In Australia, nonprofits seek to solve a variety of social problems by serving their communities. The services offered by charities and other NFPs run the gamut – from programs to improve health and well-being in at-risk populations, to education services, sports clubs and activities that seek to improve the quality of our water and other critical environmental resources. The importance of this sector cannot be overstated, as it contributes over $43 billion to the national economy, with over 6 million Australians giving back to their communities by volunteering.

While NFPs fulfil an essential role in our society, many individuals are often confused by what types of organisations qualify for NFP status.

What is a Nonprofit?

The nonprofit sector is comprised of over 600,000 organisations in Australia. Charities make up about 70% of all NFPs in Australia. Of these NFPs, around 54,000 are registered with the ACNC. What each of these organisations has in common is that they are not owned by a single individual or group of individuals; rather, they are owned by the public.

While their missions are incredibly diverse, they all operate to benefit the public good. Any excess income that a nonprofit generates is typically returned to the organisation, instead of being distributed to stockholders, which is what typically would happen in a for-profit company.

How Are Nonprofits Funded?

NFPs are typically funded in one of three ways: government grants, donations and other sales.

Funding by government accounts for nearly 42% of all nonprofit revenues, while other activities such as charging membership dues, selling merchandise, and making investments accounts for just over 50% of all nonprofits. While giving accounts for around 8% of all funding in the sector, it’s important to keep in mind that nearly one out of every four nonprofits rely on individual donations to make up over 50% of their annual budget.

Why is Registering with the ACNC Important?

While less than 105 of all charities are registered with the ACNC, going through the process is still a worthwhile activity. Once a charity has its status approved, it is typically eligible for several preferential tax treatments through the Australian Tax Office (ATO), which can increase your nonprofit’s financial stability, and ensure that more of your revenues can be used to build capacity, administer programs and offer services. Donors are also more likely to trust registered charities and may be more willing to make significant gifts than they would to an unregistered nonprofit.

Keeping Your ACNC Status

Once your registration is processed and approved, your NFP will need to meet the ACNC’s basic governance standards, unless it is a basic religious charity. To remain in compliance, your NFP will need to actively pursue its mission or charitable purpose. Other top requirements are the need to keep accurate, detailed records of your organisation’s finances and activities and to report annually by submitting an Information Statement each year. If key changes are made to your nonprofit’s operations, personnel, or details, you will need to keep your information updated with the ACNC.

Keeping your registered charity status can involve a lot of tedious, time-consuming tasks. There are also many deadlines that must be met to continue to receive preferential tax treatment and other perks. Modern, secure, accountancy software, such as Admin Bandit is one way to ensure that your financial information is kept safe while also being easy to update, on time!