We often have clients speak with us about setting up their own charitable organisation or tax effective charitable giving and ask us what’s involved. While setting up a charitable organisation sounds like a great thing to do, it’s important to seek advice to ensure you are able to achieve the outcome you desire without creating unnecessary headaches for yourself.
There are several options to consider:
Setting up an unincorporated association is easy; just say: “I’m an organisation”. An unincorporated association can donate any money it raises to any cause it likes and does not have to lodge any tax returns.
Incorporated not-for-profit association
Setting up an incorporated association including a legal personality with the ability to sign contracts or open bank accounts is a bit more difficult, but still very straight forward. Costs start to increase because you will need to purchase a shell company, customise your constitution and also file a tax return and pay ASIC fees for the entity each year. You also need to consider getting public liability insurance. There are some tax benefits available for not-for-profit organisations outlined on the ATO website.
Starting up a charitable organisation that’s recognised by the Australian Tax Office (ATO) as a charity with deductible gift recipient (DGR) status is not easy and can in fact take several years to work through the process. Only 5%-10% of Australian community groups are charities as it is quite an undertaking with a significant investment of time and money required to get and keep the accreditation. We have assisted groups go through the certification process so we can advise you on what is required.
A simpler option can be to distribute income to your preferred charity (with DGR status) either by salary sacrifice or via a family trust. These allow you to give this money to charity pre-tax which is a more efficient form of giving compared to donating post-tax and claiming a tax deduction on your next year’s income tax return. If you have a specific cause you want to support and you find the right charity to partner with, they can handle the collection of tax deductible donations on your behalf and then manage the distribution of the money to your desired cause. You can also choose to leave money or assets to charity as part of your estate plan. Some of our clients have elected to setup testamentary trusts to hold their assets in the event of their death and for a recurring income stream to then be passed to their beneficiaries including charities of their choice.
In summary, there are a number of options to consider. Many times it can be easier to align yourself with an existing charity than go through the process of setting up your own charitable organisation. If you would like to arrange a meeting to discuss which option is best for your situation, please contact us for an obligation free meeeting.