Not-For-Profit vs Charity in Australia: Essential Legal Guide

Thinking about launching a not-for-profit (NFP) or charity in Australia? Whether you’re inspired to support your local community, create social impact, or align your organisation with a purpose, you’re stepping into a space full of opportunity - and some important legal distinctions.

The terms “not-for-profit” and “charity” are often used interchangeably. In law (and for tax purposes), they mean different things. The path you choose affects how you operate, fundraise, access tax concessions, and meet ongoing compliance. Getting it right from day one sets you up for long-term success, community trust and fewer regulatory headaches.

In this guide, we’ll break down the difference between not-for-profit and charity organisations in Australia, the structures you can use, how to register, the key laws you need to follow, and the core legal documents that protect your mission.

What’s The Difference Between A Not-For-Profit And A Charity?

It helps to clarify the basics first. All charities are not-for-profits, but not all not-for-profits are charities.

What Is A Not-For-Profit (NFP)?

An NFP is an organisation whose purpose is something other than generating profits for owners or members. Any surplus is reinvested back into the organisation’s mission, programs or operations. Common examples include community groups, sporting clubs, professional associations, and cultural or educational organisations.

Being an NFP is essentially about purpose and how you use any surplus. Many NFPs are small, community-based groups that don’t register as charities - and that’s perfectly fine if the purpose and activities don’t fit the legal definition of charity.

What Is A Charity?

A charity is a type of NFP that meets a stricter legal test. In broad terms, a charity:

• Is an NFP with one or more recognised charitable purposes (for example, advancing health, education, religion, culture, or relieving poverty or distress).
• Is registered with the Australian Charities and Not-for-Profits Commission (ACNC) to be legally recognised as a charity.
• May access additional tax concessions (through the Australian Taxation Office) and, in some cases, Deductible Gift Recipient (DGR) endorsement, which can help with fundraising.

With charity status comes more transparency and compliance - including meeting ACNC Governance Standards and annual reporting based on your size.

Key Distinctions At A Glance

• All charities are not-for-profits, but not every not-for-profit is a charity.
• Charities need ACNC registration to be recognised as such and to access charity tax concessions.
• NFPs can pursue a wider range of purposes (e.g. sport or social clubs) that may not be charitable in law.
• Charities often access additional tax concessions and donor support, but must meet higher governance and reporting obligations.

Which Legal Structures Can NFPs And Charities Use?

You can run an NFP or charity under several legal structures in Australia. Your structure affects liability, governance, how you sign contracts, and how you register.

Common Structures

• Incorporated Association (state/territory based): Popular for local or regional groups operating mainly within one jurisdiction. It offers separate legal status and limited liability for members, with rules set by the relevant state or territory law.
• Company Limited by Guarantee (national): Registered with ASIC under the Corporations Act and commonly used by larger NFPs and charities operating across Australia. You’ll adopt a Company Constitution that governs objects and decision-making.
• Trust: Some charities operate as trusts, with a trustee (individual or company) holding and applying funds for charitable purposes under a trust deed.
• Co-operative: Member-owned and democratically controlled entities that can operate on a not-for-profit basis. Useful where member benefit and community benefit sit side-by-side.
• Unincorporated Association: Simple to start and suitable for low-risk, small groups. It’s not a separate legal entity, which means members may be exposed to personal liability and the group can’t easily enter contracts in its own name. Some unincorporated associations do register as charities, provided they have appropriate governing documents and meet ACNC requirements.

Do You Need A Particular Structure To Be A Charity?

No single structure is “required” to be a charity. Charities can be companies limited by guarantee, incorporated associations, trusts, co-operatives, or (in some cases) unincorporated associations. The key is that your governing document clearly sets out charitable purposes and NFP clauses (no profit to members), and you meet the ACNC’s eligibility criteria.

How Do You Choose?

Consider:

• Where you’ll operate (one state/territory vs national).
• Risk profile and the need for limited liability.
• Plans to employ staff, enter leases, or sign significant contracts.
• Whether you’ll pursue ACNC registration and tax concessions.

Smaller, local groups often prefer incorporated associations. Organisations with national reach or greater complexity often choose a company limited by guarantee for scalability and governance control.

Step-By-Step: How To Set Up A Not-For-Profit Or Charity In Australia

Every organisation is different, but most founders follow a similar path.

