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How to start a not-for-profit organisation in Australia
Build a smashing non-profit that your community can count on.
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Starting a not-for-profit organisation is not an easy task. It requires manoeuvring, creative thinking and the ability to create relationships, but the payoff will make all of the hard work worth it. If you have a burning desire to help a marginalised sector or encourage a community, this guide on how to start a non-profit organisation will guide you through the process. Read on to find out how you can get started.
What's in this guide?
What is a not-for-profit organisation?
The Australian Taxation Office (ATO) defines a not-for-profit organisation as one that provides services to the community and does not operate to make a profit for its members. Any profit that the organisation makes has to be used for the organisation's services and must not be distributed to members.
How to start a not-for-profit organisation
Starting a non-profit organisation requires some additional planning compared to a regular business. Your organisation will need to carry out its activities effectively while in compliance with the law. As you will not be making any profit, your organisation must minimise the chance of running into legal difficulties as it grows or changes. Hence, it is essential to formulate a business plan. It should cover all of the organisation's bases, from its vision and mission to money and resources.
- Choose a legal structure. The structure you choose will determine the types of activities you can legally carry out, as well as the government bodies you will need to register with and report to.
- Pick a name. The name of your association should reflect the mission of your statement. Take into account the domain availability so you can set up your website.
- Decide on your objectives and write your constitution. When registering your organisation, you are required to present your organisation's objectives and purpose. To have a general outline of your goal, consider the activities that will be conducted, who will benefit from them and the need your organisation will fulfil. You will need to keep a written copy of your organisation's constitution with other records.
- Fulfil your legal requirements. You will need to apply for an Australian Business Number (ABN) and register with the ATO for tax obligations and an endorsement. In some cases, you may need a licence to undertake a charitable fundraising appeal.
- Consider loan options. Like any business, a not-for-profit organisation might need an investment to get off the ground. Several banks offer loans to the social sector to help with financial management, or you can apply for a grant.
- Market to your target customers. As a not-for-profit organisation, you will have a diverse group of people to reach out to. It's essential to establish connections early on, especially if your organisation relies on donors and fundraisers to keep running.
Skills needed to start a not-for-profit organisation
Starting a non-profit begins with the desire to make a difference. One has to be resilient and believe in the cause they are championing when working in a resource-constrained environment. You will also need the skills to translate data into emotional stories that will grab people's attention. Conveying your organisation's uniqueness and need is an essential marketing tool. You will rely on being empathetic and sensitive in communication as you work with stakeholders.
Courses or qualifications for non-profit organisations
Starting a not-for-profit organisation requires a head for business management and marketing that effectively manages organisations with a social purpose. If you have the time and opportunity, you might benefit from investing in a qualification like the Graduate Diploma in Not-for-Profit and Social Enterprise Management offered at the University of Technology Sydney (UTS). This course helps students with business management, fundraising and revenue streams for events and not-for-profit organisations, volunteer management and more. The course should take one year of full-time study or two years of part-time study. Other similar courses include:
- Graduate Certificate in Social Impact (University of New South Wales)
- Certificate in Governance for Not-for-Profits (Governance Institute of Australia)
- Diploma of Community Services (TAFE)
- Diploma of Counselling (TAFE)
- Certificate III in Individual Support (Ageing, Home and Community) (TAFE)
- Certificate III in Individual Support (Disability) (TAFE)
- Certificate IV in Alcohol and Other Drugs (TAFE)
- Certificate IV in Youth Work (TAFE)
- Certificate IV in Mental Health (TAFE)
Additionally, you can also complement your diploma with a short course in business or marketing. Doing so will help you develop the skills for business management and an understanding of the sector.
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Equipment and software needed to start a not-for-profit organisation
Once you have leased office space, you will need furniture for staff and volunteers, a meeting with donors and clients, and a refreshment area. Your office space will need the following:
- Desks and chairs
- Filing and storage cabinets
- Whiteboards
- Computers and computer accessories
- Phone access and fax machines
- Visitor seating like couches, coffee tables and ottomans
- Meeting tables
If your organisation has a small kitchen, you might want to have a coffee machine and kitchen essentials. If you have a waiting room, it might be nice to display some art.
As for software, you may want to consider setting up a website to introduce your not-for-profit organisation, your goals, upcoming events and what you have achieved so far.
Your not-for-profit should also have reliable software to facilitate easy donations such as:
- Bloomerang
- Blackbaud Raiser's Edge NXT
- Kindful
- NetSuite
These tools can help with fundraising, event management, customer relationship management (CRM) to build and maintain relationships with donors, data collection and campaign analytics.
Of course, you will also need a bank account for your donations. When setting up one, it is vital to compare banks on interest rates, fees, accessibility and fund growth. Read our guide, which compares different bank accounts.
Loan options for a non-profit organisation
Since you are starting a business from scratch and might need a sizeable investment, you could consider applying for a loan. There are several grants available that can help cover one quarter or two-thirds of your organisation's annual running costs. To apply for a grant, your organisation will need to first be endorsed by the ATO. Once you have received the endorsement, you can browse through the websites below to help you apply for grants:
However, your not-for-profit organisation cannot rely forever on grants. Some other ways to get funding would be through fee-for-service work, community fundraising and corporate partnerships.
