There are over 60,000 charities registered by the government’s Australian Charities and Not-for-profits Commission (ACNC) - a confusing name given it only regulates the charitable institutions that it registers - and an estimated 600,000 not-for-profit organisations.

Contrary to public perception, the number of registered charities has remained relatively stable for the last decade with revoked charities often exceeding newly registered charities.  Nearly a third of registered charities have an income of less than $50,000 and nearly half are volunteer-run and have no paid employees.

For those thinking we have too many charities, we have one charity per 439 people in Australia, compared to 447 for Canada, 395 for the UK, 257 for the USA, and 183 for New Zealand.  My view is that the number of charities is healthy and represents both the unmet need and the compassionate society that we are fortunate to live in. 

The issue is not too many charities, but the competition and the lack of cooperation and collaboration between them, which creates duplication, gaps and fragmentation of services, as well as reinventing the wheel, leading to sub-optimal outcomes and one reason why or social issues are not improving. ‍

Although declining, religious charities remain the largest type at one in five, followed by social welfare and education.  Environmental charities have increased over the years, but still only account for one in thirty. ‍

The latest report from the ACNC shows assets of charities total $489 billion and total revenue of $222 billion, comprising $14 billion, or 6 per cent, in donations; a third in goods and services; and half in government funding.  The top 0.05 per cent of charities receive 20 per cent of all the donations.

As well as harnessing 3.7 million volunteers, charities employed 1.54 million people, or over one in ten of all Australians.

Whilst on average only a small proportion of total income for the sector comes from donations, the smaller the charity, the more reliance on donations (for instance, 39 per cent for small and very small charities) and less use of government funding (only 12 per cent for small and very small charities)[i].

As legal entities, charities are either charitable trusts, incorporated associations under State/Territory legislation, or companies limited by guarantee (instead of shares) under the Corporations Act.  To be a registered charity, the constitution needs to include: the charitable purpose; that it is established to operate on a not-for-profit basis (that is, any profits must be directed back into achieving the purpose of the charity, and the company cannot operate for the profit, personal gain or other benefit of certain people, such as its members, directors, employees or their friends or relatives); and prevent any of the company’s surplus assets to be distributed to any current or former members of the company if the company is wound up.

Charities can apply for one or more tax concessions from the Australian Tax Office (ATO). All should be endorsed as a Tax Concession Charity(TCC) so they are exempt from income tax on any profit.  Then, being endorsed by the ATO as a Deductible Gift Recipient (DGR) entitles charities to receive gifts which are deductible from the donor's income tax. 

There are 52 DGR endorsement categories, each with specific criteria, grouped as: health; education; research; welfare and rights; defence; environment; the family; international affairs; sports and recreation; cultural organisations; fire and emergency services; and ancillary funds.

Additionally, charities can gain the status of a Public Benevolent Institution (PBI) entitling employees to be exempt from Fringe Benefits Tax (FBT) up to $30,000 a year – a cap that has not changed since I asked Treasurer Peter Costello in 2000 what the amount represented whilst on the Charities Consultative Committee that worked with the government and ATO to implement the GST (he answered the value of a car and a bit more) – and so can package otherwise FBT-able expenses and not pay income tax or FBT on about $16,000 of their pay.  This was designed to bridge the gap between what charities can pay compared to the government and the private sector, but the ATO was not happy with the tax loss and the amount has not been indexed since.

The definition of ‘benevolent’ goes back to a 1931 legal case, Perpetual Trustee Co Ltd v Federal Commissioner of Taxation, where the High Court stated that a benevolent organisation is required to be ‘organised, conducted or promoted for the relief of poverty, sickness, destitution, helplessness, suffering, misfortune, disability, or distress’. Further advice from the ACNC Commissioner states that ‘activities must be directed towards relieving the needs of its beneficiaries’.

The more abstract and indirect the connection between an organisation’s activities and the relief of its beneficiaries, the less likely it will be regarded as a PBI, as was found in 2024 in Equity Australia’s case, where ‘sufficient connection’ was found between their advocacy for law reform and social change and the relief of the distress of LGBTQI+ people[ii].

This unhelpful and archaic definition bars charities that work in early intervention and prevention, and to change societal views, policies and systems, as well as animal welfare and environmental charities, from becoming PBIs.

