Which structure is the one to use for my not-for-profit charity?

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Do I have to register with the Australian charities and not-for-profits commission (ACNC)?

When advising clients on which is the appropriate structure for their not-for-profit charity, we start with asking the question – What are your needs?

Your structure determines the charities legal and financial obligations, liability and governance.

The main types of structures in Australia are:

  • Charitable trusts
  • Company Limited by Guarantee
  • Cooperative
  • Incorporated associations
  • Indigenous Corporations
  • Organisations formed by Royal Charter or by special Act of Parliament
  • Unincorporated associations

However, the two most common structures that are used in Australia are:

  • Company limited by guarantee; and
  • Incorporated associations

Company Limited by Guarantee

The Australian Securities & Investments Commission (ASIC) defines a company limited by guarantee as:

“A company limited by guarantee is a type of public company registered under the Corporations Act 2001 (Corporations Act). Like all other companies, companies limited by guarantee must comply with the applicable provisions of the Corporations Act. They are formed on the principle that the liability of members is limited to the amount they agree to contribute if the company is wound up. This amount is typically nominal and set out in the company’s constitution. Companies limited by guarantee cannot pay dividends.

A company limited by guarantee will usually have a constitution that sets out specific rules governing the internal affairs of the company. The Corporations Act also contains rules that deal with those affairs. Some of these rules (known as ‘replaceable rules’) will not apply if the constitution says so.

Directors of a company limited by guarantee will generally have the same legal duties, responsibilities and liabilities as directors of other entities registered as public companies under the Corporations Act. There are also specific provisions in the Corporations Act that govern companies limited by guarantee that undertake other corporate activities – such as issuing securities other than shares.”

Incorporated association

Whereas a company limited by guarantee is governed by Commonwealth Law and can operate through Australia an Incorporated Association is governed by the relevant legislation in the state or territory it is incorporated in and does not operate Australia wide.

For example, in Queensland the relevant legislation is the Associations Incorporation Act 1981, and it is administered by The Office of Fair Trading.

An incorporated association is a separate legal entity and can hold assets and can sue and be sued in its own name.

The principle behind the incorporated association is to provide a simple and more affordable way to create a legal entity for small, community-based groups with limited resources.

Australian Charities and Not-for-profits Commission

What is the Role of the Australian Charities and Not-for-profits Commission (ACNC)?

The ACNC describes its role as:

“The ACNC is the independent national regulator of charities and to maintain, protect and enhance public trust and confidence in the Australian not-for-profit sector. support and sustain a robust, vibrant, independent and innovative not-for-profit sector’

The objects of the ACNC are to:

  • to register organisations as charities
  • help charities understand and meet their obligations through information, guidance, advice and other support
  • help the public understand the work of the not-for profit sector through information, guidance, advice and other support
  • maintain a free and searchable public register so that anyone can look up information about registered charities
  • work with state and territory governments (as well as individual federal, state and territory government agencies) to develop a ‘report-once, use-often’ reporting framework for charities.

What are the benefits of registering with the ACNC?

A registered charity can:

  • apply for charity tax concessions as a charity (such as income tax exemption or goods and services tax concessions) from the ATO (your charity must be registered before you can apply for concessions)
  • apply for additional tax benefits as a public benevolent institution (PBI), health promotion charity (HPC) or charity for the advancement of religion
  • apply for certain categories of deductible gift recipient (DGR) status. Some categories of deductible gift recipient (DGR) status are only available to registered charities
  • receive a range of other concessions, benefits or exemptions available to charities under Commonwealth law.

The ACNC requires charities to:

  • notify a change of name, address, responsible persons, governing documents or failure to meet its obligations
  • keep financial records that correctly record and explain their transactions and financial position
  • Report information annually
  • Comply with ACNC Governance Standards
  • Comply with ACNC External Conduct Standards

To remain eligible to be registered, charities must continue to be not-for-profit and pursue their charitable purpose or purposes.

How can FC Lawyers help with your not-for-profit charity?

At FC Lawyers our team has nearly thirty years of advising and assisting not-for-profit charities of all sizes in different sectors with all their legal requirements right though from setting up their structures and constitutions, regulatory obligations and assisting with dispute resolution.

Contact our team of experienced lawyers to discuss your not-for-profit charity or legal matters.

The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.


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