How to structure a not-for-profit organisation
Depending on your organisation's mission, the legal structures to be aware of are:
- Unincorporated Association. This is one of the simplest structures for a not-for-profit organisation. These organisations are usually small or informal community organisations handled by a group that acts together because of a shared purpose. Generally, these types of organisations are free to establish with very few administrative or legal requirements. As such, these organisations do not have a legal identity, cannot hold assets or have legal protection for members. Each member is personally responsible for the actions or debts of the organisation or any contracts signed.
- Incorporated Association. An Incorporated Association is bound by the laws and regulations of its home state. However, it is considered a separate legal identity that will continue even when its founders retire. The association can also legally lease a property, hold assets in its name, protect its members and be sued. Because of this, an incorporated association carries additional legal and administrative obligations, such as accounting, auditing and annual reporting requirements.
- Company Limited by Guarantee. This legal structure is similar to an Incorporated Association. It can legally lease a property, hold assets in its name, enter into contracts, provide some protection to its members and directors, and face legal consequences. A company limited by guarantee is registered under the Corporations Act 2001 and complies with the Act's provisions. Each member's liability is limited to the amount they agree to contribute if the company is wound up. This structure might come with more requirements, but it is the best choice if your not-for-profit wishes to operate nationwide.
- Indigenous Corporations. An Indigenous Corporation is available only for Aboriginal and Torres Strait Islander organisations. Generally, at least 51% of the organisation should be owned by people identifying as Indigenous. This organisation can be governed and supported by the Office of the Registrar of Indigenous Corporations under the Corporations (Aboriginal and Torres Strait Islander) Act of 2006. Registration for Indigenous Corporations are free. The rules can take into account Aboriginal or Torres Strait Islander customs and traditions.
- Cooperative. This type of organisation is often controlled and used by members. A cooperative can carry out some for-profit ventures. In some cases, the constitution allows the distribution of profit between members. Like an incorporated association, a cooperative is bound by the laws and regulations of its home state.
Do I need legal documents and advice?
The documents you will need for starting a not-for-profit organisation are:
- The Governing Document. This outlines the organisation's objectives, the organisation's power, management of the organisation, internal arrangement for meetings, a non-distribution of profits provision, an amendment provision and a dissolution provision.
- By-laws. These are like an operating manual that determines the running of the not-for-profit organisation. For example, this document includes information on the length of time a board member is permitted to hold their position or the number of people required to reach a quorum. Generally, the by-laws should include the governing structure, the director's role, the not-for-profit officers, the voting rules, the committee formation and conflict resolution.
- Meeting minutes. This refers to the formal recording of meeting proceedings and the consequent actions taken. A meeting minutes should have notes on setting up accounts and tax years, memberships approvals, authorisation and establishment of the board and other committees, the appointment of officers, the approval of by-laws, decisions on the tax exemption status, and its commencement and approval for the first transactions of the non-profit.
- Volunteer Agreement. If your not-for-profit organisation relies on volunteers, there should be a written agreement before commencing work. This agreement outlines the terms of the engagement, the volunteer's obligations, confidentiality, termination of the agreement and indemnity. Follow our guide on drafting your Volunteer Agreement and get access to free legal templates.
If you set up a website, you will also need a Privacy Policy, a Cookie Policy and the Terms and Conditions.
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How to find donors for my non-profit organisation
One good way to find your target audience is to read up on case studies from similar not-for-profit organisations. Find out their methods and services, and then consider how you can adapt this to your locality. It is important to run your products and services through volunteers from your target audience. Their feedback will provide invaluable knowledge on the core issue and how you can respond to them. Remember that your resources are limited, so you will need to be efficient and smart with how you provide your services. Speak to prospective donors to get an idea of their motivation to donate, causes they are interested in and some background information.
Take to social media to spread your message and mission statement. Having an online record also communicates that you are transparent. Gaining more exposure can help you reach out to more people and donors. Collaborate with different companies and corporations that would help give your not-for-profit a boost.
Allocating a small budget for promoting content can go a long way. Consider advertising on Facebook or Google Ads, which are generally affordable. If you have a Facebook page, you can add a call-to-action or Donate Now button on any of your posts.
Frequently asked questions
What is the difference between a not-for-profit and an NGO?
A not-for-profit organisation is one that uses any profits it makes into pursuing its missions. Though these organisations can make profits, founders or members cannot claim the profits. A not-for-profit is smaller than an NGO and is run by paid staff and volunteers. Some examples are CARE Australia, Save the Children and more.
An NGO, or non-government organisation, is set up and operated independently from local, state or international governments. Generally, NGOs address more extensive and widespread issues like natural disasters, famine and so on. Some examples of NGOs in Australia are the Australian Red Cross, Habitat for Humanity and more.
What challenges do non-profit organisations face?
The biggest challenge for a non-profit organisation is the unpredictability of fundraising and operational costs. Other challenges include changes to government policy, uncertain economic environment, escalating demands and regulatory changes.
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