Types of community organisations
The main types of community organisations are:
unincorporated associations;
incorporated associations;
companies limited by guarantee;
Indigenous corporations; and
co-operatives.
There are advantages and disadvantages to each type of community organisation.
For more information and free resources (including a web-based decision-making tool to help you work out which legal structure best suits your group), see Not-for-profit Law’s website: www.nfplaw.org.au/free-resources/getting-started.
1 Unincorporated associations
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Groups are free to decide against registering a formal structure. In the eyes of the law, such groups remain simply a collection of individuals; the law (generally) does not recognise the group as a separate entity. This might mean very little to the people in the group, as in their eyes they readily identify the existence of the group, and its operation as separate to the individuals who form it. However, it means that the unincorporated association’s office holders or committee members can be personally liable for the association’s obligations and debts (although it is possible to reduce this risk if each of them obtains insurance).
Although unincorporated associations do not have formal legal structures, most groups choose a collective name and adopt rules that set out the association’s aims, membership qualifications, any subscription fees, management of meetings, financial matters, dissolution and amendment of the rules.
The advantages of unincorporated associations are that their organisational structure is very simple compared to more formal structures and usually the least costly and time consuming of the organisational structures.
The disadvantages of unincorporated associations are:
the office holders or committee members may be personally liable for the association’s obligations and debts (and actions in tort; for example, where a person is injured because of negligence) – this can be concerning for groups that run higher risk activities;
there is no perpetual succession – unless a trust is established, all property acquired by the association belongs to the individual members and therefore, every time the members (or at least the office holders) change, alterations may need to be made to documents relating to the association’s property (e.g. a lease);
there can be some complexity when gifts or trusts in wills are made to unincorporated associations;
the association generally cannot take legal action in its own capacity;
members may have difficulty enforcing the association’s rules when those rules are not being complied with; this is because courts have sometimes considered that the arrangement between members of an unincorporated association is private in nature and not one that a court should enforce; and
members may not have clear contractual or proprietary rights in relation to the association (this can make obtaining insurance or leasing an office or meeting space difficult).
The rules of an unincorporated association may set out the duties of the office holders or committee members (e.g. the duty to act honestly in the best interests of the group and to manage any actual or potential conflicts of interest). It is currently unclear to what extent these duties are imposed on the office holders or committee members of unincorporated associations under the common law.
For more information about these duties, see www.nfplaw.org.au/free-resources/who-runs-the-organisation/responsibilities-of-the-board-and-committee-members.
It is important to note that unincorporated associations need to comply with other laws (see ‘Other laws’, below).
2 Victorian incorporated associations
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Each Australian state and territory has legislation governing incorporated associations.
In Victoria, incorporated associations may incorporate under the Associations Act. There are approximately 42 000 incorporated associations in Victoria.
Being an incorporated association provides many benefits for the association, but also creates ongoing responsibilities.
The main advantages of incorporation are:
The members of the committee, the secretary and the members of the association are not personally liable to contribute towards the payment of the debts or liabilities of the association or for the costs, charges and expenses of the winding up of the association. Their liability is limited to money due under the association’s rules (unless there is it deliberate recklessness or fraudulent behaviour).
The association can enter into contracts, sue or be sued, buy or sell property, raise or borrow money, and invest money in its own name. Importantly, the association can take out insurance and enter into funding agreements in its name.
The association has perpetual succession. This means that the group continues to exist, and to be recognised by the law and the public, even when the group’s members change.
The main disadvantage of incorporation is that the Associations Act imposes certain obligations on incorporated associations. These should be carefully considered when a group is considering incorporating.
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Incorporated associations must pay initial and ongoing filing fees.
From 1 July 2024 the initial filling fee for incorporating an association is:
$81.70 if the association adopts the model rules; or
$489.90 if the association devises its own rules.
The fees are automatically indexed for inflation on 1 July of every year.
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Associations must report to the regulator of incorporated associations, Consumer Affairs Victoria (CAV). Associations must lodge an annual statement with CAV. Associations have different annual financial reporting requirements and different fees for lodging the annual statement depending on its total annual revenue (or ‘tier’).
