NFP Resources

A not-for-profit (or non-profit) organisation is an organisation that applies its profits to further the objectives of the organisation.  It is not operating for the profit or gain of its individual members during its operation nor when it winds up. On the other hand, a for-profit organisation can distribute its profit to its individual members, investors or shareholders during its operation or when it winds up.

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Not-for-profit organisations may derive their profit from a variety of sources, such as from donations, charging members for public services, selling or leasing property, State or Commonwealth funding etc. It can use the profit to employ staff, carry out programs, enhance infrastructure etc., provided that it is directed to furthering the objectives of the organisation.

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Some of the legal benefits of a not for profit structure include:

• State and Federal tax exemptions, concessions and benefits;

• access to some legal structures only accessible by not-for-profit organisations, e.g. incorporated associations;

• access to State and Commonwealth funding;

• access to private philanthropic bodies; and

• ability to conduct fundraising activities.

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Some organisations may seek to achieve a particular social outcome and trade in goods and services to achieve that outcome - these are known as social enterprises. These organisations can choose to be either not-for-profit or a for-profit, with the main difference being that not-for-profit social enterprises apply all of their profits to achieve a social outcome, rather than distributing to members, investors or shareholders.  For further information on social enterprises please see our Social Enterprises Resources page.

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When you set up a not for profit organisation, it is important that you choose an appropriate legal structure for your organisation's needs.

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Choosing a legal structure

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The legal structure that you choose when setting up your not-for-profit organisation will affect, among other things, the way you hold meetings, the minimum number of members, reporting requirements, tax obligations, and costs. It is important to understand the statutory requirements that go with the structure that you choose.

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An overview of legal structures commonly used by not-for-profit organisation is provided below.

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Incorporated associations

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An incorporated association is a legal entity that is distinct from its individual members which operates in the State/Territory in which it is registered.

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Many incorporated associations originate from a group of people who agree to act together as an organisation (i.e. an unincorporated association). The advantage of being an informal group is that there are few legal responsibilities.  There are no statutory requirements governing the way the group is organised, nor does the group have to follow any particular procedures. At its simplest, the group has the obligation to act as a trustee for the association’s purposes.

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The disadvantage is that if anything goes wrong, for example, if someone sues the association, it is possible that as the lessee and as a committee member you may be held personally liable. In that case, if the association does not have enough money to cover the pay-out, it may fall to the individuals running the assocition to pay the cost.  Additionally, if you stop being a member of the association but your name is still on the contract, there may be difficulties transferring your responsibilities. Furthermore, most foundations and government departments will only fund organisations that are legal entities that are distinct from its individual members.

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To overcome these disadvantages, the unincorporated association may decide to incorporate and become an incorporated association (see below ‘incorporating an unincorporated association‘). ‘Incorporation’ is the system used by Federal and State Governments to register an organisation as a distinct legal entity.

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Incorporated associations are incorporated under the relevant State-based incorporated associations legislation and are regulated by the relevant State-based authority.

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Suitable for: locally-focused community groups with limited capacity to meet reporting obligations and limited funds and resources

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Not suitable for: groups with fewer members than prescribed by the relevant State-based associations law or for wholly owned subsidiaries of parent organisations

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Companies limited by Guarantee

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A company limited by guarantee is a legal entity distinct from its individual members that can operate anywhere in Australia.

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In a company limited by guarantee, the members of the company have limited liability.  The members agree in writing (a ‘guarantee’) to pay a nominal amount (usually $10-$100) to the property of the company.  If the company is wound up, the liability of the members is limited to the nominal amount that they have guaranteed.

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Some of the benefits of this structure include:

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• it is facilitative of not-for-profit status;

• as a public company, it is subject tothe extra scrutiny, transparency and accountability required by legislation, giving it a level of credibility and independence that will give confidence to funders and members alike;

• it can be established as a ‘special purpose’ company;

• it is a straightforward structure familiar to organisations who wish to provide funding or be involved;

• it provides operational flexibility;

• the liability of members is limited to a fixed amount, the sum of the guarantee;

• it allows for perpetual succession;

• the company has capacity to enter into and enforce contracts;

• the company has the capacity to sue and be sued;

• it has all the benefits of corporate status; and

• the activities of the organisation may be carried out throughout Australia.

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Companies limited by guarantee are incorporated under the Corporations Act 2001 (Cth) and are regulated by the Australian Securities and Investments Commission (ASIC).

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NOTE: companies limited by guarantee registered as charities will also be regulated by the Australian charities and Not-for-profit Commission (ACNC). For further information on charities please see our NFP Resources – Charities page.

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Suitable for: groups wanting to operate nationally, charities registered with the ACNC, wholly owned subsidiaries of parent organisations

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Not suitable for: groups with limited capacity to meet reporting obligations and limited funds and resources

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Indigenous corporations

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A co-operative is a form of not-for-profit organisation which is member-owned. A co-operative must have at least five members. The fact that they are member-owned means that co-operatives allow for a more democratic style of work, and make pooling of resources and sharing of skills to be more competitive.  Co-operatives supply goods and services to their members or to the general public.

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Co-operatives are regulated by the relevant state or territory office of fair trading or consumer affairs.  A non-trading cooperative does not give returns to members, and may or may not have share capital. By contrast, a trading cooperative is able to do both of these things.

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Some of the benefits of this structure include:

• all shareholders have an equal vote at general meetings, regardless of their shareholding or involvement in the cooperative;

• shareholders, directors, managers and employees have no responsibility for debts of the co-operative unless those debts are resulted from recklessness, negligence or fraudulent activity;

• members, other than directors, can be under 18;

• a co-operative is member owned and controlled, rather than controlled by investors; and

• all members and shareholders have to be active in the cooperative.

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Suitable for: groups providing services to its members

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Not suitable for: larger organisations or organisations wanting to have non-voting members

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Other structures

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There are other structures available that are not organisations. These include charitable trusts, public ancillary funds, and private ancillary funds.

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If you need any further assistance, we can provide advice on which structure is most appropriate for you.

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Establishing a Not-For-Profit Organisation

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Once you have decided on the appropriate legal structure, you can now establish your not-for-profit organisation.  There are three main steps:

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• register (or incorporate) – the process is different for each type of legal structure and is determined by the requirements of the relevant legislation;

• apply for an Australian Business Number (ABN) – this is a unique number which identifies your not-for-profit organisation to the Australian Taxation Office and other government department and agencies.  It is not compulsory unless the organisation has has a goods and services tax turnover of $150,000 or more.  However, if your not-for-profit organisation wishes to register as a charity with the ACNC or register a business name, it must have an ABN;

• register a business name – you will only need to register your business name with ASIC if it is not your organisation's name.

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What are the core duties and responsibilities of the governing body?
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The governing body (that is the board or management committee) is the body responsible for ensuring that the not-for-profit (NFP) organisation is accountable for its actions and performance.

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The roles of the governing body are to:

• provide strategic direction,
• oversee the CEO or management, and
• facilitate accountability to stakeholders.
  
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The responsibilities of the governing body include:

• determining the NFP’s strategic objectives,
• ensuring the CEO or management implements the strategic objectives,
• supervising and directing the CEO or management.
• monitoring the NFP’s performance,
• ensuring there is a system of internal controls,
• reporting to the members,
• complying with statutory obligations, and
• reviewing the governing body’s performance.

