Legal Information for NSW community organisations

Getting Started

If you (and your group) have decided to start up a new not-for-profit organisation, one of the key factors that will determine the success and longevity of your organisation is thinking about the legal issues right from the start. And the legal issues faced by the not-for-profit sector are unique!

For example, when forming your community organisation you can decide what sort of legal structure it will have (whether 'incorporated' or not), and draft a set of rules (or 'constitution') to govern the operation of your organisation. These have a crucial impact on some future legal issues for your organisation (for example, whether your organisation can operate outside of Victoria or whether it will be eligible for tax concessions).

Getting these issues right at the start will save considerable time, money, administrative headaches and possible legal difficulties for your organisation down the track.

Issues to consider include:

• will our organisation be 'not-for-profit'? See our fact sheet on the meaning of 'not-for-profit' below
• do we need to start a new organisation, or can we work with an existing organisation? See our page on Working with other organisations 
• should our group incorporate?
• if we incorporate, which legal structure will best suit our needs now and going forwards?
• once we have decided on a structure, what are the steps to incorporate our group?
• what insurance should our group get?
• will our groups be eligible for tax concessions?, and

• how should we manage our finances and will we need to report on those finances?

Fundraising Trusts and Grant Making Foundations

If you are interested in setting up a fundraising trust entity or grant making foundation, our fact sheet below may assist you in considering whether this is the right approach for you, and includes links to further resources. It is important to understand a trust or a foundation is not the same as a not-for-profit organisation.

Resources

Running the Organisation

This section is designed to assist community organisations to comply with the legal and regulatory requirements for running not-for-profit community organisations. When running your organisation, there are both internal and external considerations.

Click on links below for more information and resources on these topics.

Internal issues

Internal issues that your group should consider, including:

• Who runs the organisation?
• Duties of committee members and office holders
• Meetings
• Documents and record keeping, and

• Reporting.

External issues

We also have information about the following extra issues that may arise when running an organisation:

• protecting your name, ideas and material
• technology and social media, and

• land, building and equipment.

Risks and risk management

When running an organisation you should also be thinking about risks and risk management, including:

• occupational health and safety, and

• insurance & risk management.

Resources

The People Involved

Not-for-profit community organisations often involve a unique combination of people. These could include volunteers, employees, members, directors or committee of management members, executive or management team members, independent contractors or consultants or clients.

Many of the legal issues that community organisations face relate to the various legal rights, roles, responsibilities, safety and liability of these different groups of people

Providing Services

When your community organisation provides services there are a number of legal issues to consider, including:

• privacy
• discrimination, sexual harassment and human rights
• negligence
• the Australian consumer law
• freedom of information, and
• responsibilities under government contracts and agreements.

Click on the links above for more information on these topics.

Organising events and fundraising

Events

Most community organisation organise events of some kind. Your organisation may hold an event to raise money for its activities or a particular cause, or just to promote the great work it does. Or it may be that your organisation organises a conference, operates a stall in a local market, holds an annual dinner and awards night, or organise a weekend away for members. Some community organisations may be set up solely for the purposes of holding an annual event, like a music festival.

Regardless of the size or purpose of the event there are a range of legal issues that community organisations should consider before the event like:

• whether your organisation needs to obtain licences, for example fundraising licences, lottery or gaming licences, council licences for use of an area or park
• risks to manage, and whether your groups should consider getting insurance
• how to handle the funds that come in to your organisation - should you set up a separate account (you may need to do this if fundraising)?
• complying with laws when advertising and promoting your event, and
• safe service of alcohol and food.

Relevant fact sheets are listed below.

Fundraising

You may also be running a fundraising drive.  Fundraising activities generally require an organistion to be registered, and report to the Office of Fair Trading.  The PilchConnect Guide to Fundraising has comprehensive information about the processes involved (below).

Some kinds of fundraising such as running lotteries or raffles require additions permits.

Resources

Tax

Not-for-profit community organisations are required to comply with both Commonwealth and state tax laws.

In general, your community organisation may need to pay tax on things like the income it receives, and GST on goods and services supplied, or stamp duty on a purchased property.

Some not-for-profit community organisations are entitled to exemptions, concessions or rebates in relation to certain taxes. An 'exemption' is where the organisation does not have to pay the tax at all, a 'concession' is where the organisation pays a reduced rate of tax, and a 'rebate' is where an organisation can claim back some tax paid.