From 1 July 2024 to 30 June 2025, the tiers, the total annual revenue thresholds, and the fees for lodging the annual statement are:
tier one (total annual revenue of less than $500 000) – $49;
tier two (total annual revenue between $500 000 and $3 million) – $98; and
tier three (total annual revenue of more than $3 million) – $196.
Generally, incorporated associations that are registered as charities with the ACNC do not need to lodge an annual statement with CAV or pay the fee for lodging the annual statement, provided that they continue to lodge an annual information statement with the ACNC for each financial year and follow the ACNC’s requirements. Charities that have been approved by the ACNC to withhold their financial details or finance reports from the ACNC Charity Register, or that form part of an ACNC approved reporting group are still required to submit an annual statement to CAV.
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The rules of an association must specify the purpose of the association and guide how the association will operate. The Associations Act sets out a list of matters that must be contained in the rules (e.g. a grievance procedure).
Associations that do not require a complex membership structure may find it easier to:
adopt the model rules (which are set out in schedule 4 of the Associations Incorporation Reform Regulations 2023 (Vic)); or
use Not-for-profit Law’s ‘Rules Tool’ to create a customised set of rules (available at www.apps.nfplaw.org.au/vic-rules-tool/).
Both sets of rules will contain all the matters required under schedule 1 of the Associations Act.
An association’s rules may be changed when at least three quarters (75 per cent) of the members voting at a general meeting, whether in person or (if permitted by the rules of the association) by proxy, vote in favour of the special resolution to alter its rules. It is important to check the association’s rules for any additional requirements.
Each member of the association who is entitled to vote at general meetings must be given at least 21 days’ notice of the proposed resolution and the notice must:
specify the date, time and place of the general meeting;
state in full the proposed resolution; and
state that it is intended to be passed as a special resolution.
The secretary of the association must make an application to CAV for the approval of an alteration of the rules within 28 days after the alteration was passed by special resolution. An alteration to an association’s rules takes effect once CAV has approved the alteration.
Associations registered as charities with the ACNC will then need to notify the ACNC and provide the ACNC with a copy of the amended rules on the Charities Portal (within 60 days for small charities and within 28 days for medium and large charities).
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The legal duties of office holders, and the penalties for breaching them, are set out in the Associations Act. An office holder includes:
a member of the committee;
the secretary;
a person, including an employee of the association, who makes, or participates in making, decisions that affect the whole, or a substantial part, of the operations of the association;
a person who has the capacity to significantly affect the association’s financial standing; and
a person in accordance with whose instructions or wishes the committee of the association are accustomed to act (but excluding a person who gives advice to the association in the proper performance of functions attaching to the person’s professional capacity or to the person’s business relationship with committee members or with the association).
Broadly, office holders have a legal duty:
to act in good faith in the best interests of the association and for a proper purpose;
to act with reasonable care and diligence;
to not make improper use of information or their position, to gain a personal advantage or cause detriment to the association; and
to disclose and manage conflicts of interest.
For more information about office holders’ legal duties, see www.nfplaw.org.au/free-resources/who-runs-the-organisation/responsibilities-of-the-board-and-committee-members.
The incorporated association is a very common form of legal structure used by groups operating in Victoria. For more information about the process of incorporation and the administration of incorporated associations, see www.nfplaw.org.au/free-resources/getting-started/legal-structure.
3 Companies limited by guarantee
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A group may incorporate by registering and forming a company under the Corporations Act. Under this Act, a group may incorporate as a company limited by shares, or as a company limited by guarantee. Only the latter is discussed here, as it is the most appropriate company structure (and the most common structure) for community organisations.
The members of a company limited by guarantee have limited liability if the company is wound up owing money. The members agree to pay a fixed but usually nominal amount if the company is wound up and does not have enough money to pay all its debts.
In general, a company’s internal management may be governed by:
the provisions of the Corporations Act that apply to the company (known as ‘replaceable rules’);
a constitution (or a memorandum and articles of association for a company formed before 1 July 1998 that has not adopted a constitution); or
a combination of both.