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What are the core duties and responsibilities of ‘officers’ and directors?

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The core duties of officers and directors arise under:

• common law – to act bona fide in the interests of the NFP as a whole, that is to act with good faith for a proper purpose and to act with reasonable care and diligence)
• equity – to avoid conflict of interest
• statute
  • for NFP companies - ss 180-185 Corporations Act 2001 (Cth) (Corporations Act) 
  • ‍for NFP incorporated associations – the relevant Associations Incorporation Act
  • for charities – the Australian Charitie and Not-for-profits Commision Act 2012 (Cth) 

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NFP companies

Section 9 of the Corporations Act defines who is an ‘officer’ of the NFP company.  If an individual’s position falls within the definition of ‘officer’, then that individual owes personal duties to the NFP.

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An ‘officer’ is:

• a director or secretary of the NFP;
• a person who makes decisions that affect the whole or a part of the business, or has the capacity to affect significantly the NFP’s financial standing, or in accordance with whose instructions or wishes the directors of the NFP are accustomed to act;
• a receiver, or receiver and manager, of the property of the NFP;
• an administrator of the NFP;
• an administrator of a deed of company arrangement executed by the NFP;
• a liquidator of the NFP;
• a trustee or other person administering a compromise or arrangement made between the NFP and someone else.

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Examples of ‘officers’ include:

• senior managers
• executive officers (CEOs, CFOs, general counsel)
• company secretaries
• directors

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Duties:

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1. Duty of care, skill and diligence (s180 (1))

‍The standard expected is that which a reasonable person would consider appropriate if placed in the same scenario.

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‍What should you do?‍

• Understand the affairs of the NFP to enable you to form a reasonable informed opinion of the finances of the NFP and the capacity of the NFP to meet and contractual obligations it may enter into.
• Ensure you have the basic financial skills to be able to interpret the NFP’s financial records to assess whether or not there is a reasonable basis for suspecting insolvency of the NFP.
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2. Duty to exercise good faith (s181)

This requires you to act honestly, exercise your powers in the interests of the NFP and to avoid conflicts of interest

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What should you do?

• Ensure you exercise independent judgment regarding proposal put before the board.
• Consider the all relevant material and views before arriving at a decision.
• Do not act in a way that would preference the interests of a third party over the interests of the NFP.
• Do not vote on motions where there is the potential of breach your duty.

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3. Duty not to improperly use his or her position (s182)‍

4. Duty not to improperly use information (s183)

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Incorporated Associations

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The Associations Incorporation Acts of each State and Territory define an ‘officer’ as:

• a member of the management committee,
• the public officer of the NFP,
• the secretary,
• the treasurer,
• the executive officer or employee of the NFP, and
• any person occupying or acting in any of those positions, whether or not validly appointed to occupy or duly authorised to act in the position.
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Duties:

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1. Duty to exercise good faith

This requires you to act honestly, exercise your powers in the interests of the NFP and to avoid conflicts of interest.

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2. Duty of care, skill and diligence

The standard expected is that of a reasonable person in the same circumstances. The actions you should take are the same as for an officer of a company.

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Charities

Charities must take reasonable steps to make sure that its responsible persons understand and carry out the duties set out in Australian Charities and Not-for-profit Commission (ACNC) Governance Standard 5: Duties of responsible persons.

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The duties are:

• The duty to act with reasonable care and diligence
• The duty to act honestly in the best interests of the charity and for its charitable purposes
• The duty not to misuse their position as a responsible person
• The duty not to misuse information they gain in their role as a responsible person
• The duty to disclose conflicts of interests
• The duty to make sure the financial affairs of the charity are managed responsibility; and
• The duty not to allow the charity to operate whilst it is insolvent.

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What are the core duties and responsibilities of the company secretary?

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The company secretary duties and responsibilities include compliance with the:

• Corporations Act;
• the company’s Constitution;
• Australian Securities and Investments Commission (“ASIC”); and
• any other applicable legislation or regulations.

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Company Secretary’s Legal Responsibilities

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Under section 188 of the Corporations Act, a company secretary must:

• maintain a registered office (s 142);
• ensure that the registered office of a public company is properly open to the public (s145);
• ensure that the register of office holders kept by ASIC is up to date (s 205B)**
• respond to ASIC queries (s 346C);
• notify ASIC if the principal place of business changes (s 146); and
• lodge financial reports with ASIC (if required) (s 319(1)).

** this requirement does not apply to a public company that is also registered as a charity with the ACNC.

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Contravention of these requirements are strict liability offences. However, the current defence of a company secretary having ‘taken all reasonable steps’ remains (s 183).

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Company Secretary Duties

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The usual company secretary duties are to:

• prepare notices and agendas (in consultation with the Chair) for board meetings and members meeting;
• prepare the board papers for each board meeting setting out the reports and documents required by the board;
• record minutes of meetings;
• maintain statutory registers;
• retain key company documents and records;
• ensure lodgement of statutory forms, returns and reports to regulatory bodies such as ASIC and any other relevant body;
• ensure compliance with the Corporations Act and any statutory obligations under the laws and regulations that apply to the company’s business activities;

Other company secretary duties may include:

• advising and monitoring the compliance of the directors with their governance responsibilities and obligations;
• guiding the Board and management on:
  • the Corporations Act;
  • the company’s constitution;
  • employment laws;
  • health and safety in the workplace;
  • insurance;
  • trade practices and consumer laws;
  • environmental compliance;
  • superannuation; and
  • accounting standards;

• signing of contracts and other documentation on behalf of the company;
• preparing policies and manuals (such as a corporate governance manual);
• attend to stakeholder enquiries and administrative tasks;
• liaise with professional advisers (such as accountants and lawyers);
• maintain custody of the Common Seal (if any) and record its use; and
• implement any other tasks required under the Constitution or Board resolutions.

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What are the core duties and responsibilities of the public officer?

Section 252(1) of the Income Tax Assessment Act 1997 (Cth) (“Tax Act”) requires that every company be represented by a “duly appointed” Public Officer within 3 months after the company commences to carry on business or derive income in Australia to ensure its various taxation-related obligations and responsibilities are fulfilled. Such person is also Public Officer for all other tax laws (s 56 Taxation Administration Act 1953 (Cth)).

In summary, the Public Officer is responsible for ensuring that the company complies with the tax law and for liaising with the Australian Taxation Office (ATO) concerning the company’s taxation matters.

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Public Officer responsibilities

The Public Officer has the following responsibilities is answerable for all things required to be done by the company under the Tax Act (and any other tax laws or regulations) and will be liable for the same penalties.

Note that under the Tax Act any proceedings taken against a company may also include the Public Officer and he or she  may be jointly liable with the company for any penalty imposed; and of particular note any such actions, etc may also be taken against any director or Company Secretary.

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Public Officer duties

Typically the Public Officer is the company executive most directly involved with tax and accounting matters whose duties would include signing and lodging various returns with the ATO.

Registering as a charity

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Who determines charity status?

