Registering as a charity

Who determines charity status?

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.

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.

Is your not for profit organisation a charity?

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

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

  • 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.

    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.

    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.

  • 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

  • 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.

  • 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.

  • 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.

Compliance

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

  • 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

  • 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.

  • 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)

  • 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:

    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.

    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.

    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.

    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.

    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.
  • 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.