A company limited by guarantee must have a minimum of three directors, a secretary and at least one member. A company limited by guarantee must comply with various requirements of the Corporations Act.
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Companies limited by guarantee must generally report to the Australian Securities and Investments Commission (ASIC). There are different annual financial reporting requirements depending on the organisation’s annual revenue (or ‘tier’).
The tiers and the annual revenue thresholds are:
tier one: small company limited by guarantee with annual revenue of less than $250 000, which is not endorsed as a deductible gift recipient (DGR);
tier two: company limited by guarantee with annual revenue or, if part of a consolidated entity, annual consolidated revenue of less than $1 million; and
tier three: company limited by guarantee with annual revenue or if part of a consolidated entity, annual consolidated revenue of $1 million or more.
Generally, if a company limited by guarantee registers as a charity with the ACNC, it does not have to comply with several requirements in the Corporations Act. Instead, these charities must comply with similar ACNC requirements (see ‘Charities: Reporting and other requirements’, below).
For more information about reporting requirements for companies limited by guarantee that register as charities with the ACNC, see www.acnc.gov.au/for-charities/manage-your-charity/other-regulators/companies-limited-guarantee.
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The fee for incorporating a company limited by guarantee is $491 (from 1 July 2024 to 30 June 2025). Companies limited by guarantee that are not registered as charities must pay other fees, including ASIC’s annual review fees. These fees range from $61 to $1492 (from 1 July 2024 to 30 June 2025), depending on the company’s size and whether the company is registered as a not-for-profit special purpose company. For more information, see:
www.asic.gov.au/for-business/running-a-company/annual-statements;
www.asic.gov.au/for-business/payments-fees-and-invoices/asic-fees/fees-for-commonly-lodged-documents.
The ASIC industry funding model details the annual levy payable by ASIC-regulated entities, including companies limited by guarantee, see www.asic.gov.au/about-asic/what-we-do/how-we-operate/asic-industry-funding/how-the-industry-funding-model-works/industry-funding-levies/. Charities registered with the ACNC are exempt from paying this levy.
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The Corporations Act sets out the duties and obligations of the directors (and, in some situations, other office holders) of companies limited by guarantee. These duties are similar to the duties of directors and office holders of incorporated associations (discussed above).
Broadly, directors (and, in some situations, other office holders) have a legal duty:
to act in good faith in the best interests of the company and for a proper purpose;
to act with reasonable care and diligence;
to not improperly use their position or information; and
to disclose and manage conflicts of interest.
The Corporations Act contains defences and penalties in relation to these legal duties.
For companies limited by guarantee that are registered charities, most of these duties are set out in ACNC Governance Standard 5 rather than in the Corporations Act. See the ACNC website for more information: www.acnc.gov.au/for-charities/manage-your-charity/governance-hub/5-duties-responsible-people.
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A company limited by guarantee can be a preferable option to an incorporated association or a co‑operative if your group thinks it might want to operate nationally or in other states or territories outside Victoria or intends to be a large organisation. For a comparison of an incorporated association and a company limited by guarantee, and tips about when to use which structure, see www.nfplaw.org.au/free-resources/getting-started/legal-structure.
4 Indigenous corporations
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Indigenous corporations may incorporate under the CATSI Act and can be for-profit or not-for-profit. The Indigenous corporation structure has been designed to consider Indigenous customs and traditions.
Indigenous corporations are generally regulated by a specialist regulator, the Office of the Registrar of Indigenous Corporations (ORIC), not ASIC. ORIC has a number of regulatory powers under the CATSI Act to intervene to solve problems within corporations (e.g. the power to call meetings of members and to appoint special administrators).
An Indigenous corporation must have as part of its name one of the following sets of words:
‘Aboriginal corporation’;
‘Torres Strait Islander corporation’;
‘Aboriginal and Torres Strait Islander corporation’;
‘Torres Strait Islander and Aboriginal corporation’ or
‘Indigenous corporation’.
If the corporation is a registered native title body corporate, then it must also have the words ‘registered native title body corporate’ as part of its name.
