Australia: 'Not-for-profit' may now mean what it says

Not for profits update
Last Updated: 11 May 2011
Article by Arthur Koumoukelis and Jon Cheung

In the Federal Budget delivered on 10 May 2011, several announcements were made that will affect the charity and not-for-profit sector. These include:

  • tighter controls on tax concessions for charities operating business activities unrelated to their charitable activities
  • establishment ofa 'one-stop-shop' for the support and regulation of the sector in the form of the Australian Charities and Not-for-Profits Commission by 1 July 2012
  • introduction of a statutory definition of 'charity' for all federal laws
  • a new regulatory framework for public ancillary funds

An overview of each of the inclusions is provided below.

Tighter controls on tax concessions

Possibly the most important Budget announcement for Not-for-Profits relates to reforms to tax concessions to ensure that income tax concessions will only apply to profits generated by commercial activities that are directed back to the not-for-profit entity's charitable works.

This will have an impact on not-for-profit entities who undertake commercial activities, although transitional arrangements are likely. The Budget has indicated that commercial activities that further the entity's altruistic purposes, and small-scale and low-risk unrelated commerical activities will not be affected.

Defining these concepts and limiting their impact will be a difficult legislative task in light of the subjective nature of the reforms.

Gadens Lawyers will be closely monitoring these reforms to determine the precise mechanisms of reform that are proposed.

Australian Charities and Not-for-Profits Commission

The announcement of theestablishment of the Australian Charities and Not-for-Profits Commission (ACNC)follows the release of the scoping study for a national not-for-profit regulator in January 2011. That study involved submissions in relation to the proposed regulator's scope and functions, independence, services to be provided, as well as a statutory definition of 'charity'(see our update here).According to the Treasury, 162 formal submissions were made to the scoping study.

The 2011 Budget announced the following proposals for the ACNC:


  • ACNC will have sole responsibility for determining charitable, public benevolent institution and other not-for-profit status
  • From 1 July 2011, The ATO will structurally separate its role of determining charitable status from its role of administering tax concessions
  • The ATO retains responsibility for administering tax concessions for the not-for-profit sector
  • The ATO will provide corporate service support to the ACNC in the form of IT services, human services, financial services and related fucntions.


  • The ACNC will implement a 'report-once use-often' general reporting framework for charities
  • The ACNC will implement a public information portal by 1 July 2013


  • The ACNC will initially be responsible for providing education and support to the sector

The Budget also announced that the Government proposed to negotiate with the States and Territories on national regulation with the aim of minimising reporting and other regulatory requirements through coordinated national arrangements. This may lead to reforms or repeal of existing charitable collection or fundraising legislation at state level.

Over time, we would expect to see increased national consistency, particularly in relation to the regulation of charitable fundraising.

Statutory definition of 'charity'

The Budget makes provision for the introduction of a statutory definition of 'charity' to take effect from 1 July 2013 including:

  • consultation with states and territories with the intention of uniform adoption across all jurisdictions
  • for the ACNC to develop guidance for the sector, implement system changes and re-assess the charitable status of entities on the basis of the new statutory definition.

New regulatory framework for public ancillary funds

The Government will introduce a new regulatory framework similar to the 2009 changes to private ancillary funds.

Following the Discussion Paper released in November 2010 (see our update here), the proposed framework has been alluded to previously and includes:

  • legislative guidelines governing the establishment and maintenance of the funds
  • ATO power to impose administrative penalties on trustees for breaches of the guidelines
  • transitional provisions to faciliate transition.

There is no doubt the reforms will force not-for-profit organisations to review and consider their current activities and future plans. Gadens Lawyers is able to advise and assist organisations in navigating this changing landscape.

For more information, please contact:


Arthur Koumoukelis

t (02) 9931 4873


Jon Cheung

t (02) 9931 4951


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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