Setting up a not for profit organisation can be a complex and rather daunting process. We have compiled a checklist of key matters that you will need to consider when setting up a not for profit organisation.
It may sound basic, but one of the most important steps in establishing a not for profit organisation is to clearly write down the purpose of the organisation. You will need to include the organisation’s purpose in its governing documents, and in the organisation’s registrations with government bodies.
2. Members and management
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 to establish both a membership base, and then decide who the founding committee members or directors of the organisation will be.
3. Legal Structure
As a not for profit organisation, there are three 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).
4. Constitution or Rules of Association
Your organisation will need either a Constitution or Rules of Association. The Constitution or Rules of Association will need to specify the purpose of the organisation.
To qualify as not for profit organisation, the Constitution or Rules of Association must provide that the income and assets of the organisation cannot be distributed to the organisation’s members.
If you would like assistance preparing a Constitution or Rules of Association, please do not hesitate to contact us.
5. Organisation name, ABN and GST registration
You will need to register a business name, 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
If your not for profit organisation qualifies as a charity, you will need to register it with the Australian Charities and Not-for-profits Commission (‘ACNC’). Charities have ongoing reporting obligations to the ACNC.
7. Tax exemptions
Not for profit organisations are often exempt from paying taxes, including income tax. In our previous article, ‘What makes a non profit organisation tax exempt?’, we explain the requirements for obtaining an income tax exemption.
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 regulations 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).
We recommend that you speak to Consumer Affairs, 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 on gifts they provide to the organisation.
The eligibility criteria for DGR status are strict. We recommend obtaining legal advice prior to applying for DGR status.
10. Domain name registration
Once your organisation has an ABN, you will be able to 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.
Your organisation will be required to pay superannuation to its employees.
13. WorkCover insurance
Your organisation will need to provide WorkCover insurance for its employees.
14. Public liability, product liability, management insurance and volunteers insurance
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
- 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 Dan Saunders 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.
Liability limited by a scheme approved under Professional Standards Legislation.
For further information contact
Dan is a Legal Practitioner at Sharrock Pitman Legal.
He deals with areas of Charities & Not for Profit Law and Commercial Law. For further information, contact Dan on his direct line (03) 8561 3325.