- Introduction
- What is ‘not-for-profit’ and ‘for-profit’ and how are they different?
- Charities and not-for-profit organisations
- Can a not-for-profit organisation make a profit?
- Why do you need to decide if you are ‘not-for-profit’?
- What is a social enterprise?
- How do you start a not-for-profit organisation?
- there are different legal structures for, and different laws that apply to, ‘not-for-profit’ and ‘for-profit’ organisations
- certain benefits apply to a not-for-profit organisation, and
- you need to be clear with donors, government, the public, and those involved in your group about what your organisation does and how it uses its money
- charities, and
- other not-for-profit organisations that are not charities – for example, most sporting and recreational clubs, community service organisations, cultural and social societies and professional and business associations
More information
See the Australian Tax Office webpage on types of not-for-profit organisations. The ATO also provides examples of different types of 'not-for-profit' organisations.
- the profit may be distributed to the organisation’s owners, or to individual members or shareholders (this can’t happen in a not-for-profit organisation), and
- people involved in the organisation are entitled to receive a personal benefit from the profits of the organisation (for example, receiving dividends, money when they sell their shares, or a payment directly from the profit)
- the organisation is not-for-profit
- all of the organisation’s purposes are:
- charitable purposes that are for the public benefit (as defined in the Charities Act), or
- purposes that are incidental or ancillary to, and in furtherance or in aid of the charitable purposes of the entity,
- none of the organisation’s purposes are disqualifying purposes (as defined in the Charities Act), and
- the organisation is not a person, a political party or a government entity
More information
Note that an organisation must also meet additional requirements to be registered as a charity. Go to our resources on registering as a charity.
- employ people and pay them reasonable salaries
- make money by charging members of the public for services
- make money by selling or leasing property, and
- invest money in shares and receive dividends
- some legal structures are only available to not-for-profit organisations (for example, an incorporated association, special purpose company limited by guarantee, non-distributing co-operative without share capital or charitable trust)
- there are exemptions, concessions and benefits for eligible not-for-profit organisations, including tax concessions (although being ‘not-for-profit’ is only one of a number of requirements)
- some government grant programs and many private philanthropic bodies are set up only to fund not-for-profit organisations, and
- some laws only allow certain not-for-profit organisations to apply for registration to conduct certain fundraising activities (for example, minor gaming activities)
Caution
Our Not-for-profit Law program is Justice Connect's specialist service for charities and community groups. Justice Connect is a registered charity with the Australian Charities and Not-for-profits Commission.
We have published information about incorporation, legal structures, tax laws, funding and fundraising. However, if members of your organisation want to make money or a personal gain from the activities of the organisation (other than as reasonable payment for wages if they are employed by the organisation), we can’t help.
We only provide legal information on not-for-profit organisations. You can find information on establishing a for-profit business on the Australian Tax Office website.
- some social enterprises operate for the benefit of their members and are set up as ‘for-profits’ with shareholders, or as trading co-operatives
- some social enterprises seek investors, and offer returns to those investors (normally on a different basis to a normal enterprise, with some profits added back to the enterprise, and some distributed to investors), and
- some social enterprises get seed funding from philanthropic sources or the government, and then generate their own profits to sustain the enterprise – these enterprises are normally set up as ‘not-for-profits’
More information
Go to our resources on social enterprises.
- they can't personally receive profits from the organisation, and
- all the organisation’s money and assets must only be used to further the purposes of the organisation
ATO’s suggested wording for the two key clauses for an organisation’s constitution to indicate that the organisation is ‘not-for-profit’
Not-for-profit clause
'The assets and income of the organisation shall be applied solely in furtherance of its abovementioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.'
Dissolution clause
'In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.'
More information
For more information about drafting a constitution, see our guides to running an organisation and our webpage on managing an organisation's rules or constitution.
Getting Started Tool: A free online tool
Need help making key legal decisions? Our self-help tool will ask you a series of questions about your new organisation - in plain and simple English - and will help determine the best way forward.