Thinking about starting an organisation to make a positive impact? You’ve probably seen the terms “not-for-profit” and “nonprofit” used online and in conversations - and it’s natural to ask whether there’s any real difference in Australia.
Getting this right isn’t just wordplay. The way your organisation is defined and structured affects your governance, your eligibility for tax concessions, whether you can register as a charity, and how you fundraise and operate day to day.
In this guide, we’ll unpack what these terms mean in the Australian context, how charities fit into the picture, and the practical steps to set up and run a compliant not-for-profit. We’ll also flag the key legal documents and compliance obligations you’ll want in place from the start, so you can focus on your mission with confidence.
What Do “Not-for-Profit” and “Nonprofit” Mean in Australia?
In Australia, “not-for-profit” and “nonprofit” are generally used interchangeably to describe organisations that exist for a purpose other than distributing profits to owners, members or shareholders.
The core idea is simple: if your organisation makes a surplus, that surplus is reinvested to further your purpose - not paid out to private individuals.
What “Not-for-Profit” Covers
- Your purpose is something other than generating private profit (for example, advancing education, supporting a local sports club, or providing community services).
- You can make a surplus, but you don’t distribute it to members or directors as dividends or profit shares.
- Many different legal forms can be not-for-profit, including incorporated associations, companies limited by guarantee, and co-operatives.
Where “Charity” Fits
A charity is a specific type of not-for-profit that has charitable purposes as recognised by law and is registered as a charity with the national charity regulator (the Australian Charities and Not-for-profits Commission, or ACNC).
- All charities are not-for-profits, but not all not-for-profits are charities.
- “Nonprofit” isn’t a separate legal structure - it’s a descriptor of how an organisation operates. Your legal structure (e.g. association or company limited by guarantee) and your registration/endorsements (e.g. charity registration, tax concessions) sit alongside that descriptor.
The bottom line: in everyday Australian usage, “not-for-profit” and “nonprofit” mean the same thing. “Charity” is a regulated subset of not-for-profits with specific eligibility and ongoing obligations.
Examples Of Not-for-Profit Structures
You can run a not-for-profit through several legal vehicles. The “right” structure depends on your size, where you operate, and your governance and funding plans.
- Incorporated Association: Incorporated under state or territory law. Often the most straightforward option for community groups or clubs primarily operating within one jurisdiction.
- Company Limited by Guarantee: Registered with ASIC under the Corporations Act 2001. A good fit for organisations operating nationally, seeking a more formal governance framework, or planning to grow.
- Co-operative: Incorporated at a state/territory level and owned by members for a mutual purpose (for example, a community-owned enterprise).
- Unincorporated Association: An informal group without separate legal personality. Suitable for very small or short-term initiatives, but it can’t contract, hold property, or sue/be sued in its own name, and it offers no limited liability.
If you incorporate, you’ll need governing rules. Many organisations adopt a tailored Company Constitution (or association rules) that set out your purpose, membership and decision-making processes.
Do Charities, DGR And Tax Concessions All Mean The Same Thing?
No - these are related but distinct concepts in Australia.
Charity Registration
A charity is a not-for-profit that has charitable purposes (such as advancing education, relieving poverty, or other community-benefitting purposes) and is registered with the ACNC. Registration can open the door to certain tax concessions and is often required for specific grants, but it’s only one part of the picture.
Tax Concessions
Not-for-profits (including charities) may be eligible for tax concessions such as income tax exemption, GST concessions or FBT rebates/exemptions. Eligibility depends on the organisation’s purposes and activities and requires separate endorsement by the ATO.
Deductible Gift Recipient (DGR) Endorsement
DGR is a specific ATO endorsement allowing donors to claim a tax deduction for certain gifts. Being registered as a charity does not automatically grant DGR status. DGR endorsement is available only to organisations (or specific funds within organisations) that fall within particular DGR categories.
- DGR status is a separate process to charity registration and is not guaranteed.
- Different legal structures can be DGR-endorsed if they meet the relevant criteria (there is no requirement to be a company limited by guarantee to access DGR).
Because DGR and tax concessions turn on your purposes and activities - and the details really matter - it’s wise to seek independent tax and accounting advice alongside legal guidance for your specific situation.
How To Set Up A Not-for-Profit: Step-By-Step
Here’s a practical roadmap to get your not-for-profit off the ground in Australia.
1) Define Your Purpose And Activities
Write down a clear mission, the community need you’ll address, and the programs or services you’ll run. This will steer your structure, your rules, and any charity/tax applications.
2) Choose Your Structure
Decide whether you’ll incorporate as an association, set up a company limited by guarantee, or establish a co-operative. Consider where you’ll operate, your growth plans, governance needs, and funders’ expectations.
3) Draft Your Governing Rules
You’ll need a governing document (constitution or rules) that sets out your purposes, membership, meetings, and how you handle funds and conflicts of interest. Many organisations customise a Company Constitution or adopt model association rules that are tailored to their work.
4) Incorporate And Get Your ABN
- Incorporated Association: Apply to the relevant state/territory regulator.
- Company Limited by Guarantee: Register with ASIC and obtain an ACN.
- Co-operative: Apply to your state/territory co-operatives registrar.
