Donate Now: Top 5 legal tips for NFP organisation’s using online fundraising
For many not for profit (NFP) organisations, such as charities and sporting associations, their first fundraising activity is to incorporate a DONATE NOW button on their website. This article provides our top 5 legal tips that NFP organisations should consider when utilising this type of online fundraising.
- Make sure you obtain/have a current licence to fundraise in all states/territories.
- Do not engage in misleading or deceptive conduct.
- Provide proper receipts to your donors. You can only provide a tax receipt if you are endorsed as a deductible gift recipient.
- Ensure that money raised is used for the purpose intended.
- Implement a donation refund policy.
Generally, an NFP organisation that fundraises online would need to consider how the campaign is promoted and what states/territory will be target. However, where an NFP organisation places a DONATE NOW button on its website a donor may come from any state/territory. That is, the NFP organisation will need to obtain a fundraising licence from each state/territory because a donor may be located in any state/territory.
An overview of the processes for each state/territory are set out below.
In Queensland, an NFP organisation will need to register as a charity by lodging an Application for Registration of a Charity with the Office of Fair Trading (Qld).
The NFP organisation must advertise a notice of its intention in the Courier Mail and, for NFP organisation located outside Brisbane, a newspaper that publishes at least 5 days per week. The notice allows third parties a period of one month to object to the registration. A copy of the notice must be forwarded to the Office of Fair Trading within 7 days of lodging the application.
There is no renewal period for registration once it has been approved.
New South Wales
Initially, the NFP organisation may not be required to obtain a fundraising licence in New South Wales. NFP organisations raise less than $15,000 in a financial year are considered small fundraisers and do not need to register.
As the NFP organisation nears this threshold, then in New South Wales, the NFP organisation must apply for a licence with NSW Fair Trading (Fair Trading) by lodging a Charitable Fundraising Application. Each licence is subject to the Charitable Fundraising Authority Conditions. Generally, the fundraising licence must be renewed each year. Each year the NFP organisation will need to provide the latest audited financial statements.
Initially, the NFP organisation may not be required to obtain a fundraising licence in Victoria. Fundraisers that only use unpaid volunteers and raise less than $10,000 (gross) per year do not need to register.
As the NFP organisation nears this threshold, then in Victoria, the NFP organisation will need to register as a fundraiser with Consumer Affairs Victoria by lodging an Application for fundraiser registration together with a Criminal record and personal insolvency declaration signed by each person on the governing body (ie directors).
The registration period is for 3 years and can be renewed. Each year the NFP organisation will need to lodge an annual statement form, to provide details of donations received and how they were distributed.
Australian Capital Territory
In June 2017 the ACT amended the Charitable Collections Act 2003 (ACT) to exempt ACNC-registered charities from requiring a license to fundraise in the ACT.
NFP organisations that are not registered with the ACNC do need a license by lodging an Application for a New or Amended Charitable Collection Licence with Access Canberra.
The registration period is for either 1-5 years, as selected by you. To renew your registration, you will need to lodge the same form.
From 1 December 2016, ACNC-registered charities are exempt from requiring a license to fundraise in the South Australia. However, an ACNC-registered charity must notify Consumer and Business Services of its intention to fundraise by lodging a Collections for charitable purposes application/notification form.
NFP organisations that are not registered with the ACNC must apply for a licence in order to fundraise using the abovementioned form.
The licence is usually granted for 12 months and will expire 6 months after the NFP organisation’s financial year ends. Renewals may be done online and the NFP organisation will need to upload and submit its financial statements for the last statement period.
For NFP organisation’s located outside Tasmania, they will need to lodge with Consumer Building and Occupational Services an Application for Approval to Collect Charitable Donations (Form 1). For other NFP organisations, they will need to lodge an Application to Collect Charitable Donations (Form 2).
For Form 1 applications the licence is granted for 3 years and for Form 2 applications the licence is granted for 2 years. At the end of the licence period the NFP organisation will need to lodge a new application.
In Western Australia, a NFP organisation needs to lodge with the Department of Mines, Industry Regulation and Safety a Charitable collections licence application form together with a Principle Executive Officer declaration form.
The NFP organisation will need to provide a covering letter explaining what the NFP organisation does, who the beneficiaries will be and why a licence is required. This, together with the forms are considered by the Charitable Collections Advisory Committee.