1) Define Your Purpose And Activities

Write down your purpose, the community need you’ll address, and the activities you’ll run (programs, services, grants, events). The fit between your “purpose” and “activities” matters for both your structure and (if relevant) ACNC registration.

2) Choose Your Legal Structure And Draft Your Governing Document

Decide on your structure and prepare the governing document (constitution, rules or trust deed). For a company limited by guarantee, your Company Constitution will set out your objects, member rights, and how decisions are made. If you plan to seek charity status, include charitable objects and clear not‑for‑profit and winding-up clauses.

3) Register The Legal Entity

• Incorporated association: Register with your state or territory regulator.
• Company limited by guarantee: Register with ASIC.
• Trust: Execute a trust deed and (if using a corporate trustee) register the company with ASIC.

Once formed, you can open a bank account, enter contracts, and operate in your organisation’s name.

4) Get An ABN (If Applicable)

You don’t automatically “need” an ABN to exist as an NFP. However, most NFPs apply for an ABN because it’s commonly required to access government grants, deal with suppliers, set up payment and banking arrangements, and manage tax registrations. If you’re seeking ACNC charity registration, an ABN is required as part of that process.

5) Apply For ACNC Registration (If You’re A Charity)

If your purposes are charitable and you want the legal status and tax concessions that come with being a charity, apply to the ACNC. On registration, your charity will appear on the public register.

6) Apply For Tax Concessions And (If Eligible) DGR Endorsement

After ACNC registration, you can apply for charity tax concessions (for example, income tax exemption and GST concessions) through the ATO, and - if eligible - Deductible Gift Recipient status. DGR endorsement can be critical for fundraising because it allows donors to claim tax deductions for gifts to your charity.

Note: Tax settings can be complex and depend on your activities and structure. It’s a good idea to get tailored tax advice alongside your legal setup.

7) Obtain Fundraising Authorisations (As Needed)

If you plan to solicit donations from the public, most states and territories require a fundraising licence or authorisation. The rules vary by jurisdiction and by the method of fundraising. If you’re running raffles or games of chance, check the applicable state rules - for instance, national resources on raffle laws in Australia can help you identify what applies to your campaign.

8) Put Your Core Documents And Policies In Place

Before launching programs or fundraising, lock in your contracts and policies - this reduces risk, clarifies roles and keeps you compliant. We cover the essentials below.

Ongoing Compliance: What Laws Apply?

Good intentions aren’t enough - you’ll also need to comply with a range of Australian laws designed to protect your members, staff, donors and community.

Registration And Reporting

• Entity upkeep: Keep ASIC or state/territory details up to date (directors/officeholders, addresses, governing documents).
• ACNC obligations (charities): Meet the ACNC Governance Standards, maintain suitable financial records, and submit your Annual Information Statement and (for medium/large charities) financial reports.

Fundraising And Promotions

• Fundraising licences: If you collect public donations, ensure you hold required authorisations in each relevant state/territory.
• Raffles and games: Follow state-based raffle/lotteries rules. Start with an overview of raffle laws in Australia and check local thresholds, permit triggers and record-keeping duties.
• Advertising and consumer law: Your appeals and campaigns must not mislead the public. Key rules sit under section 18 of the Australian Consumer Law - see an overview of misleading or deceptive conduct.

Employment And Volunteers

• Employment law: If you hire staff, you must comply with the Fair Work system (awards, minimum pay, leave, safety). Use clear contracts tailored to the role, such as an Employment Contract for permanent staff or a separate agreement for casuals, and establish fair workplace policies.
• Volunteer arrangements: Volunteers aren’t employees, but you should still use a written Volunteer Agreement to set expectations, roles, confidentiality and risk management.

Privacy And Data Protection

The Privacy Act 1988 (Cth) and the Australian Privacy Principles apply to “APP entities” - generally those with annual turnover over $3 million, and some small organisations in specified categories (for example, health service providers, those trading in personal information, or government contractors). Many NFPs and charities will either be APP entities or choose to adopt best-practice privacy standards to build trust with donors and members.

In practice, if you collect personal information (donations, newsletters, event registrations), you should implement a clear Privacy Policy, secure your systems, and train staff on data handling. If you run a site or app, pair this with Website Terms and Conditions to set user rules and limit liability.