Some relevant taxes to consider include:

• income tax
• goods and services tax (GST)
• fringe benefits tax (FBT)
• state taxes

There are other tax benefits that not-for-profit community organisations may be eligible for. For example, organisations that apply for and are endorsed as deductible gift recipients (DGR) are entitled to receive tax deductible gifts and contributions. See:

• deductible gift recipients (DGR)

It is best to get your organisation's tax issues right at the beginning. This is because you may need to include special wording in your organisation's constitution (or rules) to be eligible to apply for tax concessions or endorsements. Also, the way you set up an organisation (ie. defining who are members) may also have an impact on tax liability, as there are laws that allow membership income to be treated as tax exempt in certain circumstances.

You may need to seek specialist legal or accountancy advice on tax issues when establishing your organisation. For general information on setting up a community organisation, go to the Getting Started section above.

Reporting

Your organsation will need to consider reporting requirements that it has. Regulators of incorporated organsiation require annual reporting (there are different requirements for different structures, and requirements depend on the size of your organisation).

Companies Limited by Guarantee will report to the ACNC going forward (instead of ASIC). For more information go to the ACNC website.

NSW incorporated associations report to the Department of Fair Trading. For more information go to the Fair Trading website.

 Other types of reporting your organisation may need to undertake include:

• reporting on fundraising, and
• reporting on tax.

Resources

Advertising and raising money

Advertising

There are special laws and codes in Australia that apply to all advertising, including advertising by not-for-profits and community organisations.

The laws of advertising apply to traditional advertising like TV commercials and newspaper advertisements, but also extend to signage, social media and even conversations.

Getting advertising wrong can lead to a breach of the law, and can damage the reputation of your organisation.

The PilchConnect fact sheet on Advertising in Australia provides an overview of the different laws that apply, and practical tips to help your organisation comply.

Regulated activities

Most community organisations need to raise money for their activities. Many activities that groups can undertake to raise money are regulated, and groups may need permits or licences to undertake these activities.

Key activies covered in this section include:

• fundraising activities - which includes requesting donations for yourself or someone else's benefit, selling merchandise where some or all of profits will go towards a cause or organisation, or holding events to raise money. There are special laws that apply to all fundrasising activities
• trade promotions - which are competitions where there is no (or minimal cost) to enter, or entry is granted when a person purchases a product or ticket to an event and a prize is offered. Trade promotion prizes can be awarded on chance alone, or include an element of skill such as 'in 25 words or less...'. These promotions can be 'complete a survey and win', door prizes, and other promotional competitions. There are special laws that apply to all trade promotions
• raffles and minor gaming activities (including bingo, gaming nights, lotteries, lucky envelopes, sweepstakes) - where indivuduals purchase a ticket or pay money to enter a game or competition. There are special laws that apply to these activities
• grants and funding - where you organisation approaches grant-giving organisaitons for program funding, and
• gifts, wills, bequests and endowments - where individuals or organisatiosn provide gifts when to your organisation, or where individual through their will leave a bequest or endowment to your organisation.

Resources

If things go wrong

If things go wrong in your community organisation, it is a good idea to get help - don't wait or hope the problem will go away. Many problems can be resolved if dealt with effectively at an early stage. Find out more, ask questions, get financial or legal or other advice.

Resources

When things change

Over time, things will change for your community organisation. It may be that your small, locally focussed community organisation finds that before long it has an opportunity to operate interstate. This may require a change in legal structure.

Your organisation's fundraising and other activities may grow to a point where it decides to apply for Deductible Gift Recipient taxation status, and needs to amend its constitution to reflect its current activities.

Or your organisation may have found that there is no longer a need for it to continue to exist, or that it could better fulfil its objects if it joined forces with another not-for-profit organisation.

Some of the legal issues that NSW community organisations should think about when things change (or preferable before things change!) can include:

• changing your organisation's constitution or rules
• changing your organisation's legal structure (for incorporated associations)
• working with other organisations (including auspicing agreements, joint ventures agreements, and memoranda of understanding)
• changing your organisation's legal structure
• amalgamating with another organisation (or many), and

• ending an organisation (either voluntarily or compulsorily).

Resources

More help?

If you haven't found the answer to your legal issue on this page, go to our More Help page to find out other ways of seeking assistance.

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