All Indigenous corporations must have an Indigenous Corporation Number (ICN), which they will receive if their application for registration is successful. The ICN must generally be used alongside the Indigenous corporation’s name on all key documents.
Indigenous organisations can also incorporate under the Corporations Act, which is regulated by ASIC or as an incorporated association or co-operative. More information can be found on the ORIC website: www.oric.gov.au/registration-options.
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To be eligible to register as an Indigenous corporation, the corporation must satisfy the following registration requirements as set out in the CATSI Act:
the corporation must have at least five members (although an exemption may be applied for on certain grounds, e.g. where the corporation is a sole trader);
all members must be at least 15 years old;
if the corporation has five or more members, at least 51 per cent of members must be Aboriginal or Torres Strait Islander persons;
if the corporation has fewer than five members but more than one member, all of the members or all but one of the members must be Aboriginal or Torres Strait Islander persons;
if the corporation has only one member, that member must be an Aboriginal or Torres Strait Islander person; and
the corporation must have a Constitution (also known as a rule book) that governs the corporation’s activities and complies with the CATSI Act.
Indigenous corporations will have different requirements (such as the requirement to have a registered office) depending on whether they are registered as a small, medium or large corporation.
For more information about setting up an Indigenous corporation, see ORIC’s step-by-step guide: www.oric.gov.au/start-corporation/steps-register.
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Corporations holding or managing native title rights and interests under the Native Title Act 1993 (Cth) and the Native Title (Prescribed Bodies Corporate) Regulations 1999 (Cth) must incorporate as Indigenous corporations.
Indigenous organisations receiving grant funding of $500 000 (GST exclusive) or more in any single financial year from funding administered by the National Indigenous Australians Agency (NIAA) of the Australian Government must incorporate under the CATSI Act.
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The advantages of incorporating as an Indigenous corporation include:
an Indigenous corporation’s rules or constitution can take into account Indigenous customs and traditions;
when registering, the members of an Indigenous corporation may choose not to be liable for debts of the corporation;
Indigenous corporations can operate nationally and are not limited to the state or territory in which they are registered;
registering as an Indigenous corporation is free;
Indigenous corporations may be exempt from annual reporting (especially corporations with a small revenue);
Indigenous corporations can access free advice and support from ORIC; and
Indigenous corporations deal with a specialist regulator (ORIC), rather than with ASIC.
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The size of an Indigenous corporation is determined by considering its gross operating income, consolidated gross assets and number of employees in a single financial year:
A small corporation must have at least two of the following: a consolidated gross operating income of less than $100 000, consolidated gross assets valued at less than $100 000, or fewer than five employees.
A medium corporation must have at least two of the following: a consolidated gross operating income of more than $100 000 and less than $5 million, consolidated gross assets valued at more than $100 000 and less than $2.5 million, or between five and 24 employees.
A large corporation must have at least two of the following: a consolidated gross operating income of $5 million or more, consolidated gross assets valued at $2.5 million or more, or more than 24 employees.
Indigenous corporations must lodge reports with ORIC every year within six months of the end of the corporation’s financial year. The reporting for each corporation will differ based on its registered size and consolidated gross operating income:
Small corporations with a consolidated gross operating income of less than $100 000 are to submit a general report only.
Small corporations with a consolidated gross operating income of more than $100 000 and less than $5 million are to submit a general report, a financial report and an audit report (or a general report and a financial report based on reports to government funders, if eligible).
Medium corporations with a consolidated gross operating income of less than $5 million are to submit a general report, a financial report and an audit report (or a general report and a financial report based on reports to government funders, if eligible).
Large corporations or any size corporation with a consolidated gross operating income of $5 million or more are to submit a general report, a financial report, an audit report and a directors’ report.
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The CATSI Act sets out the duties and obligations of directors (and, in some situations, other office holders) of Indigenous corporations. These duties are similar to the duties of directors and office holders of a company limited by guarantee (discussed above). A breach of these duties may result in criminal penalties, depending on the circumstances.
Broadly, directors (and, in some situations, other office holders) have a legal duty:
to act in good faith in the best interests of the company and for a proper purpose;
to act with reasonable care and diligence;
to not improperly use their position or information; and
to disclose and manage conflicts of interest.
