Have you considered setting up your own charity to give back to your community? There are a number of reasons why you might want to:
- In the industry you work in, you can see holes in society’s social fabric.
- You want to advance society’s health, education, wellbeing, religion, culture, public welfare or human rights.
- You are frustrated with existing charities. Large charities may not be delivering on the promises made during large donation drives, and Go Fund Me is clouded with irregularities and misinformation.
You’ve targeted a genuine community need in an area, and with strong fundraising, you could give a charity purpose and direction.
If you have been in business, you might have resonated with some of these points above and want to do something about it. Just like your business, your charity will need to have a legal structure to give it accountability, direction and responsibility.
The positives for you as a successful business operator are:
- You can drive the purpose of your potential charity in a business-like manner to an area of society that might be lacking the genuine support that a driven community can offer.
- You can give back to your community without just throwing money into a sea of charities that may not fulfill the needs of your community.
- Your business marketing and branding success can aid the charity’s promotion and help it achieve success
However, a successful charity takes a lot of resources to run, such as time, money, skilled expertise, passion and an understanding of the regulatory compliance needed to make it a success.
Generally, a charity is set up utilising one of the following structures:
- An incorporated association through NSW Fair Trading,
- As a company limited by guarantee (CLG) through ASIC or
- As an unincorporated association (however, this can cause issues for the people responsible for the charity).
When set up as an incorporated association, it is then registered with the Australian Charities and Not for Profit Commission (ACNC), which is the independent regulator of charities in Australia – like ASIC is to companies or the ATO is to tax return compliance. As with all regulatory bodies, you will need to complete and file an Annual Information Statement, maintain information about the key people in the organisation and report financial statements.
Below, we discuss and set out a typical charity setup with the ACNC using an incorporated association in the jurisdiction of NSW in accordance with the Associations Incorporations Act 2009 (NSW) (Act). As mentioned above, an alternate incorporated entity is a CLG. While similar to our example below, a CLG is a type of public company and must comply with the Corporations Act 2001 (Cth) (Corporations Act). Either structure option may be right for your charity organisation, but we provide an example of a typical organisation below.
A Typical Organisation
It’s important to get the legal structure right at the start. It ultimately decides who is responsible; how the charity is governed; and the makeup of the board, committee and members. The structure will need to grow with the charity and define limited liabilities for the members and board.
The structure of the charity should allow it to take on employees and apply for government grants and tax concessions. The structure will also govern how it operates in its state or territory. Incorporation provides the charity with its own legal rights. As a legal entity, it can open a bank account, pay invoices, receive income, sign documents and enter into agreements or contracts. Incorporation will also provide two very important provisions for your charity:
- Limited liability offers your members protection from being sued and being held personally liable for the charity’s debts.
- Succession enables your vision and purpose for the charity to continue long after the original members resign and new ones join.
You will need to set up your charity before you can register it with the ACNC. The steps below detail the requirements to set up the association with NSW Fair Trade (each state and territory will have their own legislative requirements). In NSW, the next steps to apply to set up the association with NSW Fair Trade are:
- Specify the proposed name of your association.
- Indicate whether the application has been authorised by:
- Five or more people (the association should keep copies of and document recording the authorisation of each of its members with letters of application) or
- An existing unincorporated body (a copy of the special resolution authorising the application must be attached – in our case we are excluding this option from our example).
- Identify and include details of the person who is to be the association’s first public officer.
- Attach a copy of your association’s proposed constitution or a statement that your association adopts the model constitution without modification. The model constitution is the default constitution for incorporated associations in NSW.
- Include a statement of your association’s objectives.
- Indicate the principal activity of the association.
- Provide details of the association’s:
o End of financial year,
o Sources of income,
o Estimated total revenue and current assets for the first year of operation and
o Property held on trust.
- Include copies of any required special resolution, as described above.
- Include the required state fee for the form submission.
- Once NSW Fair Trade has reviewed the submission, you will be notified about the association’s incorporation.
The charity, now an incorporated association, will need to formulate its positions or roles within its administration. An association in NSW must appoint a committee to manage the charity for the members and a public officer to report changes in the association to NSW Fair Trade. The committee appointed to run an association (using the model constitution) is generally made up of eight members:
- Vice President,
- Treasurer and
- Three members.
Each of the above will be responsible for driving the purpose of the charity and reporting to the relevant regulatory bodies.
Register your association with the Australian Taxation Office
With your charity operating as a not for profit but still conducting business-like activities, it needs to register for an Australian business number (ABN) and tax file number (TFN) with the Australian Taxation Office (ATO).
ABNs are registered through the Australian Business Register, which reports the ABN to the ATO once set up. Even though the association is not required to register for a TFN (as it is a not for profit), this is still generally done through the Australian Business Register’s website when submitting the ABN application. This is done in case a TFN is needed in the future, such as for a refund of tax credits.
Register your charity with the ACNC
Now that you have your association, ABN and TFN, the charity will need to register with the ACNC.
The ACNC provides great resources, references, templates and guides to register your charity with them.
