By Harriet Warlow-Shill

9 August 2019

Although the Australian Charities and Not for Profit Commission (ACNC) mentions the word “not for profit” in its title, confusingly not all not for profits are actually governed by the ACNC.
Even more confusingly, not all charities are governed by the ACNC either!

This article will deal with the not for profits that fall outside of the ACNC’s regulatory grasp and we will deal separately with charities in a different article.

As stated by the Honourable Robert French AC, who spoke at a recent Summit on not for profits held at the University of Western Australia, for a regulatory regime to have democratic legitimacy and public confidence it must have clear purposes and those purposes must be consistent with broadly accepted community values.

At the moment, the ACNC deals with what we would all easily identify as ‘Charities’ but it does not deal with all not for profit organisations.

According to the ACNC a not for profit is defined as an organisation that does not operate for the profit, personal gain or other benefit of particular people (for example, its members, the people who run it or their friends or relatives). The definition of not-for-profit applies both while the organisation is operating and if it ‘winds up’ (closes down).

A charity is a sub category and one type of not for profit organisation. A charity is generally there to “do good” and provide public benefit, whereas a not for profit is simply defined by the way in which its profits are distributed – i.e. generally, not for the benefit of a private individual.

The not for profits that come under the auspices of the ACNC are those that identify as being a charity. Not for profits designated as a charity by the ACNC can gain income tax exemption and other tax concessions if they have an ABN and have received endorsement from the ATO. If an NPO is registered to pay income tax, endorsement reduces the amount of tax payable.

Not for profits that are not charities do not have to be endorsed to access a tax exemption; instead they need to self-assess their entitlement against a standard set of tests and rules. This exemption is not a given and is tested on an annual basis.

When a not for profit is not a charity it is because it has a purpose other than what the legislature sees as being “charitable”. This sort of activity includes things like sporting clubs, recreational clubs, community service organisations, professional and business associations and social organisations. This is where the contention lies. Are these organisations really not for the “public good”? For example, where would we be without professional organisations? They certainly assist in important tasks of setting professional standards and codes of conduct. Another example is sporting clubs. Clubs can assist greatly in maintaining and promoting positive physical and mental well being. Are these really not for the good of the public at large

Thus we come back to Justice French’s words – “Good” these days has to measure up to community values. If a charity is “good” then how can sporting clubs and other such entities be left out of the definition of “good”?

In 2018 the ACNC released the “Strengthening for Purpose Report” of the ACNC Act Review. Part of the report’s recommendations was to expand the ACNC regulatory regime beyond charities to include all not for profits. We think this is a very good idea however we do think that it doesn’t really address the core issue which is that the definition of “charity” should be broadened to include important organisations that are otherwise currently left out.

 

If you have any further questions please do not hesitate to contact Harriet Warlow-Shill, Yoni Ungar, or a member of our Charities and Not-for-Profits Team.

 

Disclaimer
The material contained in this publication is meant to be informational only and is not to be construed as legal advice. Tisher Liner FC Law will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.

Related Articles

View All
Charities & Not-for-Profit / Charities & Not-For-Profits

Reporting Requirements of Various Charities

Your charity’s financial reporting requirements and other obligations to the ACNC depend on whether it is...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Auditing Requirements of Various Charities

The long answer is: Charities that report to the ACNC all have auditing requirements, such as the Annual Information...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Looking to Start a Sports Charity: Is Sport a Charitable Purpose?

However, as the sector continues to develop, charities outcomes are being scrutinised with many questioning if there is...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Philanthropy and Charity – Tailoring Your Giving Regime

Charity is defined as the voluntary giving of help, typically in the form of money, to those in need Philanthropy has...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Attention Door Knockers: Fundraising Regulations 2019 Take Effect from 1 June 2019

The new Fundraising Regulations support the Fundraising Act 1998 (Vic) which applies to all those who engage in...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Beware! Charities Operating Overseas Are Now Under New Scrutiny

The new standards are expected to come into effect on 1 July 2019 and will be binding upon all charities operating...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits / Wills, Estates & Probate

Tax-Deductible Gifts and Public Recognition

Typically, when a donor donates funds to an entity that is endorsed as a tax-deductible gift recipient (DGR), the donor...
Read More
Charities & Not-for-Profit / Business Law / Charities & Not-For-Profits

“I’m Just a Volunteer” – Liability of Directors or Committees of Not-for-Profits

Often though, the volunteer nature of these organisations may contribute to a failure by the organisation, its’...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Tax-deductible opportunities for Indigenous charities

The school, focused upon educating Aboriginal members of its local community, was previously registered as a charity...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

What to Do if You’ve Been Asked to Run a Charity

If you have been asked by a charity to assume a governance position, then you should definitely be aware of all of your...
Read More
Australia-Israel Legal Advice / Charities & Not-for-Profit / Technology and Start Ups

TLFC – Award Finalist for Law Firm of the Year (Medium Category)

Tisher Liner FC are proud to be nominated as an award finalist in the 14th annual Victorian Legal Awards Medium Law...
Read More