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The Australian Charities and Not for profit Commission (ACNC) regulates charities. Although registration with the ACNC as a charity is voluntary, a charity must be registered to access any charity tax concessions from the Australian Taxation Office. For further information on tax endorsements please see our NFP Resources – tax endorsements page.

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NOTE: The Federal Coalition has expressed its plans to absolve the ACNC.  However, at this stage the ACNC is still empowered to be the charity regulatory.

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Is your not for profit organisation a charity?

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On 1 January 2014, the Charities Act 2013 (Cth) came into effect, and it introduced a statutory definition of ‘charity’.

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To be a charity, your not for profit organisation must:

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—  be a not for profit‍

That is, any profit must be applied to further the objectives of the organisation both during its operating and on winding up.  Not for profit organisations can demonstrate they are not for profit by having an appropriate not for profit and winding up clause in their constitution or rules.
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‍Example not for profit clause

The assets and income of the organisation must be applied solely to further the objects and no portion may be distributed directly or indirectly to the members of the organisation except as genuine compensation for services rendered or expenses incurred on behalf of the organisation.
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Example winding up clause

In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities must be transferred to another organisation which is not carried on for the profit or gain of its individual members.

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— have purposes which are charitable purposes

The main charitable purposes set out in the Charities Act include:

• Advancing health
• Advancing education
• Advancing the security or safety of Australia or the Australian public
• Another purpose beneficial to the general public that may be reasonably regarded as analogous to, or within the spirit of, the above purposes
• Promoting reconciliation, mutual respect and tolerance between groups of people in Australia
• Advancing religion
• Promoting or protecting human rights
• preventing or relieving the suffering of animals
• Advancing the natural environment
• Advancing social or public welfare (including the relief of poverty, caring for and protecting young people, providing child care services and certain disaster relief activities)
• Promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a State, a Territory or another country, in furtherance or protection of one or more of the above purposes
• Advancing culture

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— be for the public benefit‍

According to the Charities Act, an organisation will be for the public benefit if the achievement of the purpose would be of public benefit and the purpose is directed to benefit that is available to the members of the general public or a sufficient section of the general public.

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— which does not have an disqualifying purposes

The Charities Act defines a ‘disqualifying purpose’ as engaging in or promoting activities which are unlawful or contrary to public policy, or promoting or opposing a political party or candidate.

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— which is not an individual, political party or government entity.

NOTE: Being a charity is a ‘status’ rather than a structure. The structure is an incorporated association, a company limited by guarantee, a cooperative, an indigenous corporation etc.

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Compliance

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There are five key obligations that a charity must comply with to maintain its registration as a charity with the ACNC, including:

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1. Reporting

• Small charities (annual revenue is less that $250,000) – must submit an Annual Information Statement and can submit an annual financial report (if they choose)
• Medium charities (annual revenue is $25,000 or more, but less than $1 million) – must submit an Annual Information Statement and audited annual financial reports
• Large charities (annual revenue is $1 million or more) – must submit an Annual Information Statement and audited annual financial reports

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2. Record-keeping

• Under the ACNC Act, your charity must keep financial records and operational records.
• Financial records
• These must correctly record and explain how your charity spends or receives its money or other assets, its financial position, and performance. They must also allow for true and fair financial statements to be prepared and to be audited, if required.
• Operational records
• The operational records you must keep are the ones that show your charity is entitled to be registered as a charity and as its subtype, meets its obligations under ACNC Act and meets its obligations under tax law.

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3. Notification

• You need to notify the ACNC of changes to your charity, including:
• Changes to the legal name
• Address for service
• Change to the ‘responsible persons’ (that is the people who are members of the charity’s governing body (directors, committee members, trustees)
• Changes to the governing documents (that is constitution, rules or trust deed)

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4. Governance standards

Your charity must meet the ACNC’s five governance standards, which are a set of minimum requirements for governance. A summary of the governance standards are as follows:

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• Standard 1: Purposes and not-for-profit nature of a registered entity

Charities must be not-for-profit and work towards their charitable purpose. They must be able to demonstrate this and provide information about their purpose to the public.

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• Standard 2: Accountability to members

Charities that have members must take reasonable steps to be accountable to their members and provide their members adequate opportunity to raise concerns about how the charity is governed.

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• Standard 3: Compliance with Australian laws

Charities must not commit a serious offence (such as fraud) under any Australian law or breach a law that may result in a penalty of 60 penalty units (currently $10 200) or more.

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• ‍Standard 4: Suitability of responsible persons

Charities must check that their responsible persons (that is, the members of its governing body (directors, committee members or trustees)) are not disqualified from managing a corporation under the Corporations Act 2001 (Cth) or disqualified from being a responsible person of a registered charity by the ACNC Commissioner. Charities must take reasonable steps to remove any responsible person who does not meet these requirements.

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• Standard 5: Duties of responsible persons

Charities must take reasonable steps to make sure that responsible persons understand and carry out the duties set out in this standard 5. The duties are:

• The duty not to misuse their position as a responsible person
• The duty not to misuse information they gain in their role as a responsible person
• The duty to disclose conflicts of interests
• The duty to make sure the financial affairs of the charity are managed responsibility; and
• The duty not to allow the charity to operate whilst it is insolvent.

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‍5. External conduct standards

• The external conduct standards are a set of minimum standards that regulate registered charities when they send money of participate in activities outside of Australia.

Coming soon!

Tax concessions – not for profit organisations (other than charities)

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There is a range of concessions available to not for profit organisations. A summary of tax concessions are set out below:

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Income tax exempt

Only certain categories of not for profit organisations are exempt from income tax. They come from these broad groups:

• registered charities (discussed below)
• registered charities (discussed below)
• community service organisations
• cultural organisations
• educational organisations
• employment organisations
• health organisations
• resource development organisations
• scientific organisations
• sporting organisations

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Organisations that are not charities can self-assess their entitlement to income tax exemption. They do not need to be endorsed by the ATO to be exempt from income tax. Most have additional tests and rules that must be met before the organisation can be exempt. We can assist you on determining whether your charity satisfies the additional tests and rules.

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If you work out that your organisation meets all the requirements for income tax exemption, all of the following applies:

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Your organisation will not need to pay income tax, capital gains tax or lodge tax returns, unless specifically asked to do so

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You do not need to get confirmation of this exemption from the ATO

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You should carry out a yearly review to check if your organisation is still exempt – you should also do this when there are major changes to your organisation’s structure or activities.

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FBT exemption

‍Only public and not for profit hospitals and public ambulance services are eligible for this concession. If eligible the FBT exemption is capped at $17,000 per employee.
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FBT rebate‍

The FBT rebate is an entitlement to a rebate equal to 48% of the gross FBT payable, subject to a $30,000 capping threshold. Organisations that qualify for a FBT rebate are referred to as ‘rebatable employers’. Rebatable employers are certain non-government, not for profit organisations. Organisations that qualify for the FBT rebate include:

• certain scientific or public educational institutions
• trade unions and employer associations
• not for profit organisations established to encourage music, art, literature or science
• not for profit organisations established to encourage or promote a game, sport or animal races
• not for profit organisations established for community service purposes
• not for profit organisations established to promote the development of aviation or tourism
• not for profit organisations established to promote the development of Australian information and communications technology resources
• not for profit organisations established to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.