Once registered with the ACNC, you can apply for charity tax concessions and be eligible as a deductible gift recipient (DGR). DGR status allows the public to make tax deductable donations to your charity. Being listed on the ACNC DGR register will allow the general public to determine the charity’s tax deductible status. When a donation is made, the public can look up the charity’s DGR status to confirm if they can claim a tax deduction.
Before starting the charity, be sure to identify its purpose and what you are hoping to achieve. You will need to clearly identify:
- What the charity will do,
- Who will be involved and
- How it will be managed.
The ACNC has a template, the ‘Charity Registration Eligibility Assessment Tool’, that can assist by providing clarification and a purpose for your application for registration.
By outlining what the charity does, how it will be operated and who the responsible people will be, you will create the foundation of the charity. The ACNC will assess the charity’s eligibility for tax concessions, and the responsible people should be familiar with the core purpose of the charity.
The charity will need a business name and domain registration(s). It is important to check business name, domain registration(s) and email hosting for availability and determine how they sync with your vision for the charity. Typically, domain registrations for charities end with ‘.org.au’. A charity will also need to review or design its logo so that it will stand out and bring attention to the charity’s purpose.
Plan the charity for success. Consider its marketing and promotion and how it will fundraise its income for distribution to the charity’s purpose. The charity could:
- Charge members a fee for membership;
- Host dinner events or conferences;
- Conduct public appeals and donation drives; or
- Provide public auctions, silent auctions or online auctions.
Care is required with some particular raffles and online promotional prizes depending on the state or territory of association. Each state or territory has its own particular legislation. In NSW, charities need to comply with the Charitable Fundraising Act 1991, Charitable Fundraising Regulation 2015, Standard Authority Conditions and all other relevant legislation.
Create a business plan for the charity. Review the potential charity’s strengths and weaknesses. Compare the charity to others and focus on what makes them perform well or below standard.
Accountability - processes within an organisation - reporting to the ACNC
A charity requires accountability, policies, procedures and processes to ensure the board, members and volunteers have clarity, direction and purpose. In setting up the charity, write down the roles and responsibilities of the board to determine who develops the strategic plan, who approves a budget, the setting of reserves, who resolves conflicts of interest, the development of controls, grant funding applications and fundraising coordination.
The executive committee will have to assign roles to themselves, and as the charity grows, look to assign positions to volunteers or employees. At the beginning of the process, it is a good idea to break up and assign the various roles. The image below illustrates some of the roles tasked:
Starting a charity can be a minefield. Our office can ensure your compliance with the Australian State of Incorporation, the ATO and the ACNC. We can also assist with formulating the purpose and plan and with registration to make sure you are not reinventing the wheel.
Some not-for-profit associations or other incorporated entities, such as a sporting club, might seek the tax concessions provided by registering with the ACNC. Given the ACNC’s definition of charitable purposes, registration would be unlikely. There are opportunities for not-for-profit sports associations to seek registration with the Australian Sports Foundation to assist them in creating a fundraising platform. They provide a charity medium between the sporting association and the tax concessions afforded to an incorporated association registered with the ACNC and receiving DGR status.
If you consider yourself a successful business operator in your industry and want to make a bigger difference in your community, give our office a call to see how we can help you help your community in a way that aligns with your vision.
Examples of how it could work for you:
- You are in the social work industry and have identified the need to provide disability aid/improvements for people who otherwise wouldn’t be covered through an NDIS program. Your local charity could aim to support people in the community by improving their standard of living.
- As a successful builder completing beautiful homes for clients, you have realised you have a desire to provide more for your community by constructing affordable or free housing for homeless people or people in need of urgent shelter.
- You are a doctor or research doctor in the private sector. With funding through public donations and government grants, you could conduct and publish the results of independent research on the effectiveness of different treatments for an illness or disease.
Examples of famous philanthropists who make a difference with their charities:
- Andrew (Twiggy) Forrest is the chairman and co-founder of the Mindaroo Foundation. According to their website, they ‘take on tough, persistent issues with the potential to drive massive change’. He also manages his ASX listed company Fortescue Metals Group.
- On a local level, the Mai-Wel Group was formed in 1960 from a number of local Maitland-based families who shared concerns about the lack of recognition for their children with disabilities. Through their efforts, they pioneered Mai-Wel, which according to their website, ‘delivers vibrant, innovative services and successful businesses which provide opportunities for people with a disability to achieve their dreams and goals for life’.
If you want to give back to the community you live in in a real way, the steps required are as follows:
- Decide on the charity’s purpose and make sure it is in line with the suggested purposes for a charity to be registered with the ACNC.
- Consider your legal structure. In our article, we’ve provided details on forming an incorporated association with NSW Fair Trade.
- Confirm the makeup of your executive committee and members. Their details will be made public on the ACNC register for the charity.
- Adopt a constitution. In our example with NSW Fair Trade, we used the model constitution.
- Apply for an ABN and TFN through the Australian Business Register.
- Apply for registration as a charity with the ACNC.
- Conduct your charity’s business according to the purpose chartered by your association.
The contents of this article are general advice only, and you should always seek professional accounting, taxation and legal advice before acting on any of the included information. If you have further questions or queries, please don’t hesitate to contact Addison Partners for assistance