We are frequently asked whether or not there are too many charities in Australia. Many members of the public are surprised by the large number of charities on the ACNC Charity Register - 56,000 and growing at almost 4 per cent per year. A number of charities, stretched for resources, wish there were fewer.
The ACNC takes the view that there will be the right number of charities in Australia when those who want to support charitable causes have enough information to decide whether and who to support, and charities are free to form and reform so as to achieve their charitable ends most efficiently.
This information sheet explains why.
Background on the number of charities in Australia
In Australia there are approximately 56,000 registered charities.
They make up a diverse sector working across Australia and internationally in a broad range of areas, including health, education, social welfare, religion, culture, human rights, the environment and animal welfare. The precise number of registered charities changes from day to day as new charities are registered and others wind up, merge, or even have their registration revoked.
The number of registered charities also includes many organisations that people may not think of as charities: universities, aged care centres, child care centres, surf life-saving clubs, non-government schools, and religious institutions, to name a few.
The graph below, Registered charities in Australia 2013-2022, indicates the growth of charities in Australia. It takes into account new registrations and organisations that have had their charity registration revoked for whatever reason. It shows that charity registrations in Australia are growing by about 4 per cent per year – a rate that is faster than population growth and business formation.
The demand for new charities, the green columns in the graph, is strong and steady. The number of organisations that have had their registrations revoked, the blue columns, has declined following the clean-up of the organisations transferred to the ACNC from the Australian Taxation Office in 2013. Next year, four other registers that list organisations with Deductible Gift Recipient (DGR) status will be transferred to the ACNC.
The result is a steady growth in charities and a prediction that the growth will continue, under certain assumptions, in the foreseeable future.
*The calculation of an annual rate of change assumes: 1. the same number of annual registrations post DGR as occurred in the preceding years; 2. that revocations remain as low as for the 2018-19 period and subsequent periods; and 3. a discount of the once-off DGR cohort, which are entities held on other Commonwealth Registers and to be transferred to the ACNC Charity Register.
Freedom of association
The law in Australia does not set a limit on the total number of charities that can be registered, nor does it limit the number of charities that can be registered with the same or similar purposes.
Citizens have a right to freedom of association and this is something that we value in our society. Charities and not-for-profits are often the vehicles that citizens use to form associations and undertake activities. They are rightly independent of the state and a cornerstone of civil society.
As the regulator, the ACNC needs to have legitimate grounds on which to refuse a charity application. If an organisation applies to be registered as a charity and it is eligible, the ACNC must register it.
Discussions about this issue show that it is not only the total number of charities that concerns people. In many cases, the underlying concern that people have is with the number of charities they feel are doing 'the same thing', duplicating efforts and competing for the same donations and funding.
The ACNC understands that there are instances where charity resources could be used more effectively for better outcomes. The ACNC supports an effective, robust, vibrant, independent and innovative charity sector, and recognises that there is often room to improve.
Charities should regularly assess their efficiency and effectiveness, which may mean collaborating on projects or even merging with other charities to achieve better outcomes. Such decisions, though, should be made by the charities themselves, rather than being dictated by the regulator.
However, cutting back on charity services for the sake of arbitrary numbers does not serve communities well. And there are a number of benefits of having a diverse charity sector that comprises many charities.
The benefits of a diverse sector
One of the important facts to note is that around two-thirds of Australia’s registered charities are small organisations with an annual revenue of less than $250,000 and operations in only one state.
Having a large number of small charities can lead to innovation, new ways of tackling complex issues, local solutions to local problems, and specialised expertise for niche issues. Also, small charities are often effective fundraisers through local networks and can engage local volunteers eager to help their community.
A diverse charity sector also brings consumer choice and competition. While some refer to competition for funding as a negative thing for charities, competition may encourage better evaluation of outcomes, increased transparency, and more effective performances. As competition in the private sector is encouraged and accepted, similarly, competition can benefit the charity sector.
Sharing, collaborating and merging
Research shows that charities, in general, are adaptive and capable of responding well to changes in funding, donation levels and market forces.
In August 2016, the Australian Institute of Company Directors (AICD) released its 2016 NFP Governance and Performance Study which found that close to half of not-for-profit directors surveyed had either been involved in merger discussions in the preceding year, were currently involved in a merger, or had just completed a merger.
The research also found that 70% of those surveyed reported collaborating with others to advocate for the sector or beneficiaries, 43% subcontracted some services, and 39% had arrangements to refer or service clients.
These figures illustrate an awareness in the sector of the need to adapt to use charity dollars efficiently and effectively to continue to achieve outcomes.
Organisations that make up Australia’s charities
The charity sector is made up of organisations that differ in size, location, reach, purpose and methods. In reality, what we call the ‘charity sector’ isn’t really a single homogenous ‘sector’ at all; it comprises a variety of industries, causes, services and organisation types. Charities range from tiny, volunteer-run groups with no funding or revenue, to very large organisations with complicated business structures and operations.