Following their 2024 inquiry into philanthropy in Australia, the Deputy Chair of the Productivity Commission noted that ‘the system that determines which charities can receive tax-deductible donations has grown in an ad hoc way over decades and has no coherent policy rationale. The complexity and inconsistency of the system sees many charities that create clear community benefits miss out’[iii].

The report proposed an overhaul of the DGR system that would make it simpler, fairer. It focused on activities that are likely to generate the greatest net benefits for the community. The Productivity Commission estimated that the recommended changes would increase the number of charities that can receive tax deductible donations from about 25,000 charities to around 30,000 to 40,000 charities[iv].

Charities may also be registered as a Health Promotion Charity if their principal activity is to ‘promote the prevention or control of disease in human beings’ and be entitled to apply for DGR status.

Registered charities are entitled to show the symbol below and, unless classified as small with annual revenue under $500,000, must submit an Annual Information Statement and annual financial reports.  You can view these - and ABN, contact details, size, profile, status, responsible persons and governing documents - on the ACNC website (www.acnc.gov.au), with a link to the Australian Business Register to show the charity’s tax status.

Whilst it is tempting (and easier) to rely on the information posted on the ACNC, or use a broker service which does so, this data does not enable an adequate assessment of the effectiveness of the charity in achieving its purpose or the impact of its work. 
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[i] Australian Charities and Not-for-profits Commission (2023) Australian Charities Report 11th edition at https://www.acnc.gov.au/tools/reports/australian-charities-report-11th-edition

[ii]https://www.acnc.gov.au/tools/guidance/decision-impact-statements/acnc-decision-impact-statement-equality-australia-ltd

[iii]https://www.pc.gov.au/inquiries/completed/philanthropy/report#media-release

[iv] Commonwealth of Australia (2024) Future foundations for giving Inquiry report, Report no. 104, Productivity Commission, Canberra at https://www.pc.gov.au/inquiries/completed/philanthropy/report/philanthropy.pdf

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Charities begin as a small group of people recognising that the needs of a specific cohort, community or ecology are not being met, and they believe these needs can and should be addressed.  This belief in the right to human dignity in the form of safety, education, health, justice, shelter, food and livelihood is the basis for a ‘rights-based approach’ employed by most charities as the basis of their work.

However, in their quest to be more like businesses and compete with private providers, many charities now have a corporate-inspired vision and mission. The result can be ethereal and bland statements that could apply to any organisation.  Charities are not businesses. As Good to Great author, Jim Collins, notes ‘we must reject the idea – well intentioned, but dead wrong – that the primary path to greatness in the social sectors is to become ‘more like a business’’[i]. 

So, is the founding belief and purpose clear?

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[i] Collins J (2006) Good to Great and the Social Sectors. A monograph to Accompany Good to Great, UK

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‍With over two-thirds of Australians saying they would give more to charity if they knew more about the results and impact that a charity has[i], next, can the charity clearly show its progress to achieve its purpose?

In amongst the inspiring stories and smiling recipients, pie charts and infographics, the annual reports of charities look impressive but rarely outline the outcomes or impact that demonstrate the longitudinal progress they are making towards achieving their purpose (or their purpose at all).

The most generally accepted methodology for connecting processes to purpose and to be able to articulate and measure each stage is a theory of change or program logic, which can be carried out on an organisational, program or project level.

[how to put in diagram]

In this model:

·      Inputs are the resources needed for the activities to occur, including people, money, assets, say the trainers, room hire, and course materials for a charity that educates children and young people who have dropped out of school

·       Activities are the specific interventions that will take place, for instance, the number of classes by subject

·       Outputs are the results of the activities, such as the number of participants trained

·       Outcomes can be divided into short, medium and long term. They represent the result of the outputs and their effect, such as the measured educational attainment or skills acquired, as well as, getting into work or tertiary education.  Then there is the evidence gathered to demonstrate to governments a change in education policy, system and resources that would prevent the cohort from dropping out of school or intervene earlier to get them back to school

·       Impact is the holy grail as the closest measure to fulfilling the charity’s purpose as the social or environmental change envisioned, such as the financial and wellbeing benefits of the trainees, their families and communities, together with a change in the mainstream education system to intervene in non-attendance early, for instance, a policy that places the responsibility of truancy with the school

This model needs to be developed from right to left, starting with the impact desired to further or achieve the charity’s belief and purpose, respectively.  In this example, the charity’s belief in the right to education for all can only be achieved in the long term by an inclusive, skilled and resourced government education system (impact).  The short-term ‘band-aid’ teaching intervention by the charity (outputs) must be accompanied by evidence of the longer-term economic and social benefits of the outcomes it achieves, alongside the government policy, service system and resource changes needed.