5 Co-operatives
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A co-operative is a democratic organisation which is owned and controlled by its members for a common benefit. Co-operatives are traditionally based on values of self-help, self-responsibility, equality and solidarity.
There are two forms of co-operatives:
A distributing co-operative may distribute any surplus funds to its members (by way of bonus shares, dividends or rebates). When a distributing co-operative is formed, each member must buy the minimum number of shares stated in the co-operative’s rules. If the co-operative is wound up, members receive a return on the capital they invested.
A non-distributing co-operative must reinvest any surplus funds back into the co-operative to support its activities. It cannot distribute any surplus funds to members. It can have share capital, but this is optional. If the co-operative is wound up, members receive only the original value of their shares in the capital. Non-distributing co-operatives are considered ‘not-for-profit’ because they cannot distribute surplus or profits to members.
Co-operatives may incorporate under the Co‑operatives National Law (CNL), which was applied in Victoria by the Co-operatives National Law Application Act 2013 (Vic). The CNL has been applied in all Australian states and territories. The CNL allows co-operatives to operate freely across state and territory borders, without requiring separate registration and reporting in each state or territory. Co-operatives are also exempt from some requirements that arise under the Corporations Act.
The fee for incorporating a co-operative with CAV is $35.90 (from 1 July 2024 to 30 June 2025). The fee to apply for approval of a proposed name, rules and disclosure statements varies between $89.80 and $408.30 (from 1 July 2024 to 30 June 2025), depending on whether a non-distributing or a distributing co-operative is being established.
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The name of a co-operative must include the word ‘Co-operative’ and end with ‘Limited’. Acceptable abbreviations include ‘Co-op’, ‘Ltd’ and ‘&’. Any other abbreviation must be approved by the registrar.
A co-operative must function in accordance with the CNL and the co-operative principles, which are focused on providing voluntary and open membership, democratic member participation and control (one member, one vote); economic participation of members; autonomy and independence; education and training; co-operation among co-operatives; and concern for the community.
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Co-operatives incorporated in Victoria must report to CAV. A co-operative will have different annual financial reporting requirements depending on whether it is classified as a small co-operative or a large co-operative.
A small co-operative is a co-operative that satisfies at least two of the following criteria:
the consolidated revenue of the co-operative and the entities it controls (if any) was less than $8 million for the previous financial year;
the value of the consolidated gross assets of the co-operative and the entities it controls (if any) was less than $4 million at the end of the previous financial year; or
the co-operative and the entities it controls (if any) had fewer than 30 employees at the end of the previous financial year.
A small co-operative must, in a particular year, also have:
no securities issued to non-members during that year, other than securities issued to former members on the cancellation of their membership; or
not issued shares to more than 20 members in a financial year; or, if it has done this, the amount raised by issuing those shares does not exceed $2 million.
Small co-operatives must provide their financial reports to members and may be required to prepare a director’s report. Small co-operatives are not required to have their financial reports audited unless required in it rules or requested by its members or CAV. Small co-operatives must lodge a (simplified) annual report with CAV.
All co-operatives that do not fall within the definition of a small co-operative are considered large co-operatives.
Large co-operatives must have their financial statements audited in accordance with the Corporations Act and obtain an auditor’s report.
Large co-operatives must:
provide the financial report, the director’s report and the auditor’s report to members; and
lodge an annual report with CAV.
All co-operatives (regardless of size) must hold their first AGM within 18 months of registration. Subsequent AGMs must be held within five months of the end of the co-operative’s financial year, or at a time approved by CAV.
For more information about setting up and running a co-operative, see www.consumer.vic.gov.au/licensing-and-registration/co-operatives.
The Business Council of Co-operatives and Mutuals is the peak body for co-operatives and mutuals in Australia and has useful free information on its website (see www.bccm.coop).
Types of community organisations
Chapter: 6.6: Community organisations
Contributor: Justice Connect’s Not-for-profit Law Service
Current as of: 1 September 2024
Law Handbook Page: 549
Next Section: Other issues to consider
