Setting up a not-for-profit or charity organisation can be a complex and rather daunting process. This article outlines the types of charitites and reporting obligations that should be considered before embarking on such a journey.
Setting up a not-for-profit or charity organisation can be a complex and rather daunting process. We have compiled the following checklist of key matters that you will need to consider when setting up a charity.
It may sound basic, but one of the most important steps when establishing a charity is to clearly write down the purpose of the organisation. You will need to include the organisation’s charitable purpose in its governing documents and in registration applications with government bodies.
2. Members and management
Charities and not-for-profit organisations require both members and a management committee or board of directors. The management committee or board of directors are responsible for the governance of the organisation. The members are the group responsible for appointing and removing management committee members or directors, and are therefore the group that has ultimate control over the organisation.
You will need a membership base and must also decide who the founding committee members or directors of the organisation will be. Often the founding members and directors are the same people. Keep in mind that different legal structures require different numbers of founding members and directors.
3. Legal Structure
As a charity, there are two main legal structures through which you could operate your organisation. Be aware that if you decide to incorporate your organisation, you will need to register with either Consumer Affairs (for an association that is incorporated in Victoria) or with ASIC (for a company limited by guarantee). Occasionally, and when required by legislation or the existing corporate structure, a charity will be established as a Charitable Trust or a separate Fund.
Whether established as an incorporated association or a company limited by guarantee, your organisation will need a Constitution or Rules (depending on the type of organisation). This will need to specify the charitable purpose of the organisation.
To qualify as not-for-profit organisation, the Constitution or Rules must provide that the income and assets of the organisation cannot be distributed to the organisation’s members. A charity’s Constitution or Rules must also have all the required winding up and revocation clauses, and we recommend a conflicts of interest procedure and reference to the obligation to comply with the Australian Charities and Not-for-profits Commission (ACNC) Governance Standards.
5. ABN and GST registration
You will need to register for an Australian Business Number (ABN) and register GST for your organisation. You can register for each of these at the Commonwealth Government’s Business Registration Service.
6. ACNC registration & reporting
If your not-for-profit organisation qualifies as a charity, you will need to register it with the ACNC. Depending on its size, charities have ongoing reporting obligations to the ACNC, such as filing an annual financial statement or audited accounts and lodging the ACNC’s Annual Information Statement.
7. Tax exemptions
Not-for-profit organisations and charities are often exempt from paying taxes, including income tax. Many charities may also be fringe benefit tax exempt or eligible for a rebate. Different registrations are required for different tax concessions.
You will need to consider how your organisation will raise funds. It may choose to raise funds by:
- accepting donations
- obtaining grants
- charging membership fees, or
- by conducting fundraising appeals.
There are currently different regulations in each State that govern fundraising activities such as fundraising appeals, raffles, and competitions, including under the Fundraising Act 1998 (Vic) and the Gambling Regulation Act 2003 (Vic). Fundraising may also be regulated by the Australian Consumer Code.
We recommend that you speak to Consumer Affairs Victoria, the Victorian Commission for Gambling and Liquor Regulation, or obtain legal advice prior to engaging in fundraising appeals, raffles or competitions.
9. Deductible gift recipient status for charities
Some charities will be entitled to obtain deductible gift recipient (DGR) status for either some or all of their activities. This allows the organisation’s donors to obtain a tax deduction for gifts of $2 or more that they provide to the organisation. The eligibility criteria for DGR status are strict and not all charities will qualify to be DGR’s. We recommend obtaining legal advice prior to applying for DGR status.
10. Bank Accounts and Domain name registration
Once your organisation has an ABN, you will be able to open a bank account and register an Australian .org.au domain name. You may also want to register other domain names, such as a .org domain name.
11. Employees and Employment agreements
You will need to check whether your organisation’s employees are covered by a Modern Award, and ensure that your organisation is complying with its obligations under the Fair Work Act 2009 (Cth) including any relevant Modern Award and applicable state legislation.
We recommend preparing written employment agreements for use with your organisation’s employees. A written employment agreement will document the terms on which your organisation engages its employees and protect your organisation’s interests as the employer.
12. Superannuation & WorkCover insurance
Your organisation will be required to pay superannuation and provide WorkCover insurance for its employees.
13. Protection of Intellectual Property
If your charity has a distinctive name, logo or brand, you may consider registering that name, logo or brand as a trademark in order to obtain exclusive property rights to that name, logo or brand.
Your organisation should obtain appropriate insurance to protect your organisation and its directors or management committee, members and volunteers. Insurance products you should consider include:
- public liability,
- product liability,
- Directors and Office bearer’s insurance (DOI),
- management insurance, and
- volunteers insurance.
How can Sharrock Pitman Legal assist?
We at Sharrock Pitman Legal have extensive experience helping not-for-profit organisations get up and running. If you would like any advice or assistance starting a not for profit organisation, please do not hesitate a member of our Not-for-Profit legal team on 1300 205 506 or alternatively fill in the contact form below.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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For further information contact
Mitchell is the Managing Principal of our law practice.
He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.