Community organisations

What is a charity? According to the Charities Act, a charity:

• is a not-for-profit organisation;
• has purposes that are charitable and for the public benefit (i.e. achieving its purposes benefits the public generally or a section of the public);
• does not have any disqualifying purpose; and
• is not an individual, political party, or government entity. The Charities Act is relevant for Commonwealth law purposes.

  Who regulates charities?

  The Australian Charities and Not-for-profits Commission (ACNC) regulates charities and is responsible for determining whether an organisation’s purposes are charitable and for the public benefit.

  What are charitable purposes?

  A list of charitable purposes is set out in the Charities Act. These include advancing health, education, social and public welfare, religion, culture; promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia; promoting and protecting human rights; advancing the security and safety of Australia or the Australian public; preventing or relieving the suffering of animals; and advancing the natural environment. A purpose that is analogous (i.e. corresponds to) to one of the charitable purposes listed in the Charities Act may also be considered to be a charitable purpose. A purpose of promoting or opposing a change to the law, or to a policy or practice (i.e. advocacy), where that promotion or opposition furthers one of the charitable purposes listed in the Charities Act, is itself a charitable purpose.

  Registering with the ACNC

  The ACNC registers charities in Australia. Registering as a charity is free and carries no annual fees. Registration as a charity is required to access federal government charity tax concessions and other benefits (discussed further below). To register as a charity, an organisation must have an Australian Business Number (ABN) (see ‘Australian Business Number’, below). If eligible, another advantage of registering as a charity is increased public trust in an organisation as it will be listed on a public register of charities maintained by the ACNC. Through the register, the public (including potential donors, members and volunteers) can access information about an organisation, including its activities, finances, the places it operates, and the people on the governing body. Generally, if a company limited by guarantee registers as a charity with the ACNC, it does not have to comply with several major obligations and requirements in the Corporations Act. Instead, these charities must comply with similar ACNC obligations and requirements.

  Charities’ reporting requirements

  Charities are required to report to the ACNC each year. The type of reports that must be submitted vary according to the annual revenue of the charity:
• small charities (annual revenue of less than $500,000): an annual information statement and an optional annual financial report;
• medium charities (annual revenue of $500,000 or more but less than $3 million): an annual information statement and an annual financial report that is either reviewed or audited;
• large charities (annual revenue of $3 million or more): an annual information statement and an audited annual financial report. For more information about reporting requirements, see the ACNC’s website (www.acnc.gov.au/for- charities/manage-your-charity/obligations-acnc/ reporting-annually-acnc). Charities also need to notify the ACNC when certain things change, such as the organisation’s name, address, governing documents (e.g. the constitution) or when the ‘responsible persons’ (e.g. board members) in the organisation change. Charities also have obligations regarding record- keeping, compliance with governance standards, and compliance with external conduct standards. For more information about these obligations, see www.acnc.gov.au.

Income tax Community organisations, unless exempted, must pay tax on income and money received from people who are not members. Income from members (e.g. membership fees) is exempt from income tax on the basis of what is called the mutuality principle. Examples of money received from non-members include where an organisation holds functions, raffles or street stalls, operates a shop or canteen, or otherwise raises income from the public. If, after expenses and deductions, there is net income from non-member sources, many types of community organisations can obtain an exemption from income tax for that income.

All charities registered with the ACNC can apply for income tax exemptions from the ATO. A charity must be endorsed by the ATO to be exempt from income tax.

From the 2023-2024 income year, not-for-profit organisations with an active ABN that are not charities registered with the ACNC may be entitled to self-assess their income tax status and lodge an annual self-review return. ‘Self-assess’ means an organisation can work out for itself whether it is income tax exempt or taxable. Organisations that can self-assess their income tax status do not need to be endorsed by the ATO or get confirmation of their income tax status from the ATO.

The categories of income tax exempt organisations are registered charities, and organisations in the community service, cultural, education, employment, health, resource development, science or sport sectors.

For more information about income tax exemptions, see the ATO’s website (www.ato.gov.au) and Not-for-profit Law’s website (www.nfplaw.org.au). Deductible gift recipient status There are other tax concessions that might be relevant for community organisations; in particular, the ability for those who donate to the organisation to claim a tax deduction for their donation. This is called deductible gift recipient (DGR) status. It refers to being endorsed as a DGR by the ATO because the organisation falls within a DGR category specified in the Income Tax Assessment Act 1997 (Cth) or, in exceptional cases, because the organisation is listed by name in the Income Tax Assessment Act 1997 (Cth). There are over 50 DGR categories, which include:

• public benevolent institutions (PBIs);
• health promotion charities;
• harm prevention charities;
• environmental charities; and
• animal welfare charities. Each category has specific requirements. The organisations most commonly endorsed as deductible gift recipients are PBIs. Generally, to gain PBI status, an organisation must be an institution that organises, conducts itself or promotes for the relief of poverty, sickness, destitution, helplessness, suffering, misfortune, disability or distress. Such an organisation usually has to address this purpose in its constitution, which also has to contain a not-for-profit clause, a DGR revocation clause, and a suitable winding up clause. PBIs must be registered with the ACNC as a prerequisite for ATO endorsement as a DGR, or to access Fringe Benefits Tax (FBT) exemptions and other federal government concessions. For more information, visit www.nfplaw.org.au/tax, or contact the ATO (see ‘Contacts’ at the end of this chapter). Organisations may be eligible for tax concessions under state laws (e.g. on stamp duty, payroll and land tax). For more information about state-based tax concessions, contact the State Revenue Office Victoria (see ‘Contacts’ at the end of this chapter).