A licence is for a period of 3 years and can be renewed for an additional 3 years.
The Northern Territory does not have any licence requirements to conduct fundraising (as described in this article).
Misleading and deceptive conduct
NFP organisation’s who engage in activities in trade or commerce are required by law not to mislead or deceive in relation to those activities. This law applies even if you do not intend to mislead or deceive anyone.
An established charity provides ongoing financial support towards the cost of counselling services to families suffering trauma. Published on its website, together with its DONATE NOW button, the charity represents to consumers that their donations will help relieve the suffering of families who experience trauma.
The fundraising activity, ie the DONATE NOW, of the charity is likely to occur in trade or commerce due to the continuous nature of its activity. The statement, on its own, appears to accurately reflect the true situation and is therefore unlikely to mislead or deceive consumers.
However, if the charity makes the same representation to consumers but the donation is provided to another charity to assist with the cost of supplying books to children with low literacy rates then the representation is misleading and deceptive.
A charity engaging in misleading and deceptive conduct would breach the Competition and Consumer Law. In such circumstances as the above example the regulators have a variety of enforcement options available, including issuing an infringement notice. The regulator can also take court action against the charity and may seek a monetary penalty. The maximum penalty being $1.1 million for an NFP organisation that is a corporation.
NFP organisation’s who have obtained a fundraising authority must keep records of monies received by donors utilising the DONATE NOW button in accordance with the applicable fundraising legislation. However, provided the NFP organisation deposits the monies received into an account (at a bank, building society or credit union) that only consists of money raised from fundraising, the NFP organisation generally is not required to provide a receipt to the donor. In such circumstances, NFP organisations would generally maintain two accounts; one for fundraising and one for operations.
If an NFP organisation is endorsed as a deductible gift recipient and the amount of the donation is $2.00 the NFP organisation may provide a tax recipient that complies with the relevant tax law.
Use of monies received from fundraising
Each NFP organisation’s constituent document sets the primary obligation for use of any income or assets received by the NFP organisation. An NFP organisation must only use its income and assets solely in pursuit of its purpose (or objects) which are also set out in its constitution document.
Therefore, any money received by an NFP organisation through its DONATE NOW online fundraising activity must only be used in pursuit of its purpose. If the NFP organisation has made a representation in relation to that purpose, then the monies raised through the DONATE NOW must be used for that intended purpose.
Depending on the additional regulatory requirements of the NFP organisation, for example an income tax exempt entity, ACNC registered charity, Office of State Revenue concessions/exemptions, the NFP organisation would also need to demonstrate that its income and assets are used in pursuit of its purpose.
Implement a donation refund policy
There are a number of issues to consider when a donor has requested a refund of their donation, for example was the donation amount incorrect or made accidently or did the donor simply change their mind.
If an NFP organisation made an error in processing the donation it would be required to correct that error. Generally, there is no requirement to refund a donation if a donor changes their mind. However, in the absence of a clear refund policy this becomes a grey area and may lead to a dispute.
We recommend incorporating a donation refund policy on the NFP organisation’s website. Ideally in close proximity to the DONATE NOW button. Set out below is a refund policy to used as guidance.
Donation Refund Policy
This refund policy outlines the procedure for issuing a refund of your donation.
Errors made by us
Should an error be made in the amount of any donation, you must notify us of the error within 60 days of making the donation.
All requests for refunds must be made in writing and directed by email to [insert email address] or by post to [insert postal address].
The request should set out the details of the initial donation including the date, amount, name of the donor, the receipt number and the nature of the error. If the error is in relation to a tax invoice that was issued, the incorrect amount immediately becomes void and invalid, and a new tax invoice will be issued for the amount of the corrected donation.
If an error is made by us or our financial institution, a full refund will be made as soon as possible following notification of the error.
Change of mind on donation
Refunds of the amount pledged will not automatically be made simply because you have changed your mind. It is for this reason that we ask that you make your choice to donate carefully.
Errors in donation pledged
We are under no obligation to give a refund if an error has been made on your part, but will endeavour to ensure that any genuine errors (such as to the amount donated) are rectified.
We reserve the right to deduct any bank or transaction charges for any refund processed. Should an error be detected and a request for refund be made after 60 days have expired, we regret that we are unable to refund any monies.