Intellectual Property And Branding

Protect your name and logo early. Registering your brand as a trade mark (where available) helps prevent others from using it and supports your fundraising credibility. You can start with register your trade mark to secure brand assets as you grow.

Conduct, Conflicts And Financial Controls

Strong internal governance is essential - especially for charities. Adopt board/committee procedures, keep minutes, manage conflicts properly and set financial delegations. A tailored Conflict of Interest Policy helps you demonstrate responsible decision-making and compliance with ACNC standards.

Essential Legal Documents To Protect Your Organisation

The right documents don’t just keep you compliant - they help you avoid disputes, manage risk and maintain community trust. Here are the essentials most NFPs and charities should consider.

• Governing Document (constitution, rules or trust deed): Sets your objects, membership, decision-making and winding‑up. Include not‑for‑profit and asset distribution clauses.
• Board/Committee Charters: Clarify roles of responsible persons and how meetings, delegations and oversight work in practice.
• Conflict Of Interest Policy: Records how conflicts are declared, managed and minuted. Aids ACNC Governance Standard compliance for charities. You can implement a practical Conflict of Interest Policy from day one.
• Employment Contracts: Set out duties, pay, IP, confidentiality and termination rights for staff. Start with an Employment Contract for permanent roles and ensure award compliance.
• Volunteer Agreement: Covers scope, training, confidentiality, media consent and safety. A written Volunteer Agreement reduces risk and protects both sides.
• Service/Supplier Agreements: Clearly define deliverables, timeframes, fees, liability and IP ownership when engaging third parties.
• Privacy Policy: Explains how you collect, use and store personal information (donors, members, participants). A compliant Privacy Policy is essential if you handle personal data.
• Website Terms And Conditions: Set user rules, acceptable use and liability limits for your site or platform. Use clear Website Terms and Conditions alongside your Privacy Policy.
• Fundraising/Sponsorship Agreements: Document arrangements with corporate partners, peer‑to‑peer platforms or third‑party fundraisers, including branding and reporting expectations.
• IP Licensing/Assignment: Where you create resources, training or media, confirm ownership and permitted use. For brand protection, consider trade mark registration.

Not every organisation needs all of these on day one, but most will benefit from a strong governing document, basic governance policies, data and website documents, and appropriate agreements for staff, volunteers and suppliers. If you’re unsure which ones you need right now, it’s worth getting quick legal guidance so you can prioritise the essentials.

Special Considerations: Social Enterprises, Grants And Fundraising

Many purpose-driven organisations earn revenue through trading while pursuing impact - often called social enterprises. A social enterprise can be a not‑for‑profit, a charity, or a for‑profit entity with a social purpose. The key questions are how profits are used and whether your purpose meets the legal definition of “charitable.”

If you intend to distribute profits to private owners or investors, you’re not operating as an NFP or charity (though you can still pursue social impact in other ways). If you reinvest surplus for your mission and your purposes are charitable, applying for ACNC registration may make sense - especially if you plan to seek grants or DGR endorsement.

On fundraising, plan for a mix of revenue (grants, sponsorships, donations, membership, earned income). Ensure you hold the right fundraising authorisations and keep your promotions compliant with consumer law. If you plan to run raffles or trade promotions, check the applicable rules - a national guide to raffle laws in Australia is a good starting point.

Key Takeaways

• All charities are not-for-profits, but not all not-for-profits are charities - charity status depends on having charitable purposes and ACNC registration.
• You don’t need a single “set” structure to be a charity; charities operate as companies limited by guarantee, incorporated associations, trusts, co‑operatives and sometimes unincorporated associations.
• An ABN is generally required for ACNC charity registration and is often practical for most NFPs (for grants, suppliers and banking), but it’s not mandatory just to exist as an NFP.
• Expect ongoing compliance: entity upkeep, ACNC reporting (for charities), fundraising licences, employment obligations, privacy/data protection and consumer law rules on advertising.
• Protect your organisation with the right documents - governing document, Conflict of Interest Policy, Employment Contracts, Volunteer Agreement, Privacy Policy, Website Terms and Conditions and clear supplier/fundraising agreements.
• Consider trade mark protection for your name and logo to safeguard your brand and donor trust.
• Getting tailored legal and tax advice early helps you choose the right structure, access concessions and meet your obligations from day one.

If you would like a consultation on setting up a not-for-profit or charity in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.