp duty, payroll and land tax). For more information about state-based tax concessions, contact the State Revenue Office Victoria (see ‘Contacts’ at the end of this chapter). 

Fringe Benefits Tax

The Fringe Benefits Tax (FBT) is a tax paid by employers on non-salary benefits provided to their employees. An example is where an employer pays an employee’s gym membership or provides a leased vehicle for the employees’ benefit.

Community organisations are only liable to pay FBT on benefits provided to employees, employees’ families or other associates. Generally, benefits provided to volunteers or independent contractors are not subject to FBT as they are not considered employees.

For more information on working out the amount of FBT an organisation must pay, see the ATO’s website: www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/calculating-your-fbt.

If a community organisation provides fringe benefits to an employee, the employee’s family or other associates, it may be eligible for a an FBT rebate or an FBT exemption.

• Fringe Benefits Tax rebate

  The FBT rebate is a rebate that is available to organisations that are ‘rebatable employers’.

  An organisation is a ‘rebatable employer’ if it is a non-government organisation and a:

  • charity that is an institution (but not a PBI) registered by the ACNC and endorsed by the ATO;

  • religious institution registered by the ACNC and endorsed by the ATO;

  • certain type of scientific institution or public educational institution;

  • trade union or employer association; or

  • not-for-profit organisation established: to encourage music, art, literature or science; 

  • for musical purposes; 

  • to encourage or promote a game, sport or animal races; 

  • for community service purposes; 

  • to promote the development of aviation or tourism; 

  • to promote the development of Australian information and communications technology resources; or 

  • to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.

  The FBT rebate allows employers to have their FBT liability reduced by a rebate of 47 per cent of the gross FBT payable up to the capping threshold. Eligible organisations can claim the FBT rebate until the total grossed-up value of the fringe benefits provided to an employee exceeds $30 000.

• Fringe Benefits Tax exemption

  The FBT exemption is an exemption from FBT that is available to some not-for-profit organisations. 

  An organisation qualifies for the FBT exemption if it is a: 

  • PBI that is registered by the ACNC and endorsed by the ATO; 

  • health promotion charity that is registered by the ACNC, and endorsed by the ATO; 

  • public or not-for-profit hospital; or

  • public ambulance service. 

  The FBT exemption completely exempts employers from having to pay FBT on non-salary benefits up to the capping threshold, and therefore makes it financially viable to offer salary packaging to employees. Eligible not-for-profit organisations are exempt from having to pay FBT until the total grossed-up taxable value of the fringe benefits provided to an employee exceeds $30 000 for PBIs and health promotion charities and $17 000 for hospitals and ambulance services.

  For more information about FBT, see www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax.

Funding

Community organisations may obtain funds through third parties via fundraising, donations, government funding and philanthropic grants.

• Fundraising in Victoria

  Organisations that conduct fundraising appeals in Victoria need to comply with the Fundraising Act 1998 (Vic) (‘Fundraising Act’) and the Fundraising Regulations 2019 (Vic) (‘Fundraising Regulations’) (collectively, ‘fundraising laws’). A person or organisation conducts a fundraising appeal if they ask for, or receive money or a benefit for another person, cause or thing, rather than solely for their own profit or commercial benefit. 

  The fundraising laws are regulated by CAV, and cover the following fundraising activities: 

  • door knock appeals;

  • telephone appeals;

  • traffic intersection and highway collections;

  • golf days, movie nights and trivia nights;

  • dinner dances and balls; 

  • public auctions; 

  • clothing bins;

  • sale of goods at opportunity shops;

  • appeals run by commercial fundraisers;

  • public appeals to support clubs, associations, causes or people; and 

  • sale of goods where it is represented that part of the sale price is to be donated to a charitable organisation or cause. 

  Any person or organisation that undertakes fundraising activities must register as a fundraiser unless they are exempt from registration.