Not for profit organisations can self-assess their entitlement provided they are exempt from income tax.

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GST concessions for gift deductible entities

‍Only certain types of not for profit organisation can access this concession.

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GST concessions

‍There are a range of goods and services tax (GST) concessions that are available to non-profit organisations, including:

• Gifts – a gift to a not for profit organisation is not considered payment for a sale.
• School tuck shops – a not for profit organisation may sell food through a tuck shop or canteen at a primary or secondary school and treat the sales as input taxed.
• GST registration threshold – the registration turnover threshold is higher for not for profit organisations than for other organisations.
• GST groups – the requirement to satisfy the 90% ownership test is waived and all the other members of the GST group or proposed GST group are not for profit organisations and members of the same not for profit association.

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Deductible gift recipients‍

Only certain types of not for profit organisation can be endorsed as a deductible gift recipient.

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Refunds of franking credits

‍The organisation must be an entity that is endorsed by the ATO as exempt from income tax or a deductible gift recipient to access this concession.

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Tax concessions and endorsement requirements – charities

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A summary of tax concessions are set out below:

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Income tax exempt

Registered charities, public benevolent institutions and health promotion charities must be endorsed by the ATO to be exempt from paying income tax. Before an organisation can apply for endorsement, it must be registered with the ACNC and have an Australian business number (ABN). If your organisation is endorsed, all of the following applies:

• your organisation will not need to pay income tax, capital gains tax or lodge tax returns, unless specifically asked to do so
• you should carry out a yearly review to check if your organisation is still exempt – you should also do this when there are major changes to your organisation’s structure or activities.

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FBT exemption

Only registered public benevolent institutions and health promotion charities are eligible for this concession. If eligible the FBT exemption is capped at $30,000 per employee. If your organisation is eligible for FBT exemption, benefits it provides its employees are exempt from FBT where the total grossed-up value of certain benefits for each employee during the FBT year is equal to, or less than, the $30,000 capping threshold. If the total grossed-up value of fringe benefits provided to an employee is more than the $30, 000 capping threshold, your organisation will need to pay FBT on the excess.

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FBT rebate

The FBT rebate is an entitlement to a rebate equal to 48% of the gross FBT payable, subject to a $30,000 capping threshold. Registered charities must be endorsed by the ATO to access the FBT rebate.  A condition of this endorsement is that the charity is exempt from income tax. The FBT rebate is only available to registered charities that are institutions.

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GST concessions for charities and gift deductible entities

There are a range of goods and services tax (GST) concessions that are available to charities (as a not for profit organisation), including:

• Gifts – a gift to a not for profit organisation is not considered payment for a sale.
• School tuck shops – a not for profit organisation may sell food through a tuck shop or canteen at a primary or secondary school and treat the sales as input taxed.
• GST registration threshold – the registration turnover threshold is higher for not for profit organisations than for other organisations.
• GST groups – the requirement to satisfy the 90% ownership test is waived and all the other members of the GST group or proposed GST group are not for profit organisations and members of the same not for profit association.

Charities can self-assess their entitlement to GST concessions for non-profit organisations. There are additional GST concessions that are available to registered charities and gift deductible entities provided that they are also endorsed by the ATO to access the GST charity concessions, including:

• Raffles and bingo – tickets to raffles and bingo sold by an eligible entity are GST-free provided the holding of the raffle or bingo event does not contravene a state or territory law.
• Fundraising events – an eligible entity may choose to treat all sales it makes in connection with certain fundraising events as input taxed.
• Non-commercial activities – where an eligible entity makes sales and the payment it receives in return for the things it sold is less than a certain amount, the sales are GST-free.
• Accounting on a cash basis – an eligible entity may choose to account on a cash basis regardless of its GST turnover.
• Reimbursement of volunteer expenses – an eligible entity can claim GST credits for reimbursements made to volunteers for expenses the volunteer incurs that are directly related to their activities as a volunteer of the entity.
• Gifts and GST credit adjustments – adjustments of GST credits are not required when an item acquired by a business is subsequently gifted to an eligible not for profit entity.
• Donated second-hand goods – sales of donated second-hand goods by an eligible entity are GST-free.
• Non-profit sub-entities – an eligible entity may conduct some of its activities through a not for profit sub-entity, subject to certain exceptions.

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Deductible gift recipients

• The organisation must be endorsed by the ATO as a deductible gift recipient to access this concession. The only organisations that do not need to be endorsed are those listed by name in tax law.

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Refunds of franking credits

• If a charity is endorsed as income tax exempt, it will be entitled to a refund of franking credits on dividends it receives.

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Managing Risks

There is no substitute for a planned employment framework in your NFP organisation. Employment contracts prepared specifically for your NFP; workplace policies; and regular training for employees (including managers), go a long way toward protecting a NFP from employment claims. Getting legal advice from an experienced workplace relations lawyer, understanding the potential risks and how to manage them before you make decisions provides further protection.

Who is covered by Employment Laws

Employment in Australia is governed by either the state or federal industrial frameworks.

Federal Industrial Jurisdiction

The Fair Work Act 2009 (Cth) (the FW Act) regulates “national system” employers and employees and covers the Commonwealth, Commonwealth authorities and constitutional corporations, as well as all other:

• employment in Victoria, ACT and the Northern Territory;
• private sector employment in New South Wales, Queensland and South Australia; and
• private sector and local government employment in Tasmania.

The system does not cover:

• state public sector or local government employment or employment by non-constitutional corporations in the private sector in Western Australia;
• state public sector and local government employment in NSW, Queensland and South Australia; or
• state public sector employment in Tasmania.

Volunteers and genuine contractors are not covered by the unfair dismissal provisions of the FW Act.

Charities

Most, but not all, non-government organisations (NGOs), such as charities, are incorporated and those that engage in “trading” are consequently covered by the FW Act. Incorporated charities which derive their income from non-trading activities (for example fund raising) are not covered by the FW Act. However, it can be difficult to determine whether an employer is a trading corporation and the cases are not entirely clear. Charities and other NFPs may still be constitutional trading corporations despite income accrued being used for charitable purposes other than to create a profit.

Examples of NGOs that have been found to be trading corporations include:

1. a charitable organisation, on the basis that it earned substantial income from trading activities. It did not matter that the income was used for charitable purposes rather to create a profit;[1]
2. a NFP organisation, on the basis that it generated substantial income from trading activities, even though that income was only a minority proportion of total income. The motive for which that trading income was earned was not relevant;[2]
3. a NFP provider of rehabilitation services because the provider’s funding contracts, individual contracts for some activities and its youth housing renovation program, generated about $1.2 million a year for the organisation, equating to 11 per cent of its annual activities. It was also held that activities associated with the direct provision of accommodation services were trading activities. The combined level of trading activities (in excess of 15 per cent of income) was held to be not insubstantial.[3]

However, a different charitable organisation was found not to be a trading corporation. The trading activities it did engage in were considered insubstantial and peripheral to the central activity of the organisation.[4]

State Industrial Relations coverage

Employment that is not covered under the national industrial relations system remains regulated by the relevant state industrial relations systems. However, some entitlements under the FW Act extend to non-national system employees, including unpaid parental leave, notice of termination, payment in lieu or notice and protection from unlawful termination of employment. Conversely, the states retain coverage of long service leave and workplace health and safety matters.

