Starting an NFP

Getting your NFP up and running, tax concessions, deductible gift recipient endorsement and legal structures.

Last updated 12 November 2024

This page provides an overview of the process for getting your NFP up and running, about tax concessions, deductible gift recipient endorsement and legal structures. For more detailed information follow the links at the end of the page.

An NFP organisation is an organisation that is operating for its purpose and not for the profit or gain (either direct or indirect) of its individual members.

NFP organisations fall within two broad categories:

charities
other NFP organisations that are not charities, for example, most sporting and recreational clubs, community service organisations, professional and business associations and social organisations.

Charities must register with the Australian Charities and Not-for-profits Commission (ACNC) before they can be endorsed by us for tax concessions or apply for certain categories of deductible gift recipient (DGR) status.

Other NFP organisations that are not charities may be able to self-assess whether they are income tax exempt or taxable and whether they will have access to other tax concessions. They will need to be endorsed by us to obtain DGR status.

Purpose

A purpose is what your NFP has been set up to achieve or what your activities work toward.

To be a charity, all of your NFP's purposes must be charitable, except purposes that are ‘incidental or ancillary to' the charitable purposes.

Before you start an NFP organisation

Focus on what you want to achieve. Is setting up a new NFP organisation or charity the best way to achieve your goals? There may be an existing charity or NFP organisation that already does what you want to do or that may take on your idea as a project that it can support.

You should consider:

What will your organisation try to achieve?
What will its main activities be?
What programs or services will you provide?
Who is your target audience?
Who will benefit from the organisation's activities and programs?
Why is there a need for this new organisation?
How long will your NFP organisation or charity last? Will it be for a one-off short-term project or operating on an ongoing basis?

The role of legal structures

The legal structure you choose should meet your organisation's needs now and into the future.

Your organisation's legal structure will affect many things, such as:

its legal identity (whether it can be sued)
its governance structure (who makes what types of decisions)
who is liable for its debts and its specific responsibilities
what its reporting or other compliance obligations are.

Legal structures commonly used by NFP organisations include unincorporated associations, incorporated associations, companies, cooperatives, Indigenous corporations and trusts. Different legal structures have different reporting requirements and tax obligations.

Role of the ATO

When you start an NFP you may need to interact with us and other organisations. The role of the ATO for NFPs is to:

provide endorsement of NFPs as deductible gift recipients
provide endorsement for charity tax concessions
register your NFP for any applicable taxes eg PAYG, GST and FBT
provide advice and guidance over the phone or in writing
ensure compliance with tax obligations and concessions
consult with the sector through the Not-for-profit Stewardship Group.

About tax concessions

Depending on the type of NFP organisation, different tax concessions are available and the process for accessing each concession varies.

Charities:

must be endorsed by us to access charity tax concessions.

Other NFP organisations:

can generally self-assess – that is, work out for themselves – whether they are entitled to tax concessions.

The tax concessions NFPs may be entitled to access include:

income tax exemption
fringe benefits tax (FBT) exemption or rebate
goods and services tax (GST) concessions
deductible gift recipient (DGR) endorsement
refund of franking credits.

To access various concessions and comply with your organisation's tax obligations, your organisation may need to register for an Australian business number (ABN), GST, FBT, pay as you go (PAYG) withholding, fuel tax credits or other taxes.

In addition to tax registrations, your organisation may need other licences, permits or registrations to operate.

We recommend you review your organisation’s entitlement to tax concessions on an annual basis and whenever there is a change in your structure or operations. We provide worksheets to help you review your organisation’s entitlement.

About deductible gift recipients (DGR)

When you receive donations to support your organisation, your supporters can claim a tax deduction if you have been endorsed by us as a deductible gift recipient (DGR).

All organisations, including charities, must be endorsed by us as a DGR if they want their donors to be able to claim a tax deduction.

Registration process

To register your NFP organisation follow these steps:

Determine or understand your legal structure.
Determine if you’re an NFP.
Register your organisation with the Australian Government to obtain an ABN. At the same time, you can also register for GST, FBT, PAYG withholding if your organisation requires it.
Determine if you need a director identification numberExternal Link (director ID).

See also

Accessing online services with Digital ID and RAM

Endorsement process in brief

Endorsement is the approval process charities must follow if they want to access tax concessions. Also, specific types of charities and other NFP organisations, and some funds, authorities and institutions operated by NFP organisations, may be endorsed as deductible gift recipients (DGRs).

Charities

If you have charitable purposes you must apply to register as a charity with the Australian Charities and Not-for-profit Commission (ACNC) to access charity tax concessions.
Apply for endorsement for charity tax concessions and/or apply to us to be endorsed as a DGR. You can apply for charity tax concessions and DGR status when you apply for charity registration with the ACNC, they will forward the application to us.
If you are not eligible to be registered as a charity with the ACNC you may still be eligible for some tax concessions, including income tax and FBT concessions, through self-assessment.
If you are unhappy with our response (for example, if we refuse your DGR endorsement or endorsement as a tax concession charity) you can object.
You should continue to review your income tax status and entitlements regularly and notify us if anything changes.

Other NFPs that are not charities

Determine if you are entitled to self-assess your eligibility for tax concessions, including income tax and FBT concessions. Not all NFP organisations are eligible for tax concessions.
Determine if you can apply to be endorsed as a DGR. There are a limited number of categories for non-charitable DGR's.
You should continue to review your income tax status and entitlements regularly and notify us if anything changes.

Next steps