  Organisations will not need to register under the Fundraising Act to conduct fundraising appeals, but must comply with all the other requirements of the Fundraising Laws, if they:

  receive less than $20 000 gross in a financial year from fundraising;

  • are not paid to conduct the fundraising; and

  • only use unpaid volunteers.

  There are further exemptions for some organisations such as state government schools, school councils, some kindergartens and public hospitals. More information about exempt organisations can be found on the CAV website: www.consumer.vic.gov.au/clubs-and-fundraising/fundraisers/registration/exemptions-from-registration.

  Charities registered with the ACNC (see ‘Registering as a Charity’, above) do not need to register separately with CAV to fundraise in Victoria. Instead, they only need to notify CAV of their intention to fundraise in Victoria to be considered a registered fundraiser. 

  Charities that already have a fundraising registration number can also notify CAV that it is registered with the ACNC to benefit from reduced reporting and renewal requirements. Notifications to CAV of ACNC registration can be made via myCAV (the online system for incorporated associations). 

  For more information about Victoria’s fundraising laws, see www.nfplaw.org.au/free-resources/fundraising-and-holding-events/fundraising.

  The National Fundraising Principles (‘Fundraising Principles’) came into effect in Victoria on 3 July 2024. 

  The Fundraising Principles are set out in schedule 2 of the Fundraising Regulations and aim to harmonise state and territory fundraising regulation for charities registered with the ACNC by setting out the conduct expected from registered charities when fundraising in Victoria.

  Fundraisers registered as charities with the ACNC must still follow Victoria’s fundraising laws while fundraising in Victoria. However, they may be exempt from certain requirements of the Fundraising Act if they comply with the Fundraising Principles.

  If an organisation engages in fundraising activities, it may also have obligations under the Australian Consumer Law (ACL). The ACL is a national law that protects consumers from unfair business practices when buying goods and services. Generally, a fundraising activity is likely to be ‘in trade or commerce’ and the organisation is likely to have obligations under the ACL, if the organisation:

  • engages in fundraising activities involving a supply of goods or services; 

  • is a for-profit professional fundraiser; or

  • is fundraising in an organised, continuous and repetitive way.

  If the organisation’s fundraising activity is considered ‘in trade or commerce’ its obligations under the ACL may include, for example:

  • not engaging in misleading or deceptive conduct or unconscionable conduct when running a fundraising campaign; and 

  • not making false or misleading representations or engaging in unconscionable conduct in relation to the supply of goods or service in its fundraising activities. 

  For more information, see the Australian Competition and Consumer Commission’s publication, Guide to the ACL for charities, not-for-profits and fundraisers: www.accc.gov.au/about-us/publications/guide-to-the-acl-for-charities-not-for-profits-and-fundraisers.

• Fundraising outside of Victoria

  Each state and the Australian Capital Territory has its own legislation and rules for fundraising activities (there is no specific charitable fundraising legislation in the Northern Territory). Organisations that are fundraising in more than one state or territory need to ensure they are complying with all relevant fundraising laws in those jurisdictions. There are some exemptions, which depend on the specific legislation in each state. 

  Online fundraising has raised new challenges for fundraising regulation and organisations should carefully consider the relevant laws before conducting an online fundraising appeal as it may take weeks to obtain the necessary approvals . Online fundraising may include adding a ‘donate’ button to a website or conducting a fundraiser via social media. 

  For more information about fundraising laws in different states and territories, see Not-for-profit Law’s website: www.nfplaw.org.au/free-resources/fundraising-and-holding-events/fundraising.

• Other fundraising considerations

  Some fundraising activities (e.g. door knocking, lotteries, raffles, street collections, events, and the sale of alcohol) may require additional permissions, permits or licences. 

  Many local councils require organisations to apply for permits to doorknock or undertake face-to-face fundraising. Organisations should contact the relevant local councils to make sure they have the necessary permits or licences and understand the additional requirements that may apply. Receipts stating that donations of $2 or more are tax deductible cannot be given unless the organisation has been endorsed as a DGR by the ATO or is specifically listed as a DGR (see ‘Deductible gift recipient status’, above).

