‘Not-for-profit’ and ‘non-profit’ are terms used in relation to organisations in which any profit made must be used to benefit or further the aims of the organisation. These terms do not mean the organisation cannot make a profit (i.e. a surplus); all groups need to at least break even or make a small profit to remain Having enough money to pay all your debts when they are due. (i.e. viable).
Instead, ‘not-for-profit’ refers to a restriction on what the profit can be used for; namely, the profit cannot be distributed to certain people, including to the organisation’s members, directors, or their associates. In other words, the difference between a business (for profit) and a not-for-profit organisation is what happens with the profit they make.
More information is available from the Australian Taxation Office (ATO) (see www.ato.gov.au/Non-profit/Getting-started/Starting-an-NFP/).
All charities have to be not-for-profit organisations, but not all not-for-profit organisations are charities. It has been estimated that there are around 600 000 not-for-profit groups in Australia. By contrast, there are approximately 57 000 charities registered with the Australian Charities and Not-for-profit Commission (ACNC).
‘Charity’ and ‘charitable purposes’ are defined in the Charities A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation. 2013 (Cth) (‘Charities Act’). These terms are also defined in state Statutory rules made by parliament or by bodies the parliament delegates power to, for example a local council or a registration authority. See delegated legislation; statute., local government laws and in the (1) The system of law developed by the English courts through precedent and adopted in ‘common law countries’ in the British Commonwealth (as opposed to Roman law (civil law) or ecclesiastical law). (2) The case law made by judges in that system. (3) Case law that is not part of the law of equity. (4) Historically, the rules of law common to all people in England, as distinct from local or customary laws..
It is important to know whether your group is eligible to be registered as a charity with the ACNC. Registering with the ACNC can provide access to charity tax concessions and other benefits (see ‘Tax concessions’, below).
‘Rules’ or ‘constitution’
A not-for-profit organisation’s rules (sometimes called a ‘constitution’) govern the internal affairs of the organisation. This is a written document covering how the organisation operates – including an organisation’s purpose, membership, meetings, governance, use of funds and winding-up. Some legal structures, like A not-for-profit community organisation, such as a club, with a separate legal identity and a structure regulated by legislation., have minimum legislative requirements that must be dealt with in an organisation’s rules.