Most not-for-profits will also apply for an ABN to deal with government, suppliers and funders.
5) Set Up Your Governance And Policies
Appoint your board or management committee and implement core policies. A clear Conflict of Interest Policy is essential to maintain trust and good decision-making.
6) Apply For Charity Registration And/Or Tax Endorsements (If Eligible)
If your purposes are charitable, consider ACNC registration. Separately, apply to the ATO for the tax concessions and, if applicable, DGR endorsement that align with your activities.
7) Put Your Legal Agreements In Place
Before launching programs or fundraising, make sure your contracts and policies are ready - from volunteer documents to privacy and fundraising compliance (more on these below).
What Laws And Compliance Rules Apply?
Compliance is ongoing. These are the key legal areas most Australian not-for-profits need to consider from day one.
Governing Law And Reporting
Your regulator (for example, a state associations body or ASIC for companies) sets your reporting and record-keeping requirements. If you register as a charity, you’ll also have ACNC obligations such as annual reporting and upholding the ACNC Governance Standards.
Fundraising And Raffles
States and territories regulate public fundraising. Depending on where you operate, you may need an authority to fundraise, to issue receipts that comply with local requirements, and to meet reporting obligations. If you plan to run a raffle, check the relevant rules in your state - our overview of raffle laws in Australia is a helpful starting point.
Australian Consumer Law (ACL)
If you provide goods or services (even at low or no cost), the ACL applies. You must avoid misleading or deceptive conduct and ensure that any advertising, fundraising claims and promises to beneficiaries are accurate. Read more about Section 18 (misleading or deceptive conduct) and set up internal checks to keep communications clear and compliant.
Employment And Volunteers
If you employ staff, you’ll need compliant employment contracts, to pay at least minimum entitlements, and to provide a safe workplace. Volunteers aren’t employees, but they still need clarity around roles, expectations and confidentiality. Put the right documents in place - an Employment Contract for staff and a tailored Volunteer Agreement for volunteers.
Privacy And Data
Most not-for-profits collect personal information (for example, donors, members, program participants). A clear, accessible Privacy Policy explains what you collect and how you use it, and helps you comply with the Privacy Act 1988 (Cth) and any applicable state laws.
Intellectual Property (IP)
Protect your brand. Registering a trade mark for your name or logo reduces the risk of confusion and helps you defend against misuse. Understanding trade mark classes early can save time and avoid costly rebrands later.
Tax And Finance
Even if you’re income tax exempt, you may still have GST or FBT obligations depending on your activities. If you hold DGR endorsement, you’ll also need compliant receipting and record-keeping for donations. Because tax settings are highly specific to your structure, purpose and revenue, seek professional tax and accounting advice alongside your legal setup.
What Legal Documents Should You Have In Place?
Every organisation is different, but these documents are commonly used by Australian not-for-profits and charities:
- Governing Rules (Constitution or Association Rules): Set your purpose, membership, meetings, and how you apply funds and handle conflicts. Many organisations adopt or tailor a Company Constitution to suit their mission and regulator requirements.
- Board/Committee Charter: Clarifies responsibilities, delegations and decision-making for your leadership team.
- Conflict Of Interest Policy: A practical framework to identify, disclose and manage conflicts - a cornerstone of good governance. See a tailored Conflict of Interest Policy.
- Privacy Policy: Explains how you collect, store and use personal information from members, donors and program participants. A compliant public-facing Privacy Policy builds trust and meets legal requirements.
- Volunteer Agreement: Sets expectations around roles, safety, confidentiality and IP for volunteers. A clear Volunteer Agreement can reduce confusion and protect everyone involved.
- Employment Contract: If you hire staff, use a compliant Employment Contract that covers duties, remuneration, policies and termination.
- Non-Disclosure Agreement (NDA): Protects confidential information when discussing partnerships, grant proposals or collaboration. An NDA is a simple way to reduce risk before you share sensitive details.
- Fundraising/Grant Agreements: Set out deliverables, reporting and permitted use of funds to keep relationships transparent and compliant with funding conditions.
- Safeguarding And Program Policies: Depending on your activities and beneficiaries (for example, children or vulnerable people), sector-specific policies may be essential.
You might not need every document on day one, but having the core governance, privacy and people documents in place will help you build credibility with donors, funders and the community - and prevent common disputes.
Key Takeaways
- In Australia, “not-for-profit” and “nonprofit” are used interchangeably; “charity” is a specific type of not-for-profit with charitable purposes and ACNC registration.
- Charity registration, tax concessions and DGR are separate processes - being a charity doesn’t automatically grant DGR, and a range of structures can be eligible depending on your purposes and activities.
- Choose a structure that fits your plans (association, company limited by guarantee, or co‑operative) and adopt governing rules that align with your purpose and obligations.
- Set up strong governance and compliance from the start - think fundraising permissions, ACL compliance, privacy, employment/volunteering, IP and tax.
- Core documents like your constitution, Conflict of Interest Policy, Privacy Policy, Volunteer Agreement, Employment Contract and NDA will protect your organisation and build trust.
- Independent tax and accounting advice, alongside legal guidance, is important to confirm your eligibility for concessions and to manage ongoing obligations.
If you’d like a consultation on structuring and launching your not-for-profit organisation, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
