Factsheet: Who can register with the ACNC
The ACNC registers organisations as charities. This factsheet has information about:
- the role of the ACNC in deciding who can register as a charity
- the legal meaning of 'charity', including 'charitable purpose', 'not-for-profit' and 'public benefit'
- the other rules for registration
- charity subtypes, and
- charity tax concessions.
The role of the ACNC in deciding charity status
Since 3 December 2012 the ACNC has had responsibility for deciding whether an organisation can be registered as a charity, under the ACNC Act. Registration is required before an organisation can receive charity tax concessions from the ATO. There is also a range of Commonwealth concessions, exemptions or benefits that depend on a charity being registered with the ACNC.
Previously, the Australian Tax Office (ATO) decided whether an organisation was a charity in order to assess eligibility for charity tax concessions. It remains responsible for deciding eligibility for charity tax concessions.
Legal meaning of 'charity'
People often use the word 'charity' to describe an organisation that works to help the community. However, ‘charity’ has a technical legal meaning, developed over hundreds of years. When the ACNC makes decisions about whether to register your organisation as a charity, we apply the law:
- made by judges (‘common law’) on the meaning of charity and charitable purposes
- taking account of relevant legislation such as the ACNC Act and the Charities Act 2013 (Cth) (Charities Act) (which came into effect on 1 January 2014).
To be a charity, your organisation must:
Previous tax rulings on charitable status
The Australian Taxation Office (ATO) has produced tax rulings on charitable status, which set out the ATO Commissioner's opinion about the way the tax law will be interpreted and applied. Taxation Ruling (TR) 2011/4 sets out how the ATO interprets the meaning of charity. ATO rulings are not binding on the ACNC. However, we will have regard to what was previously considered by the ATO to be a charity, including what is set out in taxation rulings.
ACNC Commissioner Interpretation Statements
We are publishing ACNC Commissioner’s Interpretation Statements as they are developed. These set out the approach we will take to interpreting the law on registration of charities.
These statements will progressively replace the ATO’s tax rulings.
Read the Commissioner's Interpretation Statements.
Charities Act – the statutory definition of charity
The Charities Act clearly sets out the legal meaning of charity in legislation. The ACNC has applied this law since it came into effect on 1 January 2014.
The Act restates the existing (judge-made) law in modern language and also recognises charitable purposes such as the protection of human rights, the promotion of reconciliation and tolerance, and by recognising that many modern charities advance causes by preventing, educating, researching and raising awareness.
Find out more in:
To be registered as a charity, your organisation must demonstrate that it is not-for-profit.
Generally, a not-for-profit is 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).
Benefits to members
It can still be a not-for-profit if it simply provides a benefit to a member while genuinely carrying out its purpose. For example, organisations such as self-help groups can be not-for-profits if the benefits provided to members are consistent with the purposes of the organisation. So, a self-help group for young parents can provide counselling services to a young parent who is a member of the organisation. The member is also a person in need who is helped by the organisation.
Types of benefits
A not-for-profit can provide direct benefits (such as distributing money or gifts) or indirect benefits (such as a member receiving help that is consistent with the not-for-profits’ purpose).
A staff member and, sometimes, a responsible person (such as a board or committee member or trustee) can be paid for their work, but not an unreasonable amount. Your organisation’s governing documents (such as its constitution) may include clauses about reasonable payments and benefits.
A not-for-profit can make profit, but any profit made must be used for its purpose(s). It can keep profits as long as there is a genuine reason for this and it is to do with its purpose. For example, a good reason to keep profits may be to save up for starting a new project, building new infrastructure or accumulating a reserve so it continues to be sustainable.
If an organisation continues to hold onto significant profits indefinitely, without using them for its charitable purpose, this may suggest that the organisation is not working solely towards its stated charitable purpose (and is not operating as a not-for-profit).
Demonstrating not-for-profit character
To be registered with the ACNC, you need to show that your organisation meets the requirement of being a not-for-profit. You can do this by having particular statements (clauses) in your organisation’s governing documents, and following these. Sample clauses may include wording as used in the following examples.
The not-for-profit clause
This clause sets out how the organisation’s assets and income are used and distributed.
'The assets and income of the organisation shall be applied solely to further its objects and no portion shall be distributed directly or indirectly to the members of the organisation except as genuine compensation for services rendered or expenses incurred on behalf of the organisation.'
The dissolution clause
This clause sets out what happens to the organisation’s assets if it dissolves or winds up (closes down).
'In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.'
We also accept that some organisations can show their not-for-profit character through to the operation of certain laws, such as state or territory incorporated associations legislation and trust law (for example, charitable trusts).