Two excellent free Starting Guides from UK’s National Philanthropy Centre - Theory of Change in Ten Steps[ii] and Understanding Impact[iii].
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[i] Charities Aid Foundation & Workplace Giving Australia (2025) Giving in Australia 2025, p.19

[ii]https://www.thinknpc.org/resource-hub/ten-steps/

[iii]https://www.thinknpc.org/resource-hub/understanding-impact/

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‍Given that the biggest impact any charity can make is improving government policies and service systems that address prevention and early intervention, as well as, adequate services and resources, the next step is for the charity to gather and harness the evidence of better outcomes to advocate for the change.

Whilst as a humane society we need to assist those in urgent need, charities will still be here in another 200 years unless we can change the government policy, systems, services and resources that underpin the issue, approach and service provision, which, as shown in the Themes, are clearly currently unable to prevent, reduce or address the increasing need. 

As government contractors, charities are reluctant to ‘bite the hand that feeds them’ and be seen as criticising the government in power’s policy, system and resourcing, even though this change would produce better outcomes for the people or planet they support.  A sector’s peak body can provide safety in numbers, but can be self-serving.

In order of increasing importance, the levels of change can be categorised as:

Individual - immediate

Most of our services occur at the ‘pointy end’ to respond to the immediate suffering of those in urgent need, whether it is a family getting grocery donations to be able to put food on the table, a homeless mother fleeing domestic violence needing emergency accommodation for the night, a child being abused taken into out of home care for their safety, a tradie with suicide ideation needing ongoing therapy, or a young person leaving incarceration and needing work.  Whilst these interventions can alleviate the immediate need, they do nothing to address its underlying causes and reduce the crisis.

Individual - transformative

Given that the current trajectory of the family and/or individual’s life has led to their crisis - whether it is offending, abuse of a child or suicide ideation – the challenge is to enable them to envisage and change their behaviour to a more positive life course.  This typically involves forming new relationships (including with a significant other in the person’s life), acquiring new skills and capacities (such as emotional regulation or qualifications), educational attainment to be able to enter the workforce, rehabilitation from alcohol and other drugs dependence, ongoing mental health treatment, or simply having hope and being able to see a new future.  However, the challenge is that charities, as service providers, are typically funded to provide one of these services and not necessarily coordinated with others.

Sector wide

Sector-wide change involves the government’s reform of a service system and policy change.  For instance, the pressure on the governments from the continued rise in deaths of women from intimate partners and rates of Family and Domestic Violence (FDV), voiced as a ‘national crisis’, meant governments acted to create a target - the National Plan to End Violence against Women and Children by 2032 to enable a coordinated governmental response and resourcing for prevention, early intervention, response, recovery and healing.

Another policy change was achieved by the Home Stretch coalition of charities, supported by philanthropy. Government policies required the child protection system to begin preparing a young person to leave care as early as 15 years, while most would leave their care placement during their 16th or 17th year. In comparison, children residing at home in the wider community with one or both parents are remaining at home longer, with 85 per cent of young people still in the family home.

The CREATE Foundation found that over a third were homeless in the first year of leaving care; nearly half of the boys were involved in the juvenile justice system; and almost a third were unemployed.  The international evidence showed that extending care by three more years to 21 would halve youth homeless rates, double education engagement, reduce the youth arrest rate by 40 per cent, and hospitalisation rates would decline by a third. For every dollar spent on extending care, government would save itself $2[i].  After seven years of relentless campaigning focusing on one single unwavering issue - to extend the leaving care age for young people in out-of-home care from 18 to 21 years in all Australian jurisdictions - as of 2024, this is now the policy of every State and Territory[ii].

In March 2024, a coalition of almost 100 homelessness services from across Australia launched the Home Time campaign to highlight the nearly 40,000 young people (15-24 years) who came to homelessness services alone in 2022-23. After seeing a homelessness service, 44 per cent of them were still homeless. The campaign calls for a new approach for government system change to develop and maintain a national pool of 15,000 dedicated youth tenancies; provide linked support services to enable young people to pursue their individual goals and transition to full independence; and address the rental gap to ensure viability for housing providers and landlords offering tenancies to young people who have been homeless.