Understanding how your workplace is covered is important as that will dictate how you deal with various aspects of the employment relationship.

The Fair Work Act 2009

The FW Act establishes a safety net comprising of the NES; modern awards and national minimum wage orders; and a compliance and enforcement regime. It also establishes the institutions formed to administer the system, comprising of the Fair Work Commission and the Fair Work Ombudsman. The Fair Work Divisions of the Federal Court and Federal Magistrates Court and, in some cases, state and territory courts, perform the judicial functions under the FW Act.

Key features of the Fair Work system

The key features of the Fair Work system are:

• 10 minimum National Employment Standards (NES);
• awards that apply nationally for specific industries and occupations;
• the national minimum wage; and
• protection from unfair or unlawful dismissal, breach of workplace rights and workplace bullying.

Awards, together with the National Employment Standards and the national minimum wage, make up the safety net of entitlements for employees covered by the system.

Industrial Framework

National system employee’s conditions largely arise out of:

• the terms of the FW Act; and
• a Modern Award; or
• an enterprise agreement; or
• if they are not covered by an award or agreement, a common law employment contract.

The NES

The national minimum wage and the NES make up the minimum entitlements for employees in Australia. The NES are 10 minimum employment entitlements that must be provided to all employees. A Modern Award, employment contract, enterprise agreement or other registered agreement cannot provide for conditions that are less than the national minimum wage or the NES and they cannot exclude the NES.

The 10 minimum entitlements of the NES are:

• Maximum weekly hours;
• Requests for flexible working arrangements;
• Parental leave and related entitlements;
• Annual leave;
• Personal/carer’s leave, compassionate leave and unpaid family and domestic violence leave.

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• Community service leave;
• Long service leave;
• Public holidays;
• Notice of termination and redundancy pay; and
• Fair Work Information Statement.

The Office of the Fair Work Ombudsman investigates alleged breaches as well as conducting random audits and have a demonstrated history of prosecuting employers in breach of their obligations. The have been significant penalties applied to employers in recent years.

Employers must provide employees with a copy of the Fair Work Information Statement before the employee commences employee or soon after. Substantial penalties can apply for failing to comply with this obligation.

Who is covered by the NES

All employees in the national workplace relations system are covered by the NES regardless of the award, registered agreement or employment contract that applies to them.

However, casual employees only get NES entitlements relating to:

• unpaid carer’s leave;
• unpaid compassionate leave;
• unpaid family and domestic violence leave;
• community service leave; and
• the Fair Work Information Statement.

In some states and territories long serving casuals are also eligible for long service leave.

Where there is an expectation of ongoing work for a casual employee and they have been employed regularly and systematically for at least 12 months, they have extra entitlements under the NES of the right to request for flexible working arrangements, access to parental leave and protection from unfair dismissal.

Employment Records

Employers must keep time and wages records for 7 years. Time and wages records must be:

• readily accessible to a fair Work Inspector if requested;
• legible; and
• in English.

An employer must keep a record in respect of each employee about:

1. basic employment details such as the name of the employer and the employee and the nature of their employment (e.g. part‑time, full‑time, permanent, temporary or casual);
2. pay;
3. overtime hours;
4. averaging arrangements;
5. leave entitlements;
6. superannuation contributions;
7. termination of employment (where applicable); and
8. individual flexibility arrangements and guarantees of annual earnings.

There are also record generation and retention obligations on old employers and new employers in transfer of business situations.

Records must be properly maintained.  For example, the regulations set out the required form to make sure that records are legible and readily accessible to an inspector and that records are accurate at all times.

Time and wages records cannot be changed unless the change is to correct an error and cannot be false or misleading. Substantial penalties apply if an employer is found to breach their record keeping obligations.

Pay slips

An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work. The pay slip must be in electronic form or hard copy and include:

1. the employer’s name;
2. the employee’s name;
3. the period to which the pay slip relates;
4. the date on which the payment to which the pay slip relates was made;
5. the gross amount of the payment;
6. the net amount of the payment;
7. any amount paid to the employee that is a bonus, loading, allowance, penalty rate, incentive‑based payment or other separately identifiable entitlement; and
8. the Australian Business Number (ABN) (if any) of the employer.

If the employee is paid at an hourly rate of pay, the pay slip must also include:

• the rate of pay for the employee’s ordinary hours (however described); and
• the number of hours in that period for which the employee was employed at that rate; and
• the amount of the payment made at that rate.

If the employee is paid at an annual rate of pay, the pay slip must also include the rate as at the latest date to which the payment relates.

If an amount has been lawfully authorised to be deducted from the gross amount of the payment, the pay slip must also include the name, or the name and number of the fund or account into which the deduction was paid.

If the employer is required to make superannuation contributions for the benefit of the employee, the pay slip must also include:

• the amount of each contribution that the employer made during the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contribution was made; or
• the amounts of contributions that the employer is liable to make in relation to the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contributions will be made.

Record of hours worked

An employer must make and keep a record that specifies:

• the number of overtime hours worked by the employee during each day; or
• when the employee started and ceased working overtime hours.

Even for salaried employees, it is generally required that an employer maintain overtime records to ensure the employee is not financially disadvantaged by working excessive hours. There are also WHS obligations to consider with regards to excessive additional hours.

Performance Management

This is the area of employment that commonly sits at the heart of most employment disputes. Ensuring you have clear and reasonable expectations, consistently applied, is critical to managing your workers. Failing to have those clear standards often leads to disputes and any one of the issues we consider below.

A fair and reasonable performance management process, whilst not specifically set out in any rules or legislation, requires that employees:

• have been alerted to the reasonable conduct and performance requirements of the employer;
• are alerted to their failures to comply with those standards;
• are given the opportunity to improve their performance or conduct, including reasonable support and guidance to improve; and
• have been notified that their continuing employment is at risk if they fail to meet the reasonable expectations of their employer.

What is reasonable is a subjective consideration and independent advice about the facts of a situation will assist to determine if a proposed standard or action is reasonable.

Unfair dismissal

A national system employee, who has been dismissed, is protected from unfair dismissal and is eligible to make an application for unfair dismissal remedy if:

• they have completed the minimum period of employment; and
• they earn less than the high-income threshold; or
• a modern award covers their employment; or
• an enterprise agreement applies to their employment.
• facilitate accountability to its stakeholders

The FWC must balance the needs of business (including small business) and the needs of employees and provide remedies, where a dismissal is found to be unfair, with an emphasis on reinstatement.

The procedures and remedies available to an employee found to be unfairly dismissed, and the manner of deciding and calculating remedies are intended to ensure that a ‘fair go all round’ is accorded to the employee and employer concerned.

Dismissal

Dismissal means that a person’s employment has been terminated at the employer’s initiative, or the person was forced to resign because of the conduct or course of conduct engaged in by the employer.

