Whether you’re a foreign organisation looking to service Australia or a homegrown, passionate individual looking to give back to the community — we’re here to help you get your not for profit (NFP) running in no time. As startup lawyers, setting up new companies and reorganizing big established businesses are part of our day-to-day activities. Starting a not-for-profit follows a similar process!
Below, we take you step-by-step through all the requirements you need to keep in mind when registering as an NFP with ASIC, ATO and ACNC.
First things first: Charity or NFP?
All charities are NFPs but not all NFPs are charities. The biggest difference is in regulation and taxes.
For example, charities have access to more tax concessions and incentives like being able to register as a deductible gift recipient (DGR). On the other hand, they also have extra reporting obligations and must always comply with the Australian Charities and Not-for-profit Commission’s (ACNC) strict governance standards. These guidelines are quite strict and organisations will often find them difficult to sustain over time which is why many choose not to register as a charity despite being qualified.
NFPs are much freer in that respect. They do not have to meet those extra expectations but still get (reduced) tax concessions.
This guide will assist with these NFP requirements. Charities will follow the same steps but with additional requirements. If you are still unsure about whether to register as a charity or not, we can help you weigh the benefits against any potential impacts to your current operations and obligations. If your organisation already maintains high governance standards, you may already satisfy the ACNC’s requirements and could greatly benefit from registration.
Step One: Prove your organisation’s NFP character
In order to register as an NFP, you will need to show proof that your organisation really is operating as a not-for-profit capacity. This can be done by having certain provisions in your organisation’s governing documents such as the Constitution, Articles of Association, Deed of Trust or Rule Book.
- Not-for-profit clause — a clause which directs all assets and income to be used solely to further the organisation’s purpose and not to distribute any portion of that (whether directly or indirectly) to members.
- Dissolution clause — a clause which directs any money after dissolution to be transferred to another not-for-profit with a similar purpose.
Step Two: Determine your legal structure
Your legal structure will affect your regulator, obligations and operations. Your legal structure is an important decision which needs detailed consideration. There are many structures you can consider, but we will briefly cover the most common ones and their characteristics.
- Non-distributing or Non-trading Cooperative — This is a democratic organisation, owned and controlled by members. Accordingly, members will all share the investment and operational risks and voting rights.
- Incorporated Associations — Unlike Cooperatives, Incorporated Associations are a separate legal entity from its members and can provide protection from liabilities in exchange for higher reporting obligations. It is not recommended if you plan to operate in multiple states.
- Company limited by guarantee (CLG) — CLGs are for larger groups who want to operate in more than one state. However, there are additional administrative and reporting requirements that may be costly to maintain.
Step Three: Assess your tax concession eligibility
Once you’ve set up an NFP, your next step is to consider your tax concessions. You may be eligible for:
- Income tax exemption
- Fringe benefits tax exemption or rebate
- Goods and services tax (concessions
- Deductible gift recipient endorsement
- Franking credits refunds
Each of these will have additional requirements, and you may need to talk to your tax advisor about what you can apply for.
Biztech can help
Need help with setting up your NFP entity? Chat to us now.
