So, you want to start a charity in Australia?

It’s a great feeling – to decide to start a charity.?You’re an amazing human being!?But there’s a few moving piece you’ll need to understand first - what is required to establish your charity, the tax benefits you may be eligible for, as well as your ongoing obligations in running a charity.?

As a general rule, all charities must register with the Australian Charities and Not-for-Profits Commission (ACNC) before they can be endorsed for tax concessions or apply for deductible gift recipient (DGR) status with the Australian Taxation Office (ATO).?Engagement with ACNC is a key part in setting up your charity.?

1.????Purpose

Charities are one of two categories of not-for-profit organisations (NFP) - organisations that operate for its stated purpose, and not for the profit or gain (either directly or indirectly) of its members.

It is important to properly define your “purpose” at the outset.?This is the reason that your charity has been set up, including the activities that the charity will work towards.?And of course, this purpose must be a charitable one!?Under the Charities Act 2013 (Cth), there are twelve heads of “charitable purposes”:

• advancing education
• advancing social or public welfare
• advancing religion
• advancing culture
• promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia
• promoting or protecting human rights
• advancing the security or safety of Australia or the Australian public
• preventing or relieving the suffering of animals
• advancing the natural environment
• other similar purposes ‘beneficial to the general public’ (a general category), and
• promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a State, a Territory or another country (where that change furthers or opposes one or more of the purposes above)

So, in determining the purpose of your charity, you should give some thought to:

• What is your charity trying to achieve?
• What will be its main activities?
• What programs or services will it provide?
• Who is the target audience for your charity?
• Who will benefit from your charity’s activities and programs?

2.????Resourcing

The next thing to turn your mind to is about resourcing.?To start your charity, you will need to have a few things in place.?These will cost money.?You will also need to make sure that there is enough money to keep the charity going – until it is self-funding.?Some examples of things to consider:

• What will the set-up costs be to get your charity started??For example the cost of establishing the right legal structure, the cost of registering the charity etc.
• What assets will you need to start your charity??For example, equipment, vehicle, premises etc.
• Will you need staff or volunteers for your charity??If so, how many?
• What are the on-going costs to maintain your charity?
• Will your charity need an on-going income?
• How will you raise money for your charity?
• How much money or applicable resourcing can you contribute to start your charity?

Remember – just because you are a charity, doesn’t mean you shouldn’t treat it as a business.?The “business” will be (in your case) the furthering of your charitable purpose.?Like all business, however, you will need a source of income to keep your charity going.?Charities can raise money in many different ways, including through donations, by selling goods or service, through events and by public appears.?Note, however that some of these fundraising activities (like raffles, trade promotions or competitions) are heavily regulated – mostly by each State and Territory.?If this is one of your potential means of income raising, you’ll need to understand what these obligations are!

3.????Promoting your charity

Another important aspect to consider is the way you intend to promote your charity.?This includes the communications plan for how you want your charitable purpose to be marketed, how you’d like to engage with your charitable target audience, how you would like the general public to be involved etc.?Some questions to get you started:

• How will you promote the charity and encourage people to get involved?
• How will you get information out to your target audience?
• What are the main ways that you can publicise information?
• Will you need a website or other communication tools for the charity?

4.????The legal structure for your charity

Legal structures commonly used by NFP organisations include unincorporated associations, incorporated associations, companies, cooperatives, Indigenous corporations and trusts.??Before deciding on the legal structure you think is best for your charity, some useful things to consider are:

• The likely size of the charity, and how complex its activities will be
• Whether it will have employees or volunteers
• The accountability it will have to its members (if any) and the community
• The potential personal liability of members or office holders for things done by them on behalf of the charity
• Whether the charity will be applying for government grants
• Whether it will operate in more than one state or territory, or even overseas
• The tax concessions it will seek
• Does the charity need a governing body, such as a board or committee, or trustees?
• What kind of governance (rules, practices) will the charity have?
• Will the charity have formal processes for things like meetings, making and changing rules, or other decisions?
• Where will the charity operate from? For example, a dedicated shop front, a home office, or a shared spaced with another organisation?

Your charity's legal structure will affect many things, such as its legal identity (whether it can be sued), its governance structure (who makes what types of decisions), who is liable for its debts, and its specific responsibilities to government agencies.?Different legal structures have different reporting requirements and tax obligations, and each structure has advantages and disadvantages.?It is important to balance these against your charity’s particular circumstances and plans.

That being said, the advantage of having a formal (incorporated) legal structure is that you can do things such as rent an office, borrow money, apply for government grants or take out insurance in the name of the organisation (rather than, for example, in the name of an individual committee member).?To that end, as a charity that is intended to have national reach, the most useful legal structure is a company limited by guarantee.?

Note that some of these legal structures will require registration with the relevant regulatory authority like the Australian Securities Investment Commission (ASIC) or the relevant State/Territories’ Fair Trading Department.?Registration fees will be payable as well.

Your legal adviser is the best person to help you navigate the options for your charity’s legal structure. As this is an important part of setting up your charity, it would be advisable to consider getting advice early.

5.????Legal and regulatory issues

There are many legal implications in setting up and running a charity.?Your charity will likely have to comply with a range of laws both on the national level as well as at the State/Territory level. ???Understanding the landscape (both legal and financial) for the running of your charity will be an important part of your planning process.?Some important things that will affect the way your charity is run includes:

• Where the charity will operate. Will it operate - including fundraising - in multiple States or Territories?
• If the charity is to receive tax concessions.?What sorts of concessions will your charity be eligible for??What are the compliance rules for these concessions?
• What other legal obligations will apply (such as workplace health and safety laws, employment laws, fundraising laws etc)?

