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If you’re planning to launch an organisation with a social cause in 2025, then you may qualify as either a charity or a social enterprise – depending on the way your organisation operates. Both models are increasingly popular in today’s dynamic social landscape, so it’s useful to understand the differences early on.
There are several critical questions to address regarding structure, funding, mission, and taxation for your organisation. Once you decide whether your organisation is a charity or a social enterprise, you’ll be in a stronger position to hit the ground running in 2025.
What Is A Charity?
Under the Charities Act 2013, a charity is an organisation that is dedicated to a social cause and operates on a not-for-profit basis. In 2025, charities continue to be strictly regulated by the Australian Charities and Not-for-profits Commission (ACNC). In order for an organisation to qualify as a charity, the following requirements must be met:
- The purpose of a charity must adhere to government guidelines defining a ‘public benefit’. Generally, social, environmental and religious causes are recognised as providing public benefit.
- They must not be for profit. A charity is prohibited from earning income through the sale of goods or services for private benefit.
- Charities cannot have a disqualifying purpose. This means that an organisation cannot promote unlawful activities or support specific political parties.
The ACNC remains the primary regulator for charities and other not‐for‐profit entities in Australia. It’s a smart idea to explore their website and also review our Business Structure Guide to ensure your charity complies with all current legal requirements.
What Is A Social Enterprise?
Social enterprises are businesses with a clear philanthropic purpose. Organisations operating as a social enterprise engage in trading activities and generate income while channeling their profits to support social, environmental, cultural, or economic causes. In 2025, these entities continue to blend commercial operations with social objectives, creating sustainable models that both earn profit and deliver public good.
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Example Let’s say a small grocery store opens in a regional community to help decrease unemployment by hiring locally from vulnerable backgrounds. By doing so, they qualify as a social enterprise because they generate profit while advancing social welfare. Similarly, a jewellery business that donates a portion of its monthly profits to environmental initiatives can also be categorised as a social enterprise. |
What Is The Difference Between A Charity And A Social Enterprise?
While both charities and social enterprises are committed to effecting social change, the key differences lie in their operational foundations. Charities strictly operate on a not-for-profit basis, whereas social enterprises use their commercial activities to further their philanthropic goals while still making a profit.
Charities are legally bound to pursue public benefit without profit distribution, whereas social enterprises may reinvest profits to scale their mission. For more insights on these legal distinctions, you might want to check our Legal Advice for Your Startup resource.
Mission
The guidelines for a mission differ for a social enterprise and a charity. As mentioned above, a charity must comply with the strict criteria set out in the Charities Act 2013; its organisation must be unequivocally dedicated to its social cause.
A social enterprise, on the other hand, is not confined by such rigorous guidelines. Its mission can encompass a wide range of social, political, economic, or cultural causes, allowing for greater flexibility in how it integrates its social objectives with everyday business activities.
Registration
A charity can be registered in one of three ways:
- As a public company
- As an incorporated organisation
- As a registered Australian body
Each registration option comes with its own requirements and benefits, so it’s important to choose the route that best aligns with your organisation’s goals. For further guidance on picking the ideal structure, have a look at our Business Structure Guide, and if you’re setting up as a social enterprise, consider consulting our Company Set-Up service for tailored advice.
A social enterprise is essentially a business and must be registered as such. It is critical to consider the nature of your business activities, as these will determine the most appropriate structure for your organisation.
How Do They Get Funding?
Generally, charities secure funding through donations, community support and grants, while social enterprises generate revenue through the sale of their goods or services – alongside being eligible for grants aimed at social innovation. In 2025, many organisations also leverage digital fundraising platforms and government initiatives to boost their financial sustainability.
Organisational Structure
The organisational structure will naturally differ between the two models. A charity registered as a public entity may need to appoint multiple office bearers, such as a secretary and directors, to comply with governance standards. In contrast, a social enterprise typically operates like any other business, albeit with integrated strategies to support its mission. It can be beneficial to peruse our guide to employment and contractor agreements for further insights on structuring your team.
Types Of Charities
WIRES Wildlife Rescue is a prime example of a charitable organisation. Fully committed to rescuing wild animals in Australia, they work solely for public benefit and rely on community donations to continue their vital work.
Another example is the National Breast Cancer Foundation, which focuses on raising awareness and funding research, with every dollar coming from public contributions.
Types Of Social Enterprises
There are several ways in which a social enterprise can channel its business activities to support a philanthropic cause.
| For example, Trade Mutt sells T-shirts designed to spark conversation about men’s mental health. In this instance, their commercial success is directly linked to raising awareness and challenging social stigmas. Similarly, Magpie Goose creates dresses featuring Aboriginal prints and textures to empower First Nations communities by creating employment opportunities. |
Tax Concessions
Tax concessions enable both charities and qualifying social enterprises to pay reduced or no taxes. Registered charities may apply for an income tax exemption, while social enterprises might also benefit from specific concessions depending on their business activities and structure. It’s always a good idea to consult current tax guidelines or speak to an accountant familiar with nonprofit and social enterprise legislation in 2025.
Is A Charity A Social Enterprise?
No, a charity cannot be considered a social enterprise. By definition, social enterprises engage in trade with the goal of generating profits, whereas charities must operate without profit distribution to maintain their eligibility for public funding and tax exemptions.
Which Classification Is Right For My Organisation?
Understanding the primary source of your income, your organisational structure, and your overarching mission is key to choosing the right classification. If you’re leaning towards a social enterprise, it’s essential to consider how your business model will support your mission while remaining profitable. Conversely, a charity must strictly adhere to legislative guidelines regarding funding, donations, grants, and community support. For additional clarity on these distinctions, our Lawyer for Small Business guide can offer further insights.
Can These Organisations Be Considered Ethical Businesses?
It’s important to note that while both social enterprises and charities pursue positive social outcomes, they are not synonymous with ethical businesses. An ethical business, for example, might focus solely on minimising environmental impact or ensuring fair trade practices throughout its supply chain – such as a clothing brand that exclusively uses recycled materials.
Next Steps
There are multiple factors to consider when deciding whether to categorise your organisation as a charity or a social enterprise. The details regarding income, registration, grants and structure all depend on your selected model and long-term objectives.
In 2025, many organisations are increasingly adopting hybrid models that blend elements of both charitable and commercial activities. Staying up to date with regulatory changes and utilising modern digital platforms for fundraising and operations can help your organisation remain compliant and impactful. It’s advisable to seek tailored legal advice, such as through our free, no-obligations consultation, to ensure you choose the best path forward.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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