Dismissal does not include circumstances where:

1. a person is demoted in his or her employment without a significant reduction in duties or remuneration and remains employed by the employer;
2. a person was employed under a contract for a specified period of time, specified task or for the duration of a specified season and the employment comes to an end at the end of that period; or
3. a person had a training arrangement with their employer which:
   
   
4. specified that the employment was limited to the duration of the training arrangement, and
5. whose employment ends at the end of that training arrangement; or
6. there is a case of genuine redundancy, or
7. the dismissal is consistent with the Small Business Fair Dismissal Code (in the case of employees of small business).

However, a person employed under point (b) above, could be considered to have been dismissed if a substantial purpose of the employment of the person under a contract of that kind was so that the employer could avoid their obligations under the unfair dismissal provisions of the FW Act.

Small business employers

Small businesses have different rules for dismissal. The Fair Dismissal Code applies to small business employers with fewer than 15 employees. This is calculated on a simple headcount of all employees, including casual employees who are employed on a regular and systematic basis, at the time of the employee’s dismissal.

Small business employees cannot successfully make a claim for unfair dismissal in the first 12 months following their engagement. If an employee is dismissed after this period and the employer can demonstrate with evidence, that they have followed the Code, then the dismissal will be deemed to be fair.

Notification

Notification of dismissal should not be made by text message or other electronic communication. The message of dismissal should be conveyed face to face unless it is not safe to do so. Even in circumstances where text message or other electronic communications are ordinarily used, advising an employee that their employment will be terminated is a matter of such significance that dismissal must be conveyed personally, with arrangements for the presence of a support person and documentary confirmation. There are also health and safety issues to be considered when terminating someone’s employment and advice should be sought about how you handle a dismissal to comply with your obligations.

Time of dismissal

A dismissal does not take effect unless and until it is communicated to the employee who is being dismissed. A dismissal can be communicated orally and where the communication is in writing only, the communication must be received by the employee for the termination to be effective.

Depending on the employee’s period of service, they will be entitled to a notice period before their employment comes to an end. An employer can pay an employee an amount equivalent to their earnings for the notice period. Where payment in lieu of notice is made the dismissal usually takes effect immediately.

Applications for Unfair Dismissal

Employees must lodge an application for Unfair Dismissal within 21 days after the dismissal took effect. In limited circumstances, where the Applicant can demonstrate extenuating circumstances, the FWC may extend the time for lodgment, but this is a very high standard.

When deciding if an employee has been unfairly dismissed, the FWC will consider:

• if the person has access to the jurisdiction;
• if there was a valid reason relating to capacity or conduct;
• was notified of the reason for dismissal;
• if the person had an opportunity to respond;
• if the person was unreasonably refused a support person;
• if the person was adequately warned about their unsatisfactory performance or conduct;
• the size of employer’s enterprise and access to human resources specialists; and
• any other matters the FWC considers to be relevant.

Management of application

Employers may raise objections to an application in their initial response if they believe that the employee does not have access to the unfair dismissal jurisdiction. The FWC will have to deal with those objections either before or in hearing a matter. A jurisdictional objection generally will not prevent conciliation taking place.

Conciliation is commonly used to give both parties an opportunity to put their arguments to an independent conciliator who will first assist the parties to resolve the matter or failing that, provide the parties with an assessment of the case with regards to a full hearing of the matter. A considerable majority of unfair dismissals are resolved in conciliation.

Representation

Whilst the FWC is largely a jurisdiction of self-representation, many employees and employers seek to be represented because they feel they cannot manage the complexities of the process.  A lawyer or paid agent must seek the permission of the Commission to represent a person in a matter before the Commission. This includes making an application or submission on another person’s behalf. It is not an automatic approval process and only a Commission member can give permission for a lawyer or paid agent to represent a party, usually on the grounds that it will assist the parties and the FWC to deal with complex arguments and points of law.

General Protections

All employees have protected rights at work. These protected rights include:

• workplace rights;
• taking or not taking part in industrial activities or belonging or not belonging to an industrial association; and
• Being free from discrimination.

Employees cannot be treated differently or worse because they possess or have exercised a right, or for a discriminatory reason. Employees are protected from:

• adverse action;
• coercion;
• undue influence or pressure; and
• misrepresentation.

A person has a workplace right if they:

• have a benefit, role or responsibility under a workplace law, instrument or an order made by an industrial body;
• can start or take part in a process or proceeding under a workplace law or instrument;
• can make a complaint or inquiry about their employment to a body; or
• are an employee and can make a complaint or inquiry about their employment.

Adverse action is action that is unlawful if it is taken for particular reasons and includes doing or threatening to do any of the following:

• firing an employee;
• injuring the employee in their employment, e.g. not giving an employee legal entitlements such as pay or leave;
• changing an employee’s job to their disadvantage;
• discriminating between employees;
• not hiring someone because of a protected reason;
• offering a potential employee different and unfair terms and conditions for the job, compared to other employees;
• ending a contract, or refusing to enter into a contract with an independent contractor, discriminating against them in the terms and conditions offered, altering their position to their detriment, refusing to make use of their services, or refusing to supply goods or services to them;
• an employee or independent contractor taking industrial action against their employer or principal.

Employers must take general protections issues seriously and consider the risks when they are making decisions about their workers or potential workers. General Protections is a complex area and one in which employers should seek legal advice.

Discrimination

As well as being relevant to the FW Act, employers in any industry or sector have specific responsibilities under state and federal Anti-Discrimination legislation to provide workplaces free from discrimination, sexual harassment and vilification. In Queensland, public entities have further obligations under the Human Rights Act 2019, to act and make decisions in a way that is compatible with human rights, and to give human rights proper consideration when making decisions. A public entity is an organisation or body providing services to the public on behalf of the government or another public entity.

Discrimination can cost businesses time and money, damage morale, reduce productivity and undermine business reputation, but there are also legal obligations on employers to provide workplaces free from discrimination, sexual harassment, victimisation and vilification. Employees have access to both State and Federal Human Rights Commissions to raise complaints, as well as the General Protections provisions of the FW Act.

Employers must not allow workers to be discriminated against, sexually harassed or subjected to vilification by other workers, clients or management. If they do, they can be held legally liable. This means that the employer can ultimately be held responsible for the behaviour of their employees, and therefore need to be proactive in education staff about their responsibilities and standards of behaviour that are acceptable in the workplace.

Workplace Relations and Safety

Employers must comply with a range of WHS legislation, regulations and codes of practice. Each state has a Work Health and Safety Act (the WHS Act) that provides a framework to protect the health, safety and welfare of all workers at work. They also protect the health and safety of all other people who might be affected by the work, including:

• employees;
• contractors;
• subcontractors;
• outworkers;
• apprentices and trainees;
• work experience students;
• voluneers; and
• employers who perform work.

The WHS Act also provides protection for members of the public so that their health and safety is not placed at risk by work activities.

The WHS Act places the primary health and safety duty on a person conducting a business or undertaking (PCBU). The PCBU must ensure, so far as is reasonably practicable, the health and safety of workers at the workplace. Duties are also placed on officers of a PCBU, workers and other persons at a workplace. All duties under the WHS Act are qualified by the term ‘reasonably practicable’.

Compliance and enforcement

In each Australian State and Territory, the relevant government department is empowered under the law to respond to health and safety incidents at workplaces.

