Is your organisation not-for-profit?

A not-for-profit (NFP) organisation does not operate for the profit or gain of its individual members, whether these gains would have been direct or indirect. This applies both while the organisation is operating and when it winds up.

A NFP organisation is not an organisation that hasn’t made a profit. An NFP organisation can still make a profit, but this profit must be used to carry out its purposes and must not be distributed to owners, members or other private people.

The Australian Taxation Office accept an organisation as NFP where its constituent or governing documents prevent it from distributing profits or assets for the benefit of particular people – both while it is operating and when it winds up. These documents should contain clauses that are acceptable to the Australian Taxation Office as showing the organisation’s NFP character.

The tax law does not prescribe the words that an NFP organisation must have in its constituent documents. Example clauses are available on the ATO and ACNC websites. The organisation’s actions must be consistent with this requirement. Below are examples provided by the ATO.

Non-profit clause
‘The assets and income of the organisation shall be applied solely in furtherance of its above-mentioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.’

Dissolution clause
‘In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.’

Examples of NFP organisations
NFP organisations (including charities) operate in many areas of society. They can include:

  • church schools
  • churches
  • community child care centres
  • cultural societies
  • environmental protection societies
  • neighbourhood associations
  • public museums and libraries
  • scholarship funds
  • scientific societies
  • scouts
  • sports clubs
  • surf lifesaving clubs
  • traditional service clubs.

Checklist – is your organisation an NFP organisation?
Consider the following questions, together with the other information available when working out whether your organisation is an NFP organisation.

  • Is your organisation not operating for the profit or gain of its individual members, either directly or indirectly?
  • Do your organisation’s constituent documents prohibit it from making any distribution – whether money, property or otherwise – to its members during the course of its operations?
  • Do your organisation’s constituent documents prohibit it from making any distribution – whether money, property or otherwise – to its members on dissolution?
  • Are your organisation’s activities consistent with its constituent document’s clauses?
  • Does your organisation have sufficient controls (processes) in place to ensure that members and other private persons do not receive the property or assets of the organisation? Property or assets can be bona fide (legitimate) reimbursement for services they have provided to the organisation, or as reasonable compensation for expenses incurred on behalf of the organisation.
  • Are any profits made by your organisation used to carry out its purposes?

A not-for-profit organisation does not operate for the profit or gain (either direct or indirect) of its individual members. This applies both while the organisation is operating and when it winds up.


About ACNC

Role of the ACNC and corporate information
Discover more site information, including our glossary of terms, useful links and list of regulators. You can also read our privacy and other site policies. Find out more at:…

Role of the ACNC Find out more

  • the role of the ACNC as the Commonwealth charity regulator
  • the ACNC’s corporate information, including our vision and mission, Advisory Board, leaders and organisational structure
  • ACNC data
  • the sector research network
  • ACNC research publications
  • the background to the not-for-profit sector, and
  • research resources.

ACNC legislation
Read about the legislation that establishes the ACNC and sets out transitional arrangements, and the Charities Act 2013 (Cth), which provides a statutory definition of charity.


Red tape reduction
Part of the ACNC’s statutory object is to promote the reduction of unnecessary regulatory obligations on the Australian not-for-profit sector . It is developing a reporting framework, have created a Charity Passport to facilitate the ‘report once, use often’ framework for charities and government agencies, and are working to harmonise reporting and other requirements between the ACNC and other regulators.


Regulatory approach and decision-making
The ACNC has developed its approach to charity regulation, in consultation with the sector, which details how it will exercise its regulatory powers. As part of a compliance role, and in investigating concerns raised about charities, it look at risks for charities. It aims to support charities through advice and education, using regulatory powers where necessary.
ACNC decisions are open to review and appeal, under the ACNC Act and administrative law, and information-handling and freedom of information (FOI) requirements apply to the ACNC

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Thompsons Australia Newsletters and articles are distributed by professional tax practitioners to provide information of general interest to our clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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