1. How can I set up a Not-for-Profit? Can it send money overseas?
The first thing you need to do is to be clear on what you want the not-for-profit organisation (NFP) to achieve. You and the team need to work together to prepare a document that sets out the objects of the proposed organisation.
You’ll need advice whether to set up a company or an incorporated association. Generally the former is the right vehicle if you want to operate around Australia; the latter is more suitable for a local body.
The purpose of an NFP is achieving the objects of the organisation. All money, including profit must be paid back into the NFP and not to members.
If there is already another NFP doing similar work, setting up in competition may not be desirable. It might be better to set up a fundraising foundation only and collect funds for the already existing NFP.
If you have significant wealth and wish to give it to other NFP’s or charities you should set up a private foundation. Then, you would not raise funds from the public but your payment to your foundation would be tax deductible because it in turn would be distributing to tax deductible entities.
If the NFP becomes an overseas aid fund, all its funds can be sent overseas. If not, only funds ancillary to the total revenue of the NFP can be sent overseas.
Your Carroll & O’Dea lawyer will guide you through the process.
2. Will it be a charity?
There are now strict rules about whether an organisation can be a charity. A Federal Government organisation, called the Australian Charities and Not-for-profits Commission (ACNC), regulates charities.
A charity must:
(a) be registered with the ACNC;
(b) file annual information statements;
(c) file annual financial statements;
(d) observe the five governance standards, which can be found here.
A charity’s objects have to advance one of the purposes in the list below:
(c) social or public welfare;
(f) reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;
(g) promoting or protecting human rights;
(h) the security or safety of Australia or the Australian public;
(i) preventing or relieving the suffering of animals;
(j) the natural environment;
(k) purpose beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of, any of the purposes mentioned in paragraphs (a) to (j).
3. How can I attract donations and how can I give tax deductions for donations?
In New South Wales, to fundraise, the NFP must hold a fundraising certificate from Fair Trading unless it is connected to a major religion. To give a tax deduction the NFP must fall into one or more limited categories.
4. Do I need a business name, trade mark ABN or TFN?
Business Name: Yes, any NFP carrying on any activity in NSW needs a business name even if the activity is not a commercial business. The Business name can be obtained from the Australian Securities and Investments Commission and must not be too similar with any other business or company name.
Trade Mark: You should consider an application for trade mark registration as early as possible because this will ensure that you have the earliest priority date under the Trade Marks Act 1995 (Cth) affording your business name protection against unauthorised use of an identical or similar names. However, it is important to note that without requisite use, your registered trade mark may become vulnerable to removal for non-use upon application by another party’s similar name with respect to the same or similar class of goods or services.
ABN: Yes, if the NFP seeks registration as a charity.
TFN: not required as the NFP will be tax exempt, usually, but can be helpful when dealing with government departments or opening bank accounts.
5. Who can be on the board and what duties do they have?Any adult who has not been disqualified by ASIC or ACNC from being a director. The person should be someone holding a position of responsibility in the community, who actively participates in the governance of the NFP. It is not obligatory for the person to be a professional from finance law administration etc. Duties are:
- Act honestly
- Disclose a personal interest
- Not take advantage of position
- Not take advantage of information
- Put interest of the NFP above that of individual board member or member
6. What insurances do we need?
- Public liability to minimum of $20m
- Directors and officers insurance
- Building insurance if any buildings owned
7. Are there exemptions from taxes and charges?
Yes, from income tax, (Div 50), FBT (if a public benevolent institution), GST (if income tax exempt), land tax, (if a charitable organisation), council and water rates if land has particular uses. Applications for exemption need to be made to all the different government departments, federal and state.
8. What rules apply to how the Not-for-Profit is run?
The main rules are:
1. No profit for members: all for the NFP.
2. On winding up, surplus must go to another NFP with like objects.
3. Objects must be either charitable in nature or for common purpose.
4. Individual committee members will be liable for damages caused to person or property unless a company or incorporated association is set up.
5. Governance standards must be observed: ie financially responsible, accountable to members, acts consistent with objects and compliant with Australian laws, responsible persons on board, regular meetings and record keeping.
9. How much cost must the Not-for-Profit pay?
Filing fees: name at ASIC $34.
Name at Fair Trading $46.
Application to incorporate at Fair Trading $121.
Application to incorporate at ASIC $366.
Legal costs minimum $1000, but actual cost will depend upon particular tasks required.