Selecting an appropriate legal structure is an important decision when forming a charity. The structure frames governance, member rights (where applicable), regulatory oversight, reporting and how the organisation can scale. For existing organisations, a change of structure can unlock growth or simplify compliance. It also involves legal, regulatory and operational steps which should be mapped carefully. We provide a high-level overview of the main not‑for‑profit structures in Australia, key decision points when choosing between them, and practical considerations if you are contemplating a restructure involving a change in legal entity type or adding another legal entity to your existing corporate group.
The core building blocks
Most formal not‑for‑profit structures create a separate legal entity capable of holding assets, entering contracts, suing and being sued, and offering continuity beyond changes in membership. Incorporated associations, cooperatives, companies (public companies limited by guarantee and proprietary companies limited by shares) and corporations under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) all provide this separate legal status. By contrast, unincorporated associations do not, thus exposing members to greater risk and limiting the entity’s ability to contract and hold property in its own name.
Charities can also be established using trusts. A trust is not itself a separate legal entity, rather, a trustee holds and administers trust property for charitable purposes under a trust deed. Trusts are frequently used for philanthropic giving vehicles, such as public and private ancillary funds.
A threshold question is geographic footprint. Incorporated associations and cooperatives are created under State and Territory laws and are generally best suited to organisations operating in a single jurisdiction. By contrast, companies incorporated under the Corporations Act 2001 (Cth) (Corporations Act) and corporations under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) can operate across Australia from the outset.
Further governance considerations arise which are unique across structures. For example, companies limited by guarantee must have at least three directors and at least one member. Proprietary companies may operate with a sole director and shareholder. Incorporated associations typically require a management committee and a public officer or secretary, with membership and meeting requirements varying by jurisdiction. Organisations registered under the CATSI Act have minimum member and director requirements calibrated to Indigenous control and participation, including thresholds for Aboriginal and Torres Strait Islander membership and director composition.
The main options – and where each fits best
Public company limited by guarantee: This organisational structure is commonly used by charities and not-for-profits. It has no share capital, cannot pay dividends, limits member liability to a nominal guarantee (only on winding up if the company cannot meet its debts). It is incorporated under the Corporations Act and primarily regulated by the Australian Securities and Investments Commission (ASIC). Where the entity is also a registered charity, the Australian Charities and Not‑for‑profits Commission (ACNC) becomes the primary regulator. For entities that are not ACNC registered charities, ASIC is the primary regulator. This structure is commonly used and popular entity type for charities and not-for-profits. It supports national operations, scalable governance, clear stakeholder confidence and compatibility with most charity and deductible gift recipient (DGR) endorsement pathways (subject to meeting the relevant criteria).
Proprietary company limited by shares: While less common as a not‑for‑profit vehicle, a proprietary limited company can be used in certain scenarios such as group structures, social enterprise subsidiaries, where future divestments are planned or by way of acquisition. A proprietary limited company may have a single director and a capped number of members. Member liability is limited to any unpaid amount on their shares. Care is needed to ensure the constitution and any shareholders’ agreement align with not‑for‑profit and ACNC requirements, including prohibitions on distributions to members and strict provisions regarding valuation of shares.
Incorporated association: Incorporated associations are created and administered under State or Territory legislation and are often well‑suited to local, community‑based organisations. They provide separate legal personality and limited liability for members, with model rules available in many jurisdictions. However, cross‑border operations introduce complexity and, if interstate activity is contemplated, a company limited by guarantee may offer a cleaner platform. Reporting obligations vary by jurisdiction and may overlap with ACNC reporting for registered charities.
Organisations registered under the CATSI Act: For Aboriginal and Torres Strait Islander organisations, a corporation under the CATSI Act is regulated by the Office of the Registrar of Indigenous Corporations (ORIC). These organisations can operate nationally and carry governance features tailored to Indigenous participation and control. While the CATSI Act does not itself prohibit distributions to members, tax and charity law requirements typically require constitutional restrictions to maintain access to relevant tax concessions. If registered as a charity, CATSI corporations continue to report to ORIC, which shares those reports with the ACNC.