Breaches

Examples of breaches of the WHS Act include:

• exposing workers to the risk of excessive noise;
• working at heights where the risk of falling is not controlled;
• allowing unlicensed operators to use specified equipment (e.g. forklifts);
• not ensuring that plant is appropriately guarded to eliminate or minimise exposure of workers to moving parts;
• failing to have in place safe work method statements for work carried out in or near a confined space; and
• not notifying Workplace Health and Safety when a notifiable serious injury or illness occurs at your workplace.

Please note, each State and Territory has similar, but not entirely the same provisions.

Workers’ Compensation

Each state has workers’ compensation legislation and regulators that establish the workers’ compensation scheme, set out the laws for workers’ compensation and rehabilitation, and for managing insurance, compensation, rehabilitation, damages and costs.

Employer’s must have workers’ compensation insurance and comply with their policy and legislated obligations in managing ill and injured workers.

In the instance of a dispute about workers’ compensation decisions, employers will be obliged to comply with the instructions of their State authority in dealing with those disputes.

Bullying and Harassment

Workplace bullying occurs when:

• an individual or group of individuals repeatedly behaves unreasonably towards a worker or a group of workers at work,

AND

• the behaviour creates a risk to health and safety.

Importantly, reasonable management action conducted in a reasonable manner does not constitute workplace bullying.

Bullying behaviours can include:

• the making of vexatious allegations against a worker;
• spreading rude and/or inaccurate rumours about an individual, and
• conducting an investigation in a grossly unfair manner.

The following behaviours could also be considered as bullying, based on cases heard in other jurisdictions:

• aggressive and intimidating conduct;
• belittling or humiliating comments;
• victimization;
• spreading malicious rumours;
• practical jokes or initiation;
• exclusion from work-related events; and
• unreasonable work expectations.

Workplace bullying often results in adverse consequences for an individual’s health and wellbeing.  However, proof of actual harm to health and safety is not necessary under the anti-bullying laws. It is sufficient to establish that the conduct demonstrated poses a risk to health and safety.

Management policies consistently and effectively applied are important tools in managing the risks of workplace bullying as is an understanding that there is no ‘typical’ bully and each complaint should be treated objectively and on its own merit. Employees can lodge a dispute with the FWC if they are affected by bullying in their employment. If the employer cannot or will not resolve the situation, the FWC has the power to make orders to manage bullying in a workplace.

Who is a ‘volunteer’?

There is no accepted legal definition of who is a volunteer, but we can take guidance from:

• Fair Work Act 2009 (Cth) – (emergency management) “A person is a volunteer of a designated emergency management body if the person engages in activities with the body on a voluntary basis (whether or not the person directly or indirectly takes or agrees to take an honorarium, gratuity or similar payment wholly or partly for engaging in the activity)…”.
• Fair Work Commission – A volunteer is ‘someone who enters into any service of their own free will, or who offers to perform a service or undertaking for no financial gain’.
• Fair Work Ombudsman – to volunteer time and effort to a not-for-profit organisation.
• Volunteering Australia – volunteering is time willingly given for the common good and without financial gain.
• Case law

Further, the FWC considers volunteerism as an arrangement generally motivated by altruism, rather than for remuneration or private gain. The commitments shared between the parties are usually considered moral in nature, rather than legal. Payment unrelated to hours of work or the actual performance of work does not of itself imply that a worker is an employee. In these circumstances, the payment can more aptly be described as an ‘honorarium’ or gift.

Volunteers should receive reimbursement of out of pocket expenses.

Volunteers can be rewarded and recognised as part of good practice. While this process may introduce an element of financial or material benefit to the volunteer it does not exclude the activity from being considered volunteering.

It is important to understand that you should distinguish volunteering from the employment or independent contractor relationship, but the activities of volunteers must be managed to ensure compliance with the organisations various legal obligations.

Safety

A NFP is required at law to ensure they provide a safe working environment. They are bound by:

• work health and safety legislation;
• common law of negligence; and
• State negligence legislation.

There are two sides to safety relating to volunteers:

1. safety of the volunteer; and
2. safety to others because of the volunteer.

Safety to the volunteer: negligence laws

If your NFP:

1. owes a duty of care to the volunteer;
2. breaches that duty; and
3. the breach is the cause of the damage to the volunteer,

the NFP may be found liable for the damage caused.

Example:Geoff, a regular employee of the NFP cleans the stairs of the NFP premises and, contraryto policy, forgot to display the sign to caution people that the stairs were slippery.Andrew, a volunteer at the NFP unaware of the slippery stairs tripped and broke his leg.If Andrew can establish that had the sign been displayed, he would have not walked downthe stairs, tripping and breaking his leg, the NFP will be liable to the volunteer.

Safety to the volunteer

Your NFP should maintain adequate insurance to cover the liability to compensate a volunteer for their loss in the instance of illness or injury arising at the fault of the organisation (i.e. indemnify).

Safety to others because of the volunteer

The various States may have legislation that protects volunteers against personal liability for an act or omission they have done in the course of the proper execution of their volunteer duties. As an example:

the Civil Liability Act 2003 (Qld) sets out a special protection for volunteers against personalliability for civil liability which arises as a result of an act or omission they have done, provided:

• they have acted in good faith;
• without recklessness; and
• while doing community work that has been organised by the NFP.

Vicarious liability

Example:NFP’s non-delegable duty of care is to provide adequate training to volunteers.If someone is injured by a volunteer because the NFP failed to give the volunteer appropriatesafety training, the NFP could be liable to pay compensation to the injured person.

The NFP may be liable for damage caused by a volunteer who was acting in good faith if the NFP was in breach of a ‘non-delegable duty of care’. The common law ‘duty of care’ owed by the NFP itself to the person who suffered damage could be relied on rather than any relationships between the volunteer and the person harmed.

Safety to the volunteer: work health and safety laws

Work Health and Safety Act 2011 (QLD)

• Applies to “persons conducting a business or undertaken” (a PCBU); but
• Does not apply to volunteer associations

A volunteer association is “a group of volunteers working together for one or more communitypurposes where none of the volunteers, whether alone or jointly with any other volunteers, employs any person to vary out work for the volunteer association.”

Volunteers who carry out work for PCBUs are required to take reasonable care of their own health and safety and not create risks to others. Volunteer workers can be prosecuted for failing to comply with their duties, but prosecutions against workers in the past have been rare and would likely only occur in relation to serious incidents where there is a high degree of recklessness or negligence on the part of the volunteer.

If your NFP does not fit into either PCBU or volunteer association categories, common law negligence law still applies to impose obligations on your NFP to ensure, so far as reasonably practicable, the safety of volunteers in the workplace.

Key issues to be aware of

• unlawful workplace behaviours, e.g. discrimination, sexual harassment, bullying and victimisation;
• unsafe work environment, e.g. operating machinery, using equipment inappropriately or person not trained for.

Office Holders – WHS

A volunteer director or officer is expected to comply with the duties that arise under work health and safety (WHS) Law, but they cannot be personally prosecuted for failing to comply with those duties.

However, volunteers have a duty to take reasonable care for their health and safety, and of others, to ensure they are not adversely affected by their actions at work and can be prosecuted for a breach of that duty.

