To be officially recognized as a charity under the Charities Act 2013 (Cth), your organisation must first and foremost operate as a not-for-profit. This is the foundational requirement that underpins all others: having a charitable purpose for the public benefit, avoiding any disqualifying purpose, and not being an individual, political party, or government entity.

This guide builds on the insight you provided and updates it with the latest Australian guidance and legal points in 2025, so you can check whether your organisation really meets its not-for-profit objects.

Last updated 10 October 2025

What is a Not-for-Profit Organisation?

A not-for-profit organisation is one that does not operate for the profit, personal gain or other benefit of particular people — for example, the organisation’s members, directors, staff or their associates. That principle applies while the organisation operates and also if it winds up. All ACNC-registered charities must be not-for-profit, but some not-for-profits, like clubs or associations, aren’t charities.

Legally, the Charities Act 2013 provides the statutory framework for what counts as a charity in Australia; one of the Act’s core requirements is that an entity must be a not-for-profit to qualify as a charity. The Act and ACNC governance standards require charities to both be and demonstrate their not-for-profit nature.

Important practical points:

• A charity or not-for-profit can generate surpluses but must reinvest them into its programs or capital, not distribute to members.
• A charity or not-for-profit may pay staff and directors fairly if approved and aligned with its objects and rules.
• Organisations seeking tax concessions or DGR status must include not-for-profit and winding-up clauses to prevent asset distribution to members. The ATO expects these clauses when endorsing DGR status.

Does Your Organisation Meet Its Not-for-Profit Objects?

Use this checklist to quickly assess whether your organisation’s structures, documents and practices evidence a true not-for-profit purpose.

1. Governing document clauses. Do your rules or constitution include a clear not-for-profit clause (preventing distribution of profits to members) and an appropriate winding-up clause (directing surplus assets to another charity/DGR or similar body)? If not, update your governing document. The ACNC and ATO publish recommended clauses and examples for charities and NFPs.
2. Use of income and surpluses: Regular budgeting and a reserves policy are good evidence you’re applying funds appropriately.
3. Remuneration and related-party transactions. Are staff and director payments reasonable, documented and approved via appropriate processes (conflict-of-interest declarations, board minutes, market benchmarking)? Declare, record, and actively manage all conflicts.
4. Conflict of interest and governance systems: Strong governance is a central test of a not-for-profit charity.
5. Winding up and asset distribution. If your organisation has DGR endorsement or significant public fundraising, check whether ATO/ACNC rules require transfer of residual assets to another DGR or charity on winding up. Many funders and the ATO require that surplus gifted funds be transferred to an organisation with similar objects.
6. Public benefit and charitable purpose (if you are a charity). If you claim charity status, ensure your purposes align with the Charities Act and that you can demonstrate the public benefit.

Next Steps

Birchgrove Legal can review and redraft your governing documents to meet ACNC and ATO standards and protect your not-for-profit status. We draft purpose-aligned clauses, advise on DGR implications and help implement governance policies that reduce risk and strengthen public trust. Contact Birchgrove Legal for an expert governance review and a practical roadmap to compliance.