If you are thinking of establishing a not-for-profit organisation or charity, or even if you are running one already, it is important to know the answer to the question of what a charity actually is. The answer might surprise you and is more complicated than people first think.
And the dictionary is not going to help!
A charity is a not-for-profit organisation established and operated to pursue a charitable purpose. Which begs the question - what is a charitable purpose?
First though, you can learn more about what a not-for-profit organisation is here.
We have all heard of charities. However, defining a charity and determining what is a charitable purpose can be a little tricky and will depend on the context.
The concept of “charity” or “charitable” has an everyday meaning and a legal meaning. Even within the legal meaning, there are variances depending on whether we are talking about:
And these are only examples!
Whilst the legal meaning of charity has a long and interesting history, much of this is now codified in the Charities Act 2013 (Cth) (Charities Act). The Charities Act lists 12 different categories (sometimes called ‘heads’) of charity. These are:
There is a large amount of case law and explanatory material that helps unpack and understand what each of the above categories mean and include which we won’t go into now. We hope however this article has given you a flavour of what a not-for-profit is and what makes a not-for-profit a charity.
As we are sure you can appreciate, we have only really scratched the surface. For instance, we haven’t covered the charity registration process, what might disqualify an organisation from being a charity, what deductible gift recipient endorsement is and how to obtain it, when a non-charitable not-for-profit can self-assess as income tax exempt or when a charitable fundraising authority is required.
The world of not-for-profits and charities is fabulously diverse and complicated, which is why we love working exclusively to serve this sector.