Australia

Not-for-profits entities and Australian charities and Not-for-profits Commission (ACNC)

What is a not-for-profits entity?

A not-for-profit entity, as its name suggests, is an organisation that does not operate for the profit, personal gain or other benefit of particular people (for example, its members, the people who manage the entity or their friends or relatives). An organisation can still be not-for-profit if it simply provides a benefit to a member while genuinely carry out its business objectives as outlined in its governing documents (this can be a constitution, trust deeds or legislation under which the organisation operates).

What are the examples of not-for-profits entities?

The followings are three broad categories of NFP:

Type or organization Example of entities Key activities
Charities Entities who raised funds through funding activities or donation and use the fund to fulfil its objectives
(Example: Lifeline Australia, Guide Dogs, The Fred Hollows Foundation and St. John Ambulance, etc)
Fundraising and charitable works.
Other NFP Sporting and recreational clubs, community service organisations. professional and business associations cultural and social societies

 

Collect membership fees, promote social interaction and provide community services.

 

Government entity

 

Councils, departments, statutory bodies, and government authorities

 

Public works under various legislation

 

For a NFP entity to be a classified as a “charity”, it needs to be registered with the Australian Charities and Not-for-Profits Commission.

What is a charity?

On 27 June 2013, the Commonwealth Parliament passed the Charities Act 2013 (Cth) (The Charities Act) and the Charities (Consequential Amendments and Transitional Provisions) Act 2013 (Cth). These acts came into effect on 1 January 2014. The Charities Act sets out the legal meaning of “Charity”.

The Charities Act clarifies 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; and
  • not be an individual, a political party or a government entity.

What is the role of the Australian Charities and Not-for-Profits Commission (ACNC)?

The Australian Charities and Not-for-Profits Commission Act 2012 (the ACNC Act) sets out the objects and functions of the ACNC, as well as the framework for the registration and regulation of charities.

The key role of the ACNC is to decide who can be registered as a charity. Registration is required before an organisation can receive charity tax concessions from the Australian Taxation Office (ATO).

What are the tax concessions available to charities?

Charities that register with the ACNC can potentially apply for the following tax concessions:

  • Income tax exemptions – do not have to pay income tax
  • Refunds on franking credits – for charity which holds shares in a company that provides franked dividends, the charity can receive refunds on franking credits
  • Goods and services tax concessions – GST free for sales on fundraising events
  • Fringe benefits tax (FBT) rebates – FBT concession to reduce overall liability
  • Deductible gift recipient – donors to make tax-deductible donations to a charity, and
  • Other tax concessions for state, territory and local governments including stamp duty, payroll tax, land tax and council rates.

What are the annual financial reporting requirements for Charities?

All charities, except ones that that are registered with the Office of Registrar of Indigenous Corporations (ORIC) must submit an Annual Information Statement (AIS) with ACNC. In addition,, medium and large charities are required to submit an annual financial report as part of their AIS.

The size of a charity is based on annual revenue for the reporting period:

  • Small charities have annual revenue under $250,000
  • Medium charities have annual revenue of $250,000 or more but under $1 million, and
  • Large charities have annual revenue of $1 million or more.

The annual financial report for a medium charity is required to be reviewed or audited.

The annual financial report for a large charity is required to be audited.

Charities are required to submit their Annual Information Statement (together with an annual reviewed or audited financial report where applicable) within six months after the financial year-end.

How can William Buck help?

William Buck is providing professional services to several not-for-profits organisations including membership organisations, sport clubs, community services and religious organisations. These include small to large charities. We are familiar with the financial reporting requirements for entities registered with ACNC.  The services we can provide include:

  • Review or audit of the annual financial report
  • Application for tax concession, and
  • Business advisory services.

For more information please contact your local William Buck Audit and Assurance specialist.

Not-for-profits entities and Australian charities and Not-for-profits Commission (ACNC)

Syeon Koh

Syeon is a Principal in our Audit division. He devotes a lot of time to researching and understanding the industries in which his clients operate. He believes that having a holistic view of a business leads to the most effective outcome for an audit.

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