Times like these are ripe for starting up a charity.

This is thebrighter side of a financial crisis where redundancy and not-so-voluntaryretirement are becoming commonplace and demands for charitable services areincreasing.

Establishing a charity can be quite straightforward as long as thedominant purpose of the charity is for the benefit of the community and ischaritable in nature.  Education,health, science, religion, environment, social and community welfare are someexamples of well-accepted charitable purposes.

Eligibility

How does an organisation qualify for formal recognition as a charity? Inaddition to showing a dominant charitable purpose, the other eligibilitycriteria include:

·       being an appropriately formed institution,fund, foundation, trust or association. The organisation’s rules can be ofvital importance.

·       being non-profit. If the charity ispermitted to pay or make available any portion of its property or fundraising forthe benefit of any trustee or member, it will not qualify.

·       obtaining an ABN.

·       fulfilling the criteria forobtaining Tax Concession, Income Tax Exempt or Deductible Gift Recipient statusfrom the Australian Taxation Office (ATO).

Benefits 

Obtaining Deductible Gift Recipient status is one of the most popularbenefits. This essentially means that a donation to the charity will entitlethe donor to an equivalent tax deduction. Clearly, this is a significantinducement for fundraising.  Once acharitable  organisation has IncomeTax Exempt status, it will be relieved of liability for tax or GST on theincome it raises and generates.

Additionally, reduced start-up fees are charged for companiesestablished for a charitable purpose. Charities can also take advantage ofexceptions to the company naming provisions under corporate laws.

Ultimately, it is up to the law to decide whether a charity is eligiblefor the benefits. Assessing what structure best suits the organisation’sobjectives, choosing trustees or directors, settling rules of engagement, fundraisingand other legal formalities all need to be addressed within the overarchingregulatory framework.  Reconcilingthe initial noble motivation for forming the charity with the laws that governcharities can often be a challenge.