The Fringe Benefits Tax (FBT) is a tax an employer pays when it provides a non-salary benefit to its employees. An example is where an employee chooses to have part of their salary paid directly to their rental provider or car loan provider.

Community organisations are only liable to pay FBT on benefits provided to employees, employees’ families or other associates. Generally, benefits provided to volunteers or independent contractors are not subject to FBT as they are not considered employees.

The FBT is paid by the employer, based on the ‘grossed-up’ value of the non-salary benefits provided to its employees. The FBT rate for the FBT years ending 31 March 2021 to 2024 is 47 per cent. FBT must be recorded on employees’ PAYG payment summaries.

There are two main types of FBT concessions provided by the ATO:

• FBT rebate; and
• FBT exemption.

  Fringe Benefits Tax rebate

  The FBT rebate is a rebate on the tax (i.e. a tax discount) that employers pay on non-salary benefits. An organisation qualifies for the FBT rebate if it is a non-government organisation and a:
• charity that is an institution (but not a PBI) registered by the ACNC and endorsed by the ATO;
• religious institution registered by the ACNC and endorsed by the ATO;
• certain type of scientific institution or public educational institution;
• trade union or employer association; or
• not-for-profit organisation established: – to encourage music, art, literature or science; – for musical purposes; – to encourage or promote a game, sport or animal races; – for community service purposes; – to promote the development of aviation or tourism; – to promote the development of Australian information and communications technology resources; or – to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia. As at 12 January 2023, employers that are entitled to the fringe benefit rebate can have their FBT liability reduced by a rebate of 47 per cent of the gross FBT payable. The rebate for each employee can be claimed until the total grossed-up taxable value of the fringe benefits provided to an employee exceeds $30,000.

  Fringe Benefits Tax exemption

  The FBT exemption is a more extensive tax concession that is available for certain not-for-profit organisations, including PBIs, health promotion charities, public and not-for-profit hospitals, and public ambulance services. The fringe benefit exemption completely exempts employers from having to pay FBT on non- salary benefits up to a certain threshold per employee, and therefore makes it financially viable to offer salary packaging to employees. Eligible not-for-profit organisations are exempt from having to pay FBT until the total grossed-up taxable value of the fringe benefits provided to an employee exceeds $30,000 for PBIs and health promotion charities and $17,000 for hospitals and ambulance services. More information about the FBT is available from the ATO (see ‘Contacts’ at the end of this chapter).

Generally, not-for-profit organisations with a turnover of $150,000 or more per year must register for Goods and Services Tax (GST). Not-for-profit organisations with a turnover of less than $150,000 per year may choose to voluntarily register for GST.

If an organisation is required to register for GST, then it needs to have an ABN.

If an organisation is not registered for GST, then it does not collect GST on the sale of goods and services or remit the GST to the ATO. However, it cannot claim GST credits for any GST included in the price of goods and services bought by the organisation in carrying on its activities. If an organisation is registered for GST, then generally GST is payable on the sale of goods and services (called taxable sales) made by the organisation. The organisation will then be liable to pay GST to the ATO on the taxable sales. There are other types of sales where GST is not payable. These are called GST-free sales and input-taxed sales.

If an organisation is registered for GST, then it can claim GST credits for any GST included in the price of goods and services bought by the organisation in carrying on its activities. The organisation claims GST credits in its business activity statement.

However, there are GST concessions available for not-for-profit community organisations. These concessions usually relate to particular activities (e.g. sales relating to raffles, bingo, fundraising events, sales of second-hand goods or non-commercial activities, volunteer expenses and certain gifts) and mean that GST is not payable on supplies relating to those activities.

There are significant reporting and accounting requirements attached to GST registration.

An organisation should obtain professional advice about whether it should register for GST, the effect of GST on funding sources, and the best way of maintaining cash flow for the organisation in light of GST remittance obligations.

For more information about GST, call the ATO’s not-for-profit organisation telephone enquiries line (1300 130 248).

Not-for-profit Law has published resources that explain the different tax concessions for community organisations (see www.nfplaw.org.au/free- resources/tax-landscape).

Community organisations may obtain funds through fundraising, donations, government funding and philanthropic grants. Fundraising in Victoria Groups fundraising in Victoria need to comply with the Fundraising Act 1998 (Vic) (Fundraising Act) and the Fundraising Regulations 2019 (Vic) (‘fundraising laws’). The fundraising laws are regulated by CAV, and cover activities including telephone appeals, door-knock appeals, traffic intersection and highway collections, golf days, movie nights and trivia nights, dinner dances and balls, public auctions, clothing bins and sale of goods at opportunity shops, appeals run by commercial fundraisers, public appeals to support clubs, associations, causes or people, and sale of goods where it is represented that part of the sale price is to be donated to a charitable organisation or case.