  Other laws for example, privacy laws may apply when fundraising. 

• Other sources of funds

  Organisations may apply for financial grants from the government, philanthropic foundations, charitable trusts, private businesses and others. Information on how to make these applications is available from grant providers. Being endorsed as a DGR and registered with the ACNC is a requirement of some grants.

  An organisation or group may use an auspicing arrangement to satisfy funding requirements. Auspicing is the process where an entity (the ‘auspicor’) provides support, sponsorship, or guidance to a less established and often unincorporated or unregistered organisation or group (the ‘auspicee’). Groups of individuals wanting to carry out a one-off project may not want to formally register as a charity or incorporate as a not-for-profit organisation, and auspicing is a good way to meet their funding requirements by working under an umbrella organisation that receives the money on their behalf.

  For more information about auspicing arrangements, see Not-for-profit Law’s website: www.nfplaw.org.au/free-resources/working-with-others/what-is-auspicing. 

  Community organisations may also generate their own ‘funds’ by selling goods or delivering fee for service. For more information about social enterprises, see Not-for-profit Law’s website: www.nfplaw.org.au/free-resources/how-to-set-up-your-organisation/social-enterprise.

• Goods and Services Tax

  Generally, not-for-profit organisations with a turnover of $150 000 or more per year must register for Goods and Services Tax (GST). Not-for-profit organisations with a turnover of less than $150 000 per year may choose to voluntarily register for GST. An organisation is required to have an ABN to register for GST.

  There are significant reporting and accounting requirements for organisations that register for GST. Organisations should obtain professional advice about whether or not to register for GST. If an organisation is required to register for GST, then it needs to have an ABN.

  If an organisation is not registered for GST, then:

  • GST is not payable on the sale of goods and services by the organisation. 

  • The organisation cannot claim GST credits for any GST included in the price of goods and services purchased by the organisation in carrying on its activities. 

  If an organisation is registered for GST, then:

  • GST is payable to the ATO if it sells certain goods and services (called taxable sales). There are types of sales, called GST-free sales and input-taxed sales where GST is not payable. Further, there are GST concessions available for community organisations. These concessions usually relate to particular activities (e.g. sales relating to raffles, bingo, fundraising events, sales of second-hand goods or non-commercial activities, volunteer expenses and certain gifts) and mean that GST is not payable on supplies relating to those activities.

  • The organisations can claim GST credits for any GST included in the price of goods and services purchased by the organisation in carrying on its activities. The organisation claims GST credits in its business activity statement.

  For more information about whether to register for GST, speak to the ATO’s Not-for-profit Premium Advice Service on 1300 130 248.

  For more information on the types of GST concessions available see the ATO’s website: www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/your-organisation/gst-for-not-for-profits/gst-concessions-for-not-for-profits#ato-GSTregistrationthreshold.

• Australian Business Number

  A community organisation, whether it is incorporated or unincorporated, is not required to have an ABN unless it wishes to register with the ACNC as a charity or for other business purposes (e.g. registering for GST). 

  An ABN is an identifying number for all Australian enterprises (the definition of ‘enterprise’ is very broad and encompasses businesses and most community organisations).

• Other laws

  Community organisations may have to comply with other laws, depending on its activities, funding arrangements, contracts, legal structure, and types of people involved in the organisation. 

  Some laws that may be applicable to community organisations include those relating to:

  • health and safety;

  • negligence;

  • employment, workplace health and safety;

  • superannuation;

  • equal opportunity and human rights;

  • working with children;

  • privacy;

  • defamation;

  • intellectual property;

  • contracts; and

  • planning and the environment.

  For more information about these laws, see www.nfplaw.org.au.

Other issues to consider

Chapter: 6.6: Community organisations

Contributor: Justice Connect’s Not-for-profit Law Service

Current as of: 1 September 2024

Law Handbook Page: 556

Next Section: Key contacts & regulators