Starting a charity in Australia is a meaningful way to create long-term community impact, but the process involves several legal, structural and regulatory steps. Understanding how charities differ from other not‑for‑profit organisations, choosing the right legal structure, and meeting the expectations of regulators like the ACNC and ATO are all critical to getting it right from the beginning.

This guide breaks down the key decisions and requirements so founders can move forward with clarity and confidence.

What Is a Charity and How Is It Different From a Not‑for‑Profit?

A charity is a particular type of not‑for‑profit (NFP) organisation that exists solely for charitable purposes and provides a public benefit. All charities are NFPs, but not all NFPs qualify as charities – an important distinction that influences governance, regulation and access to tax concessions.

What counts as a charitable purpose?

Under Australian law, charitable purposes fall into several recognised categories, including:

  • Advancing health
  • Advancing social or public welfare
  • Advancing education
  • Promoting community development
  • Relieving poverty, distress or disadvantage

Charities must be able to demonstrate that their activities provide a measurable public benefit. For example, an organisation offering trauma‑informed support, counselling or welfare assistance would typically fall under advancing health or relieving distress.

Why does this distinction matter?

Becoming a registered charity with the Australian Charities and Not‑for‑profits Commission (ACNC) determines access to:

  • Commonwealth charity registration
  • Charity-specific tax concessions through the Australian Taxation Office (ATO)
  • Deductible Gift Recipient (DGR) status – a requirement for donors to claim tax deductions

Getting the purpose and structure right at the outset sets the foundation for eligibility across these areas.

For a deeper dive into purpose statements and structuring, the ACNC provides guidance on charitable purposes: https://www.acnc.gov.au

Which Legal Structure Should You Choose When You Start a Charity?

Before applying for charity registration, you’ll need a legal entity. In Australia, most charities choose one of three structures.

1. Incorporated Association

Best for organisations operating mainly within a single state or territory.

Key features:

  • Creates a separate legal identity
  • Limits member liability
  • Governed by state or territory legislation
  • Lower establishment and ongoing compliance costs

In Victoria, registration occurs via Consumer Affairs Victoria, with application fees ranging from roughly $84 to $504 depending on whether model rules are used. Annual renewals fall between $50 and $200.

Advantages:

  • Simple and cost‑effective to set up
  • Straightforward governance requirements
  • Provides legal protection for members

Limitations:

  • Less suitable for organisations intending to operate nationally
  • May be unfamiliar to some national donors or grant providers
  • Requires additional registrations if operating outside the founding state

You can explore Victorian requirements at Consumer Affairs Victoria: https://www.consumer.vic.gov.au

2. Company Limited by Guarantee (CLG)

Often chosen by organisations seeking a national presence or a more formal governance structure.

Key features:

  • Registered as a public company under the Corporations Act 2001
  • No shareholders—members guarantee a nominal amount if wound up
  • Regulated by ASIC
  • Typically viewed as a more robust governance model among institutional funders

Set‑up costs usually include:

  • ASIC fee (~$611)
  • Constitution drafting (commonly $1,500–$2,000 depending on complexity)
    Ongoing ASIC review fees are currently around $67 for eligible charitable companies.

Advantages:

  • Nationally recognised and flexible
  • Strong governance obligations
  • Often preferred by government, corporate and philanthropic funders

Limitations:

  • Higher compliance burden
  • Directors must meet strict legal duties

More information is available at ASIC: https://asic.gov.au

3. Unincorporated Association

A low‑cost option sometimes used by emerging community groups before formalising into a legal structure.

Key features:

  • Not a separate legal entity
  • Members may be personally liable for debts and obligations
  • Cannot hold property or enter contracts in the association’s name

This structure is generally unsuitable for long‑term operations or significant fundraising but can occasionally act as a temporary early-stage arrangement.

What Needs to Be Included in a Charity’s Governing Document?

Every charity requires a governing document—either a constitution or rules—depending on the chosen structure.

A clear governing document should include:

Charitable purpose clause

Explains the organisation’s reason for existing and must align with the charity categories recognised by the ACNC.

Not‑for‑profit clause

Prevents profits from being distributed to members, requiring all assets to be used to further the organisation’s purpose.

