For many community groups, registering as a charity seems the natural next step. Donors ask whether gifts are tax-deductible, or a grant body asks for ACNC registration.
Registration and tax-deductible status are separate, each with its own tests. This article explains the issues an organisation should understand before applying, with a Victorian focus.
Is the purpose charitable?
The starting point is the Charities Act 2013 (Cth). Broadly, a charity is a not-for-profit entity whose purposes are all charitable purposes for the public benefit, or incidental or ancillary to such purposes. It must have no disqualifying purpose and must not be an individual, a political party or a government entity.
The Act lists charitable purposes, including advancing health, education, social or public welfare, religion and culture, promoting reconciliation and tolerance between groups in Australia, protecting human rights, and advancing the natural environment. There is also a category for analogous purposes beneficial to the general public. Disqualifying purposes include engaging in or promoting unlawful activity, and promoting or opposing a political party or candidate.
The public benefit requirement is where many community organisations need care. An association that exists mainly for its members’ fellowship and social activities may struggle to show that its purposes are directed to the general public or a sufficient section of it. One that runs public festivals, classes and heritage programs may be differently placed. The answer depends on the organisation’s purposes as written and on what it actually does.
ACNC registration and the governance standards
Registration with the Australian Charities and Not-for-profits Commission (ACNC) is voluntary. However, it is generally needed to access Commonwealth charity tax concessions.
Once registered, a charity must meet the ACNC governance standards. In broad terms, these cover:
- being run for its purposes and as a not-for-profit;
- accountability to members;
- compliance with Australian laws;
- the suitability of its responsible people, and their duties;
- participation in the National Redress Scheme where that is required.
Charities working overseas must also meet the External Conduct Standards, and basic religious charities are exempt from some requirements.
DGR endorsement and its categories
Deductible gift recipient (DGR) endorsement allows donors to claim income tax deductions for eligible gifts. It is a separate endorsement and is administered by the ATO. From 1 January 2024, the ATO took over the categories that were previously handled through separate registers kept by other government departments: environmental organisations, harm prevention charities, cultural organisations, and developing country relief. The ATO now administers all categories, and for most non-government organisations, DGR endorsement requires the organisation to be a registered charity.
An organisation qualifies only if it fits a category. Categories include public benevolent institutions, health promotion charities, school building funds, public libraries, museums and art galleries, and the categories mentioned above. Some organisations are named in the tax law instead. Two points stand out:
- An organisation can be a charity without fitting any DGR category. For example, advancing religion is a charitable purpose, but there is no general DGR category for religious worship.
- Some categories require a separate gift fund. Others endorse only part of an organisation’s operations.
Whether a community language school, a cultural centre or a temple’s welfare program can obtain DGR endorsement depends on how it is constituted and what it does.
The clauses regulators look for
The governing document must support the application. Three kinds of clause matter most.
- The purpose clause. This should state charitable purposes clearly, without broad or commercial objects.
- The not-for-profit clause. This should prevent income and property being distributed to members. Payment of reasonable remuneration for services and reimbursement of expenses is generally permitted.
- The winding-up clause. This should direct surplus assets to another organisation with similar purposes, rather than to members.
For DGRs, the ATO expects a further rule. On winding up, or if DGR endorsement is revoked, whichever happens first, surplus gifts, deductible contributions and money received because of them must be transferred to another DGR. A required gift fund must keep those gifts separate for the principal purpose.
Ongoing obligations
Registered charities generally lodge an Annual Information Statement with the ACNC. Medium and large charities also lodge financial reports, and the size tier determines whether those reports need to be reviewed or audited. Charities must keep proper records and notify the ACNC of changes to responsible people, name, address and governing document within time limits that depend on the charity’s size. DGRs must also keep records of gifts and issue receipts that meet ATO requirements.
Victorian fundraising and state tax concessions
Under the Fundraising Act 1998 (Vic), an organisation generally needs to register with Consumer Affairs Victoria (CAV) before fundraising from the public, unless an exemption applies. ACNC-registered charities benefit from an arrangement with CAV that streamlines registration and removes separate annual reporting to CAV while ACNC registration continues. Record-keeping and conduct obligations still apply. Raffles and other gaming are regulated separately by the Victorian Gambling and Casino Control Commission.
State tax concessions such as land tax, payroll tax and duty exemptions are applied for separately through the State Revenue Office, each with its own tests. ACNC registration does not mean they apply automatically. For land tax, the charitable exemption now generally requires that land be used and occupied by a charitable institution exclusively for charitable purposes. Leasing land to a commercial operator may affect eligibility.
Common reasons applications are delayed
- Purposes that are drafted too broadly or include member-benefit or commercial objects.
- Missing or defective not-for-profit, winding-up or revocation clauses.
- Activities that do not match the stated purposes, or little evidence of activities.
- Applying for a DGR category the organisation does not fit, or failing to set up a required gift fund.
- Details that do not match across the ABN record, CAV or ASIC, and the application.
A hypothetical scenario
Consider a group of parents who run a weekend Chinese language and culture program. They are not incorporated, and fees go into one parent’s personal account. They want to register as a charity and seek tax-deductible donations for a building. The issues include whether and how to incorporate first, framing the purposes, dealing with past funds, whether any DGR category fits, and fundraising registration. The right approach depended on facts that needed advice.
Questions to discuss
- Are all our purposes charitable, and for the public benefit?
- Does our governing document contain suitable purpose, not-for-profit and winding-up clauses?
- Which ACNC subtype and DGR category, if any, fit our activities?
- Do we fundraise in Victoria or elsewhere, and are we registered where required?
- Have we considered state tax exemptions, and how our property is used?
Frequently asked questions
How do I register a charity in Australia?
An organisation applies to the ACNC online, generally after it has an ABN and a suitable governing document. The ACNC then assesses whether it meets the definition of a charity.
Does ACNC registration make donations tax-deductible?
No. Tax-deductibility requires separate DGR endorsement from the ATO, and only organisations that fit a DGR category can obtain it.
Do charities need to register to fundraise in Victoria?
Generally yes, unless an exemption applies. ACNC-registered charities have a streamlined arrangement with Consumer Affairs Victoria, but some obligations continue.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates assists organisations across Australia with charity registration and DGR endorsement applications and ongoing charity compliance. We draft and review constitutions and rules, assist with incorporation, and advise on fundraising registration and DGR gift funds. We have worked with community organisations, schools, faith and cultural associations on governance from the inside, including at board and committee level. Justin Chua trained in accounting (Bachelor of Commerce, accounting major) and is a Nationally Accredited Mediator and an Accredited Family Business Advisor. We work alongside the organisation’s accountant and registered tax agents, and advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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