Setting up a charity
General advice for setting up a not-for-profit organisation to deliver charitable services to the community.
If you’re thinking about setting up a charity, it’s important to take time to plan and understand what’s involved. You also need to consider whether setting up a new charity is the best way to achieve your goals.
There may be an existing charity that already does what you want to do or that may support your idea as a project. You can explore charities and charity programs across Australia on the Australian Charities and Not-for-profits Commission (ACNC) Charity Register.
The steps below are a guide only. To set up a charity or a not-for-profit organisation, you need to get independent legal advice.
1. Understand what a charity is
The Charities Act 2013 (Cth) states that to be a recognised as a charity, an organisation must:
- be not-for-profit
- have only charitable purposes that are for the public benefit
- not have a disqualifying purpose
- not be an individual, a political party or a government entity.
Generally, a not-for-profit organisation does not operate for the profit, personal gain or the benefit of particular people – for example, its members, the people who run it, or their friends or relatives. To learn more, visit Australian Charities and Not-for-profits Commission (ACNC).
2. Define a community need
We recommend doing background research and a feasibility study to define the charity’s role and the community needs it will meet.
It’s important to remember that there are already more than 600,000 not-for-profit organisations in Australia. In many cases, these organisations are fundraising and raising revenue from similar sources – for example, from donors, member fees, events for the public, sales to the public, and government.
Connecting with existing networks can help your cause. This may be local community organisations or larger national networks – such as Philanthropy Australia and other cause-specific or organisation-specific networks. Getting an idea of the landscape can help define the distinct and compelling role of your charity.
Defining your role will help also define your ‘charitable purpose’. This is required for the charity to be registered with the ACNC. Find information and examples of what the ACNC considers to be a charitable purpose.
These organisations can help you find existing charities:
- Australian Communities Foundation
- Australian Charities and Not-for-profits Commission (ACNC)
- Pro Bono Australia
3. Consider your fundraising potential
Charities raise money in different ways. Sufficient funding is essential to survive and thrive.
If you want to start an organisation that both seeks funding – from grantmakers or the general public – and makes grants for other organisations, it is essential to determine your fundraising potential.
Charities that are registered with the ACNC may be eligible for tax concessions and deductible gift status. Tax concessions from the Australian Tax Office (ATO) and relevant state and territory governments refer to:
- income tax exemption
- good and services tax (GST) concessions
- fringe benefits tax (FBT) concessions
- a refund of franking credits.
The ATO is the authority, so charities need to apply with them. For more information, see Is my organisation eligible for charity tax concessions?
Also see Other commonwealth benefits and exemptions on ACNC website.
Donations to registered charities may be tax-deductible by the donor. This is only allowed if the charity has been endorsed as a deductible gift recipient (DGR) by the ATO. To do this, you must apply with the ATO under eligible ‘DGR categories’ – or, less often – be listed by name in the tax law. For more information, see:
- Deductible gift recipient endorsement
- Getting endorsed for tax concessions or as a DGR – video explaining tax concessions and deductible gift recipient.
If your organisation is already a not-for-profit organisation, and you’re considering setting up a perpetual foundation to benefit your organisation, we recommend doing a feasibility study into the financially viability of investing resources to set-up and maintain a separate legal entity.
To learn more about the different types of giving structures, see Choosing the right philanthropic structure.
The ACNC’s annual Australian Charities Report details the breakdown of revenue sources for the total charity sector and for different charities by size – such as small, medium and large.
Revenue sourced from donations, sale of goods and services, government and other sources of revenue differ. In 2020, the total percentage of revenue from donations and bequests across the total charity sector was 7%. For more information, see Australian Charities Report.
4. Understand the start-up costs
There are many costs related to starting up and running a charity. Some of the underpinning infrastructure and normal day-to-day operating costs cannot be avoided – such as insurance, rent, other leases and logistics.
On an ongoing basis, volunteers can be an important backbone of your organisation. But as the saying goes, ‘volunteer time is freely given, but enabling volunteering is not free’.
The costs involved in setting up and running a charity can be a significant challenge, so it’s worth seeking advice and planning carefully.
You may need to be prepared to fund the start-up phase yourself or try crowdfunding. To learn more, see Crowdfunding on the ATO website.
To help you, it might be worth:
- successfully piloting the project or projects you’re interested in offering
- having evidence that another organisation is not carrying out the same work in your area
- having a detailed and realistic plan for ensuring the future financial stability of your organisation.
5. Understand the important role of legal structures and legal implications
The legal structure you choose should meet your organisation’s needs now and into the future. Charities have a range of structures – incorporated or unincorporated – and there may be more than one that works for your charity.
Legislation also varies between states and territories. Your charity’s legal structure affects many things – such as:
- its legal identity – whether it can be sued
- its governance structure – who makes certain decisions
- who is liable for its debts
- its specific responsibilities – such as reporting or other compliance obligations.
To become and remain registered with the ACNC, your charity must comply with the ACNC’s Governance Standards. If it operates overseas, it also has to comply with External Conduct Standards. To learn more, see:
Get professional advice
Seeking professional advice is recommended as there are many legal implications in setting up a charity, and it may have to comply with a wide range of laws – including federal, state and territory laws.
For more information, see:
- ATO – Know your legal structure, Legal structures for not-for-profits
- ACNC – Legal structure
- JusticeConnect – Which incorporated legal structure should you choose?
The ACNC provides a charity checklist to help with this process – see Before you start a charity.
It also has other information – including how to register as a charity and what happens next – see Start a charity.