More information on being not-for-profit
The Australian Taxation Office (ATO) also provides guidance on the:
To be registered as a charity, your organisation must have a charitable purpose or purposes.
Purpose of your organisation
Your organisation’s ‘purpose’ is the reason your organisation has been set up, or what your activities work towards achieving. Some people also refer to this as your organisation's mission.
How we decide your purposes
When you apply to register your organisation as a charity, you need to demonstrate its charitable purpose. Generally, the ACNC will decide what your organisation's purposes are by looking at its governing documents, which will usually set out its purpose or ‘objects’. Your organisation’s governing documents are its constitution, rules or deed. We may also need to look at other types of evidence such as your organisation's activities, annual reports, financial statements and corporate documents.
Some activities may not seem charitable, but are appropriate if they are to further a charitable purpose. For example, if your organisation has activities designed to raise money for its charitable purposes (for example, operating a recycled clothing shop, where the profits raised are used to provide accommodation for homeless youth).
Once we decide your organisation’s purposes are charitable, and that it is otherwise eligible, we register your charity. When we register it, we register it as a ‘subtype’ of charity, which reflects its purpose or purposes (for example, as a charity advancing education).
The subtype of charity we register your charity as can affect the tax concessions that may be available to it. You may be required to provide further information to support an application for particular subtypes of charity, such as a public benevolent institution or health promotion charity.
Recognised charitable purposes
'Charitable purpose' has a special legal meaning, developed over years by courts and parliament. The courts have recognised many different charitable purposes, and as society changes new charitable purposes are accepted.
The Charities Act 2013 (Cth) lists twelve charitable purposes:
- advancing health
- 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
- promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country, and
- other similar purposes ‘beneficial to the general public’ (a general category).
Purposes that the law recognised as charitable before the Charities Act came into effect will continue to be charitable. The charity subtypes of public benevolent institution and health promotion charity also continue to be recognised.
Having more than one charitable purpose
Your organisation may have more than one charitable purpose. For example, your organisation may educate the public about the environment, and so advance education as well as the environment.
The law requires all of your organisation’s purposes to be charitable, except for purposes that are ‘incidental or ancillary to’ (further or aid) the charitable purposes.
Your organisation may have more than one purpose, and many activities, and still be a charity, as long as these all further the charitable purpose.
Attention - Important information!If your organisation has non-charitable purposes and these do not further its charitable purposes, your organisation is unlikely to be registered as a charity.
Purposes that are not recognised as charitable
Some purposes may benefit the community, but not fit the legal meaning of charitable purpose. For example, your organisation may not fit the legal meaning of charity if it is a:
- social club – unless its purpose is charitable such as to help people who are socially isolated or disadvantaged, and the club’s social activities are the way it achieves this purpose
- sporting and recreational organisation – unless its purpose is charitable such as providing sporting activities for the people with disabilities or the elderly
- professional or trade group – unless its purpose is charitable, such as advancing education.
These organisations may still:
However, they are unlikely to fall within the general legal meaning of charity as we apply it.
Purposes that cannot be charitable
Some purposes are deliberately disqualified from being charitable, such as:
- the purpose of engaging in or promoting activities that are unlawful or against public policy
- the purpose of promoting or opposing a political party or a candidate for political office.
Unlawful activities would include being engaged in tax evasion, people or drug trafficking, dealing in weapons or illegal goods. In some cases, a charity may be set up for charitable purposes but be used to hide or transfer money that has been gained illegally. In these cases, the organisation is not a charity because its activities show that its true purpose is to engage in unlawful activities.
Activities that are against public policy
It is not against public policy to have a purpose of advocating for a change in government policy or law, or from promoting a law or policy – in certain situations these may be charitable purposes, for example advancing public debate on a charitable topic.
An example of an activity against public policy would be educating people in how to build illegal weapons. Even though education is a charitable purpose, it would not be a charitable purpose to educate people in a way that may put members of the public at risk.
Purpose of promoting or opposing a political party or candidate
An organisation that has a purpose of promoting or opposing a political party or candidate for political office cannot be a charity. For example, an organisation that exists to fundraise for the election of a political candidate is not a charity.
Charities can still distribute information or engage in debate about the policies of political parties or candidates, where these activities must be ways of achieving their charitable purposes.
Subtypes of charity
If we decide your organisation’s purposes are charitable, and that it is otherwise eligible, we can register your charity. When we register it, we register it as a ‘subtype’ of charity, which reflects its purpose or purposes (for example, as a charity advancing education). The other recognised subtypes are public benevolent institutions and health promotion charities.