Unincorporated association: This is simple to establish and is common for small or informal groups, as well as being a common part of broader structures for many religious organisations. It does not create a separate legal entity, which limits its ability to contract or hold assets and may expose members to liability. While unincorporated associations can register as a charity, most organisations with material operations or risk profile will prefer an incorporated form.
Co‑operatives: These can be suitable where the co‑operative principles (such as democratic member control and member use of services) are inherent to the mission and model. They are regulated at State or Territory level, with increasing standardisation under a national law framework in some jurisdictions. Their ‘one member, one vote’ principle makes them less suited to organisations seeking differentiated membership classes. The same cross-border issues faced by incorporated associations also arise in the context of co-operatives.
Charitable trusts and ancillary funds: Trusts are a cornerstone for philanthropic structures and were historically commonly used by charities. Public ancillary funds and private ancillary funds are established by trust deed and must comply with detailed guidelines to maintain their eligibility for DGR endorsement. These vehicles are typically used to hold and grant philanthropic capital rather than to deliver operating programs, and they require careful deed compliance and ring‑fencing of funds. Ancillary funds are established as vehicles to drive charitable giving, acting as a conduit between the public and other charitable organisations, and are endorsed as DGRs. For more information on their use, purpose and the differentiation between public and private ancillary funds, you can read our article.
Regulation and reporting
Companies (both companies limited by guarantee and proprietary companies) report to ASIC unless registered with the ACNC, in which case ACNC reporting generally displaces the annual ASIC lodgement obligations for most (but not all) matters. Incorporated associations and cooperatives report to State or Territory regulators, with some jurisdictions recognising ACNC reporting for registered charities and others requiring dual filings. Organisations registered under the CATSI Act report to ORIC annually and, if registered as charities, continue to report to ORIC, which shares reports with the ACNC.
Across all registered charities, ACNC reporting obligations and financial reporting tiers depend on the charity’s size. Charitable trusts, including ancillary funds, are typically established and governed by a trust deed. Ancillary funds must also comply with the relevant Public or Private Ancillary Fund Guidelines.
All registered charities should expect ongoing compliance with ACNC Governance Standards if registered as a charity. Across structures, appropriate record‑keeping is essential, including member registers, governance documents and financial records sufficient to prepare true and fair financial statements at the level required by the relevant regulator.
Changing structures – when and how
The case for change typically emerges where the organisation’s footprint expands beyond a single jurisdiction or governance needs outgrow the current form. Common transitions include moving from an incorporated association to a company limited by guarantee to support national operations (explored in more detail in our article ‘Metamorphosis: From incorporated association to company limited by guarantee’), or introducing a trust‑based philanthropic vehicle (such as a public or private ancillary fund) alongside an operating entity.
While some such transitions are supported by legislative mechanisms (such as the change from an incorporated association to a company structure), others will require the establishment of a new entity, asset transfers and winding up of the current structure. As a first step, it is essential to understand what mechanisms are available. At a minimum, restructures often require a planned sequence addressing member approvals, regulator consents, updates to governing documents and preservation of tax endorsements and charity registration. Where a new entity must be established, other factors for consideration will include structure choice, transfer of assets and liabilities, employment and contract novations, duty and other tax liabilities (and any exemptions) and winding up requirements.
Making the decision
There is no right or best structure for all situations. What is best in one circumstance turns on a handful of practical questions: where you operate today and where you plan to operate tomorrow, the governance model you need, how you intend to raise and deploy funds and the regulatory relationship which best fits your scale and risk profile. With these questions answered, the trade‑offs between incorporated associations, companies limited by guarantee, proprietary limited companies, corporations registered under the CATSI Act, co‑operatives and trust‑based philanthropic vehicles come into clearer focus. Getting the structure right, and knowing when to change it, sets the organisation up for compliant, growth, robust governance and enduring public benefit.
How can we help?
If you would like support in determining which structuring option best suits your organisation’s needs as part of establishing a new charity and refreshing your existing governance and structure, please get in touch with our specialist Charities + Social Sector Lawyers.