A director may be found personally liable for a breach of WHS Law if:

• they receive payment for their position as a director in the NFP (i.e. they are not a volunteer director); and
• they fail to exercise due diligence to ensure that the organisation complies with its duties or obligations under WHS Laws.

Recruiting Volunteers

When you are recruiting volunteers:

1. Develop a position description to ensure that the volunteers have the appropriate skills and experience for the duties they will perform for the NFP;
2. Ensure there is an induction process before commencing the volunteer role, so they understand their obligations under the volunteering arrangement;
3. Ensure your volunteers are kept up to date with the NFP’s work health and safety policies and procedures;
4. Undertake regular training of volunteers to ensure they continue to understand what the organisation requires to comply with its obligations; and
5. Adopt a risk management strategy aimed at eliminating, managing or mitigating the effects of those risks associated with the safety of volunteers.

Insurance

Volunteers doing work for a volunteer association are not workers and so are not covered by workers’ compensation insurance. Your organisation should ensure that it is covered for injury caused to volunteers where they are not covered by worker’s compensation.

Personal accident insurance – covers your volunteers for out of pocket medical expenses if injured whilst performing work for the NFP

Public liability, product liability and professional indemnity – covers activities (acts or omissions) or your volunteers.

It is good practice to speak with a reputable mortgage broker about what insurance is specifically relevant to your NFP.

Protecting the Officers in a NFP against liability

The primary ways to protect officers:

1. Indemnities contained in the NFP’s constitution;
2. Deeds of indemnity, access and insurance; and
3. Directors and Officers insurance (D&O Insurance)

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Indemnities in Constitution

Often NFP Constitutions contain a provision which provides an indemnity for the officers.

The wording of the indemnity always needs to be assessed to determine whether the NFP is obligated (ie must) to indemnify its officers or it has the discretion to indemnify its officers (ie may).

Volunteers should review the indemnity provisions in a NFP’s constitution to ensure they understand if and how they are indemnified in the execution of their duties.

Limitations of constitutional indemnities are:

• The constitution may be amended by the members;
• Constitution arguably is only enforceable by current officers, and not former ones;
• The indemnities may be out of scope or lack sufficient scope to be effective.

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Deed of indemnity, access and insurance

A NFP may enter into a deed with the officers. A deed sets out the basis for the indemnity:

• personal liabilities;
• associated legal costs; and
• resulting from role as an officer,

building on the indemnity contained in the NFP’s constitution.

Indemnity: is generally limited by law, e.g. cannot indemnify officer for breach of duty or unlawful act or omission

Access: provides a right to an officer to access books and records of the NFP even after resigned or retired, for purposes of defending allegations of breach of duties

D&O Insurance: is the direct cover to directors in respect of liabilities and legal costs of defending claims against them made by the organisation or third parties for wrongful acts committed in their capacity as directors or officers.

Deed of indemnity, access and insurance: places an obligation on the NFP to take out, maintain and pay for D&O Insurance, even after the officer has left the NFP

D&O Insurance may address the gap in coverage given the various limitation on indemnities. Commonly three sides of coverage:

• Side A provides the indemnity for officers
• Side B provides reimbursement to the NFP for its indemnity of officers
• Side C provides cover to the NFP directly for securities transactions

Affordable D&O Insurance for NFPs, may be available as part of insurance package and is commonly available to community organisations.

Protections for directors under the ACNC Governance Standard 5

There are situations where a director could possibly be in breach of a duty even though he or she acted in good faith and took all reasonable steps to comply with their duties.

The ACNC “Governance Standard 5” operates as a defence to a possible breach of duty.

To be available, a director will have complied with the duties set out in the Governance Standards where:

• Advice: advice was provided by an employee, professional adviser or expert you reasonably believed to be competent in the subject matter, or by another director/ a committee if the subject matter was within their authority.
• Duty to act with reasonable care and diligence: where the director:

• made a decision in good faith for a proper purpose;
• did not have a material personal interest in the matter;
• informed himself/herself about the subject matter of the decision to the extent he or she reasonably believed to be appropriate; and
• rationally believed that the decision was in the best interests of the NFP.

* This is referred to as the “business judgment rule”

• Duty not to operate whilst insolvent: at the time the debt was incurred the director had reasonable grounds to expect, and did expect, that the NFP was solvent and would still

Paying volunteers

Certain payments or other benefits are acceptable:

• cash, non-cash or a combination; and
• termed as honoraria, reimbursements or allowances.

If a volunteer’s activities are a pastime or hobby, then any money or benefits received would not be considered assessable income.

Paying your Directors – Check your constitution

Generally, directors may be paid reasonable compensation for bona fide services rendered to the NFP. However, for a director to be paid fees in his or her capacity as a director – it must be provided in the constitution.

Care must be taken to ensure that the private benefit of payment of a fee assists the NFP to achieve is purpose rather than simply be for private gain of the Director.

The amount of remuneration and the process for setting that remuneration will be relevant to determining the benefit to the organisation.

Before paying your Directors, you should check:

• Fundraising legislation: e.g. in NSW, the Charitable Fundraising Act 1991 prohibits member of a governing body from receiving remuneration for their role unless Ministerial approval is obtained.
• Funding agreement: some funding agreement restrict the use of funds and, accordingly, paying fees to directors would be outside the allowable use of funds, consequently a breach of contract;
• Work Health and safety: if a Director is paid for services in that capacity, he or she will lose immunity from prosecution
• Corporations law: if the company is a special purpose company, paying director fees will be an offence under the Corporations law

Privacy

If your NFP is bound by privacy laws this means your NFP should only:

• collect a volunteer’s personal information with their express consent;
• use the volunteer’s personal information for the purpose for which it was collected; and
• store the volunteer’s personal information securely.

Volunteers should also be able to access their personal information with the same rights as others.

Discrimination

Volunteers have the right to be interviewed and engaged as a volunteer in accordance with equal opportunity and anti-discrimination legislation.

Discrimination occurs when a person (the discriminator) discriminates against another person (the aggrieved person) on the grounds of an attribute such as:

• age;
• gender;
• sexual orientation;
• race;
• religious belief;
• disability;
• political opinion;
• national extraction;
• nationality;
• social origin; or
• criminal record,

of the aggrieved person if, because of the attribute, the discriminator treats, or proposes to treat, the aggrieved person less favourably than the discriminator would treat a person without the attribute, in circumstances that are not materially different.

In certain circumstances, a person does not discriminate against another person by imposing, or proposing to impose, a condition, requirement or practice that has, or is likely to have, a disadvantaging effect if the condition, requirement or practice is reasonable in the circumstances. The relevant pieces of legislation also allow for limited exemptions for specific relationships. For example, religious exemptions exist in relation to acts and practices by ‘a body established for religious purposes.’

What is reasonable in the circumstances will be a matter of determining the genuine requirements of the activities relevant to the decision made against the person. Some of the issues to be considered are:

• the nature and extent of the disadvantage resulting from the imposition, or proposed imposition, of the condition, requirement of practice; and
• the feasibility of overcoming or mitigating the disadvantage; and
• whether the disadvantage is proportionate to the result sought by the person who imposes, or proposes to impose, the condition, requirement or practice.