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7 September 2024

It Depends – NFPs and charities – are they the same or different and why does this matter?

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Cooper Grace Ward

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Transcript & link to video discussing the differences between not-for-profits & charities & why those differences matter.
Australia Corporate/Commercial Law

In this edition of It depends, special counsel Carly Ashwood talks about the differences between not-for-profits and charities and why those differences matter.

Keep an eye out for more videos in our Not-for-profit and charities legal 101 series in the coming weeks.

Video transcript

Welcome to this video in our Not-for-profit and Charities Legal 101 series. I'm Carly Ashwood, special counsel in the corporate advisory team here at Cooper Grace Ward Lawyers. Today, I'll be talking to you about the differences between not-for-profits and charities and why those differences matter.

Are all NFPs charities?

The answer to whether all not-for-profits are charities does not depend, the answer is no. A not-for-profit is best described as an unincorporated or incorporated entity that exists to further a purpose or an objective, and is prevented from making a distribution to its members or controllers. The most common examples of not-for-profits are unincorporated and incorporated associations, public companies limited by guarantee and charitable trusts.

What is a charity?

The answer to 'what is a charity' depends on why you are asking and who you are asking. In Australia, the Australian Charities and Not-for-Profits Commission, the ACNC, registers charities under the legislation it administers and under that legislation, 'charity' has a particular meaning. The courts have also given 'charity' a particular meaning in case law.

Why should an NFP register as a charity?

Whether or not-for-profit should register as a charity depends on the activities and objects of the not-for-profit. However, the main benefit of registering as a charity is obtaining charity tax concessions. It is a common misunderstanding that all not-for-profits are exempt from tax this is just not the case in Australia. This is because a not-for-profit is a taxpayer like any other entity or individual, unless it is exempt from tax. Not-for-profits that are registered as charities are entitled to an income tax exemption. There are also some other charity tax concessions, such as an increased threshold to register for GST and some FBT exemptions or rebates.

Can tax concessions be achieved by NFPs that are not registered charities?

It depends. Some not-for-profits that are not registered charities can obtain tax concessions. There are some provisions in the 1997 Tax Act for not-for-profits with certain activities to self-assess as income tax exempt. Common examples are sporting and tourism organisations, and also organisations promoting the development of Australian resources. Another common example is membership-based organisations operating under the principle of mutuality. This is a legal principle derived from the proposition that an entity cannot derive income from itself. Here at Cooper Grace Ward Lawyers, we strongly recommend that not-for-profits self-assessing as income tax exempt apply for a private ruling from the ATO. They should also be aware of the relatively new requirement to lodge an annual self-return with the ATO. If you have any questions about not-for-profits, charities, whether you can be registered as a charity or obtain tax concessions, please feel free to contact me. Please also tune in for our other videos in the Not-for-profit and Charities Legal 101 series. Thank you.

© Cooper Grace Ward Lawyers

Cooper Grace Ward is a leading Australian law firm based in Brisbane.

This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.

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