Winding‑up clause

States that upon closure, remaining assets must be transferred to another charity with substantially similar purposes.
If the organisation seeks DGR status, the transfer must be to another DGR-endorsed charity.

Well‑structured governing documents are crucial to ACNC approval and smooth ATO endorsement.

How Do You Register a Charity with the ACNC?

Once your legal structure is in place and you’ve secured an Australian Business Number (ABN), you can apply for registration with the ACNC.

Step 1: Apply for an ABN

  • Required for banking, tax and charity registration
  • Free if self‑prepared
  • Apply via the Australian Business Register: https://www.abr.gov.au

Step 2: Gather required information

You will need to supply:

  • The governing document
  • ABN details
  • Details of responsible persons (e.g., directors or committee members)
  • A clear description of planned or existing activities demonstrating public benefit

Examples include:

  • Providing mental health support
  • Offering case management or care coordination
  • Delivering direct welfare assistance
  • Facilitating access to professional services

Step 3: Apply via the ACNC Charity Portal

The application is free, and processing times vary depending on complexity and completeness of information.

More details: https://www.acnc.gov.au/charityregistration

What Tax Concessions and Endorsements Can Charities Access?

Once ACNC registration is approved, the next step is applying to the ATO for tax concessions.

Common tax concessions include:

  • Income tax exemption
  • GST concessions
  • FBT rebates or exemptions (eligibility varies)

These concessions can significantly reduce operating costs, making them an important component of long-term sustainability.

You can explore available concessions here: https://www.ato.gov.au/non-profit

Do You Need Deductible Gift Recipient (DGR) Status?

For many charities, DGR status is essential. It allows donors to claim tax deductions for contributions, which in turn supports fundraising.

How does an organisation qualify?

Eligibility depends on the type of charity and its purpose. One common DGR category is Public Benevolent Institution (PBI), which applies to organisations providing direct relief to people experiencing disadvantage, trauma, or distress.

Key elements of PBI eligibility include:

  • Activities must provide immediate and direct relief
  • Services must be targeted at people in need
  • Governing documents must reflect PBI purpose
  • ACNC registration must align with activities

The ATO assesses DGR eligibility based on ACNC information, making consistency between documents, purpose and activities essential.

Application for concessions and DGR endorsement is free when self‑prepared.

Useful Resources for Founders

  • ACNC — Charities & Registration Guidance
    https://www.acnc.gov.au
  • Australian Taxation Office — Not‑for‑profits
    https://www.ato.gov.au/non-profit
  • Consumer Affairs Victoria — Associations
    https://www.consumer.vic.gov.au
  • ASIC — Companies Limited by Guarantee
    https://asic.gov.au

Thinking about starting a charity?

Getting the structure right early can make a significant difference to your registration, tax concessions, governance obligations and long-term funding options.

Davidsons can help you understand the right structure, prepare for ACNC registration, and work through the tax and compliance considerations before you begin.

Speak with our team before you set up your charity.

Summary Insight

Establishing a charity in Australia involves a balance of purpose, governance, compliance and structure. Taking the time to get these foundational elements right supports the organisation’s long-term credibility, funding opportunities and impact within the community.

FAQ

Do all charities need to be incorporated?

No. An organisation can technically operate as an unincorporated association, but this is rarely suitable for charities seeking funding, DGR status or long-term operations.

Can a charity operate nationally if it registers as an incorporated association?

Yes, but only after completing additional registrations through ASIC. A company limited by guarantee is generally more efficient for national work.

How long does ACNC registration take?

Processing varies based on complexity, completeness of documents and the nature of activities. The ACNC indicates that applications can take several weeks.

Do you need DGR status to run a charity?

No, but many organisations seek it because it supports fundraising and donor engagement. Some grant makers only fund DGR-endorsed organisations.

Can a charity change legal structure later?

Yes. Many organisations begin as incorporated associations and transition to a company limited by guarantee as they grow.

Are volunteer‑run charities still eligible for registration?

Yes. The ACNC focuses on purpose and public benefit, not staffing model.

Disclaimer: The information that is provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals. Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.