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Note: This document forms part of our publication Tax basics for non-profit organisations. To view the full publication, click here.
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Non-profit organisations 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, and
- traditional service clubs.
A non-profit organisation is one which is not operating 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.
Any profit made by the organisation goes back into the operation of the organisation to carry out its purposes and is not distributed to any of its members.
The Tax Office accepts an organisation as non-profit 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 acceptable clauses showing the organisation’s non-profit character. The organisation’s actions must be consistent with this requirement.
Acceptable clauses to indicate non-profit character are:
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.’
A non-profit 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.
Example
A society makes a $40,000 profit for the year. It uses the profit to reduce its debts and provide for its activities in the following year.
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Last Modified: Tuesday, 5 June 2007
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