Many people would be surprised to learn that a significant proportion of the 56,000 registered charities are organisations that they would not ordinarily think of as charities. In fact, many organisations and services commonly found in towns all over Australia are registered charities: from local religious groups, rural fire services and Returned & Services Leagues (RSLs), to surf life-saving clubs, child care groups and private hospitals.
These are just some examples of the types of organisations registered as charities in Australia:
- religious organisations
- parents and citizens committees or associations
- universities and research organisations
- non-government schools
- animal welfare organisations
- international aid agencies
- family violence support organisations
- aged care centres and child care groups
- cultural institutions such as museums and galleries
- environmental protection groups
- legal aid centres
It is also worth noting that some organisations consist of multiple separately registered charities. These individual entities may fall under a larger parent body, but they each have their own ABN and are registered as separate charities. Some examples include:
- The Salvation Army – 33 separately registered charities
- Melbourne University – 10 separately registered charities
- Surf Life Saving Australia – 264 separately registered charities
- Lifeline – 32 separately registered charities
- RSLs – over 500 separately registered charities
You can find out more about the diversity of the charity sector in the Australian Charities Report and explore the details with its interactive dataset.
The size of Australia's charities
Almost two-thirds of Australia’s registered charities (63%) are classified as small, with annual revenue of $250,000 or less. Of this majority, approximately one-third is very small, with annual revenue of less than $50,000. Also, just under half of Australia’s registered charities (44%) employ no staff and are entirely volunteer-run.
Only a minority of charities are medium (17%) with annual revenue between $250,000 and $1 million or large (19%) with annual revenue of $1 million or more.
Many charities are small, grassroots organisations comprising volunteers that have come together to service a local or specialised need – for example, groups undertaking conservation work near a local creek, or services for a local religious congregation. In most cases, these charities are not competing with others for the same funding dollars.
The locations of Australia's charities
Australia is a large country, with a geographically dispersed population – 31% of Australians do not live in one of the major cities. Some charities feel that they better meet the needs of the community if they are located in remote, rural or regional areas.
The distribution of charities is similar to the population – just under two-thirds of charities are located in major cities (65%), while a substantial proportion (31%) are registered in regional locations, and a smaller minority (4%) are based in remote areas.
Multiple charities doing the same thing?
Most charities are meeting a community need and generally not doing the same thing in the same area as another charity. However, there are instances where there is duplication.
Undertaking the same charitable activities to serve the same beneficiaries in the same area can be inefficient and a duplication of effort and funds. In such cases, it may be best for the charities involved to consider whether it would be beneficial to collaborate, or even merge.
A charity’s committee or board should always consider the best ways to fulfil its purposes. It may be that continuing to run the charity is still the best way for it to fulfil its purposes, or it may be more effective to merge or wind the charity up and transfer the funds and assets to another charity.
Competing for donations
Some organisations are protected from local competition, for example, pharmacies, but generally, such restrictions are not allowed by law. No one stops coffee shops from opening if there are others in the same area – the best ones will succeed and the rest will fold. Should charities have similar freedoms? Does the difference between private and public funding make a difference?
There is a difference in that charities are the stewards of donated funds, philanthropic grants or government contracts which are provided to be spent for the public good. However, charities also raise their own funds through trading, fees and investments. There is an onus on a charity to be able to demonstrate efficient and effective use of its money which can lead to continued or increased support. In this context, competition for donations or grants is a good thing as it is likely to motivate a charity to better demonstrate its impact and effectiveness.
Charities and mergers
There has been much debate about whether charities that do similar work in the same area should merge. In some cases merging will bring efficiencies and expand the breadth of a charity’s service, but it may be not be the right answer for every charity.
Mergers may be more likely if donors, and other charities, are aware of charities operating in the same field and servicing the same area. The ACNC aims to provide a level of visibility on its Charity Register to assist this process.
The responsibility for deciding to merge sits with a charity’s Responsible People (its committee or board). There are no requirements or conditions that dictate a charity must merge or consider merging, and when charities do merge, it is often to consolidate resources or take advantage of new funding arrangements or contracts. In some cases, charities may collaborate on projects or share resources as a way to improve efficiency and effectiveness.
Registering a similar charity
Before starting and registering a new charity, we strongly recommend checking the ACNC Charity Register to see what charities are already operating for similar purposes. It is likely that there will be a registered charity already doing what you are thinking about doing. In such a case, giving funds to the established registered charity may be the best thing to do.
There are a range of ways you can contribute to a cause without necessarily starting a new charity. You may be able to give funds to a charity on ‘special trust’, for example, in the name of a loved one, and you may even be able to have a steering committee for the trust. You may be able to set up a sub-fund within a community foundation to help pursue your goals.
Starting and running a new charity is hard work, and raising funds is difficult. This may not be the best way to achieve your objectives.
- ACNC Charity Register
- Australian Charities Report
- Australian Institute of Company Directors: 2016 NFP Governance and Performance Study: Raising the Bar