Who can register with the ACNC

Since 3 December 2012 the ACNC has had responsibility for deciding if an organisation can be registered as a charity.

Registration is required before an organisation can receive charity tax concessions from the Australian Taxation Office (ATO), and there is also a range of Commonwealth concessions, exemptions or benefits that depend on a charity being registered with the ACNC.

Previously, the ATO decided whether an organisation was a charity in order to assess eligibility for charity tax concessions. While this responsibility has changed since the ACNC's inception, the ATO 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).

To be a charity, your organisation must:

• be a not-for-profit
• have only charitable purposes that are for the public benefit
• not have a disqualifying purpose, and
• not be an individual, a political party or a government agency.

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, but 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 publish ACNC Commissioner’s Interpretation Statements which set out the approach we will take to interpreting certain aspects of the law on eligibility for charity registration.

These statements, as they are developed, will progressively replace the ATO’s tax rulings.

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 Charities Act restates the existing law in modern language and recognises charitable purposes such as the protection of human rights, the promotion of reconciliation and tolerance. It also recognises that many modern charities advance causes by preventing, educating, researching and raising awareness.

Find out more in:

• our information on the legal meaning of charity and how the Charities Act applies
• the Charities Act.

To be registered as a charity, your organisation must demonstrate 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 (its members, those who run it, their friends or relatives for example). The definition of not-for-profit applies both while the organisation is operating and if it winds up.

Benefits to members

An organisation 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.

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-profit's 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 document (its constitution or rules) may include clauses about reasonable payments and benefits.

Making profit

A not-for-profit can make profit. But any profit it makes must be used for its purpose.

It can retain profits it makes as long as there is a genuine reason to do so, and that reason is linked directly with its purpose.

For example, a good reason to retain profits may be to build up reserves so the organisation can start a new project or build new infrastructure. Another reason might be to accumulate a reserve so the organisation can continue to operate sustainably.

If an organisation retains significant profits indefinitely without using them for its charitable purpose, it could appear that it 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 demonstrate your organisation meets the requirement of being a not-for-profit.

You can do this by having particular statements or clauses in your organisation’s governing documents, and then following them.

Below are examples of wording for a not-for-profit clause, and a dissolution clause.

The not-for-profit clause

This clause sets out how the organisation’s assets and income are used and distributed.

The dissolution clause

This clause sets out what happens to the organisation’s assets if it dissolves or winds up.

Legal structure

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).

Purpose of your organisation

To be registered as a charity, your organisation must have a charitable purpose.

Your organisation’s ‘purpose’ is the reason your organisation was set up, or what your activities work towards achieving. Some people also refer to this as the 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 document, which usually sets out its purpose or ‘objects’. Your organisation’s governing document is 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, an organisation that has activities designed to raise money for charitable purposes - such as 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 with one or more charity ‘subtypes’ - these are charity categories that reflect its purposes (for example, 'advancing education' or 'advancing health').

The charity subtype with which we register your charity 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 remain charitable. The charity subtypes of Public Benevolent Institution (PBI) and Health Promotion Charity (HPC) also continue to be recognised.

PBI and HPC

A PBI is a type of charitable institution whose main purpose is to relieve poverty, sickness, suffering or disability.

A HPC 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.

Both PBIs and HPCs may be able to apply for extra tax benefits.

These might include fringe benefits tax exemption or endorsement as a deductible gift recipient (DGR). 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.

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 - its purposes are both to advance education and advance the natural environment.

The law requires all of your organisation’s purposes to be charitable, except for those which are ‘incidental or ancillary to’ your main 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.

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:

• be not-for-profits and exempt from income tax, or
• qualify as charities under state or territory laws.

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
  • This includes a charity set up for charitable purposes but which is in fact used to act unlawfully. This organisation is not a charity because its activities show that its true purpose is to engage in unlawful activities.
• the purpose of engaging in or promoting 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
• the purpose of promoting or opposing a political party or a candidate for political office.
  • 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.

Benefit must be to the public

To be registered as a charity, a not-for profit must have charitable purposes that are for 'the public benefit’.

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.

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 the ACNC's Governance Standards
• comply with the ACNC's External Conduct Standards if it operates outside Australia
• 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. But before you do, have a look at the checklist of things to consider before you start.