The subtype of charity we register can affect the tax concessions that may be available to it. You may be required to provide further information to support an application for particular subtypes, such as a public benevolent institution or health promotion charity.
Additional tax benefits for some charity subtypes
Extra tax benefits (such as fringe benefits tax exemption or endorsement as a deductible gift recipient (DGR)) are available to a charity that can show it is a:
There are strict requirements that apply and you must be able to demonstrate that your organisation can meet these before it can be registered as being one of these subtypes, for example, by providing supporting information about its activities and expenditure.
Public benevolent institutions (PBIs)
A public benevolent institution is a type of charitable institution whose main purpose is to relieve poverty, sickness, suffering or disability.
Examples of public benevolent institutions include:
- some hospitals and hospices
- some disability support services
- some aged care services
- providers of low rental or subsidised housing for people in need.
Find out more about public benevolent institutions.
Health promotion charities
A health promotion charity is a charitable institution whose principal activity is to promote the prevention or control of diseases in people. This may include providing public information about a disease, research to develop cures or treatments, or providing equipment to help people who are suffering from the disease. Examples of health promotion charities include:
- some community health care providers
- some medical research organisations
- organisations that work to raise awareness of human diseases.
Find out more about health promotion charities.
Deductible gift recipients (DGRs)
Certain DGR categories require charities to be registered with the ACNC before applying for DGR status with the ATO. If your organisation is a charity that wants to apply for DGR status, you may need to be registered with the ACNC first.
You can apply to register as a charity with us and apply for deductible gift recipient (DGR) status with the ATO at the same time.
Read more in the ATO’s guidance on DGRs.
Find out more about charity tax concessions and other benefits for registered charities.
To be registered as a charity, a not-for profit must have charitable purposes that ‘is for the public benefit’.
Benefit must be to the public
A charity’s purpose is for the public benefit if achieving this purpose would be of benefit to the public generally or a sufficient section of the public.
A sufficient section of the community may be, for example, a local community, followers of a particular religion, people with a particular disability, refugees or young people.
Types of benefit
There are many ways a charity’s purpose can benefit the public, for example, it can provide goods, services, education, counselling or spiritual guidance, or improve the environment.
Restrictive membership can still benefit the public
Restriction related to purpose
A charity may restrict its benefits to a particular class or group of people if the class is not closed, and the restriction advances its charitable purpose. For example, an organisation whose purpose is to provide assistance services to refugees can still be a charity if its services are available to all refugees (so the class is not closed) as the restriction advances its charitable purpose.
However, an organisation may not be a charity if it is too restrictive in who can receive benefits. For example, an organisation set up to provide scholarships to employees of a particular employer is unlikely to be a charity as it is a closed class of beneficiaries who are linked by ties to a single individual or company.
Restriction to manage services
A charity can also limit access to manage its services. For example, a school may require students to enrol, legal clinics may accept only certain types of cases, and libraries may impose borrowing rules.
When public benefit test is limited or does not apply
Traditional Indigenous land rights
The Charities Act makes it clear that organisations that receive, hold or manage benefits relating to native title or traditional Indigenous land rights are for the public benefit even though they may benefit people who are related to each other. This is a complex area of law. For more information, read the ACNC Commissioner Interpretation Statement: Indigenous charities.
Relief of necessitous circumstances
For organisations relieving the necessitous circumstances of Australian individuals (people in need), the benefit does not have to be directed to the general public.
Closed religious orders and self-help groups
The public benefit test does not apply for:
- closed or contemplative religious orders that regularly pray on request from members of the general public, and
- self-help groups that have an open and non-discriminatory membership and were established to help people affected by a particular disadvantage or discrimination, or unmet need, by people affected by that disadvantage or discrimination or need.
Other rules about registration
There are specific rules about which organisations the ACNC can register. To be eligible to register, your organisation must:
- be a charity (as described above), meaning it is a not-for-profit, has a charitable purpose and is for the public benefit
- have an Australian Business Number (ABN)
- comply with governance standards
- not be a type of organisation that cannot be registered.
Your organisation cannot be registered as a charity if it is:
- a political party
- a ‘government entity’ — this is part of an Australian or foreign government or one of its agencies, and some organisations established under a state or territory law
- included in a written decision made by an Australian government agency or judge that lists it as engaging in or supporting terrorist or other criminal activities.
Also, the ACNC cannot register an individual, or a partnership (a particular legal structure) as a charity.
If you think your organisation is eligible, you can now apply to register. There is a checklist of things to consider before you start, as well as a guide to the application form, to help you through the process.