Answers to the above questions will also give you clarity on the relevant State and Territory government registrations requirements.?Depending on what your charity does, some charitable organisations need particular licences to operate.?These are usually issued by the relevant State or Territory government.?Most States/Territories have a Fair Trading department that can tell you what licences you need and how to get them.

Additionally, there may be taxes and duties that may be levied by particular State and Territory governments.?These include things like stamp duty, payroll tax and land tax.?As the requirements for these taxes and duties vary between States and Territories, it’s best to get clarification from your local State/Territory revenue office.

On Local government level, your charity may also need a council permit to operate.?For example, to use a building for a specific purpose, or sell food or dangerous goods.?This is something that you should explore with your Local Council.

6.????Registration with ACNC

Once you work out your charity’s legal structure (including getting your charity’s governing documents right and getting the legal structure registered with ASIC etc), then it’s time to get it registered with ACNC.

To become and remain registered with the ACNC, your charity must comply with the ACNC's Governance Standards.?These standards may require your charity to have certain policies, process or procedures in place to be eligible for ACNC registration.?These standards are:

• Standard 1 - Purposes and not-for-profit nature

A charity must be not-for-profit and work towards its charitable purpose. It must be able to demonstrate this and provide information about its purposes to the public.?Common steps your charity can take to meet Governance Standard 1 are to:

• include charitable purpose and not-for-profit clauses in your?charity’s governing documents (such as your charity’s constitution, rules or trust deed). Then upload the governing documents with these clauses to the ACNC Register using the ACNC Charity Portal (this makes them public)
• run your organisation as a charity (by following its purpose and being a not-for-profit), and
• provide information about your charity's purpose and how it meets it on a website or through social media.
• Standard 2: Accountability to members

A charity that has members must take reasonable steps to be accountable to its members and provide them with adequate opportunity to raise concerns about how the charity is governed.?Common steps your charity can take to meet this standard are to:

• organise a meeting at least annually with your members (such as an annual general meeting) with opportunities for members to ask questions and vote on resolutions
• provide information to members on the charity’s activities and finances, and
• have clear processes for appointing?Responsible Persons (such as board or committee members). This can include setting out the process in your Governing Documents (such as constitution, rules or trust deed).
• Standard 3: Compliance with Australian laws

A charity must not commit a serious offence (such as fraud) under any Australian law or breach a law that may result in a penalty of 60 penalty units (equivalent to $12,600 as at December 2018) or more.?You can take some simple steps to reduce the risk of your charity breaching this standard. In most cases, common sense and good practice will reduce risk, such as:

• being familiar with the main areas of regulation for your charity
• having some processes to protect your charity’s finances and assets, and
• having a process to ensure your charity meets its legal obligations.
• Standard 4: Suitability of Responsible Persons

A charity must take reasonable steps to be satisfied that its Responsible Persons (such as board or committee members or trustees) are not disqualified from managing a corporation under the?Corporations Act 2001?(Cth) or disqualified from being a Responsible Person of a registered charity by the ACNC Commissioner.?If so, the charity must remove any Responsible Person who does not meet these requirements.

• Standard 5: Duties of Responsible Persons

A charity must take reasonable steps to make sure that its Responsible Persons are subject to, understand, and carry out the duties set out in Governance Standard 5.?Steps your charity can take to meet this standard are to:

• bring these duties to the attention of Responsible Persons (such as providing them with a copy of this guidance or other resources) or outline their duties in a?letter of appointment or by setting them out in a board or committee charter
• regularly provide information or training to Responsible Persons on their duties to refresh their knowledge
• encourage Responsible Persons to attend, prepare for, and participate at meetings
• have processes for the responsible management of money
• have processes in place to manage conflicts of interests, and
• take action?if your Responsible Persons are failing to meet their duties.
• Standard 6: Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector

The purpose of this standard is ensure that a registered charity’s governance enables it to be accountable for its past conduct relating to institutional child sexual abuse.?A registered charity will be impacted only if it is, or is likely to be, identified as being involved in the abuse of a person.

7.????Endorsements by the ATO

Depending on the type of NFP organisation, different tax concessions are available.?For a charity to obtain tax concessions, it must first be endorsed by the ATO.?The types of tax concessions available for charities are:

• Charity tax concession
• Deductible gift recipient (DGR) endorsement

Charity tax concession is where your charity is endorsed by the ATO to receive income tax exemption, fringe benefits tax (FBT) concessions and goods and services tax (GST) concessions.?DGR endorsement, on the other hand, allows people who make donations in support of your charity to claim a tax deduction for that donation.?

To be endorsed to access charity tax concessions and to be endorsed as a DGR, your charity must:

• have an Australian business number (ABN)
• be a registered charity with the ACNC
• meet all other requirements (eg relating to the particular charity tax concession you are seeking)

So, to access various concessions and comply with your organisation's tax obligations, your charitable organisation will need to register for an Australian business number (ABN) and for GST, as well as (if relevant) FBT, pay as you go (PAYG) withholding, fuel tax credits or other taxes.??

If you are completing the ACNC registration, you can apply at the same time for ATO endorsement to access charity tax concessions and endorsement of your charitable organisation as a DGR.?The ACNC will forward your endorsement application details to the ATO.

Next Steps

Starting a charity is a great idea, but as you now know – there’s a lot to do before you launch into it.?Getting your charitable purpose right, selecting the right legal structure for your charity, making sure your charity’s governing document covers all the relevant information required to be registered with ACNC and to obtain endorsement by the ATO as well as ensuring that you have all the right licences and permits to start is just as important as developing your charity’s operational strategy.

Don’t feel overwhelmed, though.?There are many people out there who can help you achieve this.?The various government departments and regulatory authorities (like the ATO and ACNC) are great resources, along with people like me, your accountant and other people in your network.

If you have any questions or would like more information, please don’t hesitate to get in touch!

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