Any person or organisation that undertakes fundraising must register as a fundraiser unless they are exempt from registration.

Organisations that are charities registered with the ACNC don’t need to register separately with CAV to fundraise in Victoria. Instead, they only need to notify CAV of their intention to conduct a fundraising appeal in Victoria to be considered a registered fundraiser. Organisations can notify CAV via myCAV (the online system for incorporated associations).

An organisation does not need to register under the Fundraising Act but must comply with all the other requirements of the Fundraising Act, if:

• the organisation receives less than $20,000 gross in a financial year from fundraising;
• the organisation is not paid to conduct the fundraising; and
• the organisation only uses unpaid volunteers. Certain organisations do not need to register under the Fundraising Act and do not need to comply with Part 3 of the Fundraising Act but must comply with all the other requirements of the Fundraising Act. For more information about Victoria’s fundraising laws, visit Not-for-profit Law’s website (www.nfplaw. org.au/free-resources/fundraising-and-holding- events/fundraising).

  Australian Consumer Law and other relevant laws

  If an organisation engages in fundraising activities, it may also have obligations under and may need to comply with the Australian Consumer Law (ACL). The ACL is a national law that protects consumers from unfair and unsafe business practices when buying goods and services. Generally, a fundraising activity is likely to be in trade or commerce where an organisation:
• engages in fundraising activities that involve the supply of goods or services;
• is a for-profit professional fundraiser; or
• continually fundraises in an organised, continuous and repetitive way. Where an organisation’s fundraising activity is likely to be in trade or commerce then it is likely to have obligations under the ACL, for example, not to mislead or deceive consumer when running a fundraising campaign, and not to harass or coerce consumers when seeking donations. For more information, see the ACCC’s publication, ‘Guide to the ACL for charities, not-for-profits and fundraisers’ (www.accc.gov.au/publications/guide-to-the-acl- for-charities-not-for-profits-fundraisers). Other laws may apply when conducting fundraising. For example, the Telecommunications (Telemarketing and Research Calls) Industry Standard 2017 (Cth) sets out the rules for fundraising via telemarketing. Also, privacy laws are relevant to the collection, use and disclosure of personal information (see www.nfplaw.org.au/free- resources/discrimination-and-privacy-laws/privacy). There may also be specific local government requirements for door-knock appeals and face-to- face fundraising. Many local councils require permits for these activities.

  Fundraising outside of Victoria

  Each state and the Australian Capital Territory has its own legislation and rules for fundraising activities (there is no specific fundraising legislation in the Northern Territory). Organisations that are fundraising in more than one state or territory need to ensure they are complying with all relevant fundraising laws in those jurisdictions. There are some exemptions, which depend on the specific legislation in each state. Some types of groups are exempt and there are some exemptions depending on how much money is raised. Online fundraising has raised new challenges for fundraising regulation and organisations should carefully consider the relevant laws before conducting an online fundraising appeal. This includes putting a donate button on a website. It can take weeks to get all the required approvals. For more information about fundraising laws in different states and territories, see www.nfplaw.org. au/fundraising.

  Other fundraising considerations

  Some fundraising activities (e.g. door-knocking, lotteries, raffles, street collections, events, and the sale of alcohol) require other permissions, permits or licences. Information about permits and licences is usually available from local councils. Receipts stating that donations of $2 or more are tax deductible cannot be given unless the organisation has been endorsed as a DGR by the ATO, or is specifically listed as a DGR (see ‘Deductible gift recipient status’, above).

  Other sources of funds

  Organisations may apply for financial grants from government, philanthropic foundations, charitable trusts, private businesses and others. Information on how to make these applications is available from grant providers. Being endorsed as a DGR is a requirement of some grants. If an organisation does not have DGR endorsement, it may be able to apply for funding via an arrangement with another organisation that does have DGR endorsement. This is known as an ‘auspicing arrangement’. For more information about auspicing arrangements, see www.nfplaw.org. au/free-resources/working-with-others/what-is- auspicing. Organisations should be aware that GST may apply to sponsorship and funding arrangements (‘sponsorship’ is defined very broadly). GST generally does not apply to donations. However, if something of value is provided (e.g. advertising, signage, or naming rights), this may be considered to be sponsorship, thus attracting GST.

A community organisation, regardless of whether it is incorporated or unincorporated, is not required to have an Australian Business Number (ABN) unless it is a charity, but may need one for business purposes (e.g. registering for the GST).

An ABN is an identifying number for all Australian enterprises (the definition of ‘enterprise’ is very broad and encompasses businesses and most community organisations).

Community organisations may have to comply with other laws. This depends on factors including an organisation’s activities, funding arrangements, contracts, legal structure, and the kind of people involved in the organisation.

Some legal areas that may be applicable to community organisations include:

• health and safety;
• negligence;
• employment, workplace health and safety, and superannuation;
• equal opportunity and human rights;
• working with children;
• privacy;
• defamation;
• intellectual property;
• contracts; and
• planning and the environment. For more information about these laws, see Not-for- profit Law’s website (www.nfplaw.org.au).