In 2024, Nova FM’s radio host Michael ‘Wippa’ Wipfli and Rob Galluzzo founded the 36 Months campaign to raise the age Australians can access social media from 13 to 16 years, reflecting the mental health issues, cyberbullying, anxiety, depression, self-harm and suicide in Australian teenagers caused by social media, especially during the critical phase of psychological development - the 36 months between ages 13-16.  In only six months, the campaign gained bipartisan support and achieved a remarkable change in government policy.  On 29 November 2024, the Australian Parliament passed the Online Safety Amendment (Social Media Minimum Age) Bill 2024 with the social media ban for under 16s enacted on 10 December 2025.

Societal

This is where societal attitudes positively change over time, albeit slowly, and with periods of little change. In my lifetime, there has been progress with gender equality, the awareness and treatment of mental health and wellbeing, the exposure of FDV, the celebration of people with a disability through sport, and the widespread acceptance of the LGBTQI+ community, including marriage equality.  Government can play a role in changing attitudes through public education campaigns, such as the recent Consent Can't Wait, to encourage adults to positively influence the attitudes of young people around consent and healthy, respectful relationships to reduce the unacceptably high rates of sexual violence in our community.  Based on ‘you can’t be what you can’t see’, role models play an important catalyst in our society, whether from community, sporting, business or arts backgrounds. 

In summary, these aspects of change can be shown as:

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[need diagram]

Individual - immediate

Individual -transformative

Sector-wide

Societal

Assists an individual’s immediate needs

Changes an individual’s trajectory

Policy and system changes

Changes in attitudes and culture

Examples:

·    Soup kitchen

·    Foodbank

·    Emergency accommodation

·    Legal aid

·    Mental health treatment

Examples:

·    Education, training eg in a youth foyer or social enterprise

·    Employment

·    Transitional, social or affordable housing

Examples:

·    Ending FDV by 2032

·    Payment by outcomes for social enterprises

Examples:

·    Role models

·    Government education campaigns

·    Community campaigns

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[i] McDonald P (2024) How we achieved “the most significant Australian child welfare reform in a generation”,Australian Journal of Social Issues. 1 August 2024DOI: 10.1002/ajs4.361at https://thehomestretch.org.au/news/how-we-achieved-the-most-significant-australianchild-welfare-reform-in-a-generation/

[ii]https://thehomestretch.org.au/

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‍To achieve change, charities need to be the catalysts through the evidence-based demonstration of the effectiveness of their current or new practices, together with the government policy and service system changes required.

Too often, projects and programs are designed on office whiteboards without a clear understanding of the problem's complexity, the challenges involved, or the engagement and consultation required with the cohort or community, as well as the interests of the funder.  Rarely do the funder’s timeframes allow for proper research, development and co-design, let alone implementation.  Furthermore, this approach ignores the inherent capabilities of the recipient community, including their knowledge, networks, resources and skills. 

The principle ‘nothing about us, without us’ stems from the premise that policies, procedures, rules, projects, programs, and services should never be created for any population without explicit input from the very population that is impacted.  Recipients should be seen and valued as co-producers and citizens, rather than being viewed only as clients, consumers or customers.  If so, the intervention produced is more lasting and effective when the beneficiaries care about and support what they create.

The engagement and input from the users of the program or service are crucial to assess and improve its efficacy.  To do so, charities should maintain service user groups to provide this feedback. This involvement can go beyond consultation to being active in decision making and governance, including representation on the board.

For instance, Vision Australia has a Client Reference Group to gain advice and feedback on specific matters relating to the experience of our clients and direction of the organisation that regularly meets with the Board[i].  At the youth drug and alcohol agency, YSAS, we followed Hart’s Ladder of Participation, which escalates from ‘young people are consulted and informed’ to ‘adult-initiated shared decisions with young people’ to ‘young people lead and initiate action’ to ‘youth-initiated, shared decisions with adults’[ii].

An evidence-informed approach to practice requires the integration of this ongoing input, as well as the evaluation of programs and services, research into good practice in the sector and practitioner development and expertise.  Otherwise, how does the charity, supporters and community know ‘what works’ for the people they serve? How can they show that their programs and services are effective in responding to the needs and achieve lasting impact?  How can value for money be determined?
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[i]https://visionaustralia.org/about-us/governance/client-reference-group

[ii] For instance, see https://ymhac.rnao.ca/sites/default/files/2016-10/Harts%20Laddar.pdf

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In order to deliver their services, maintain confidence of their stakeholders, maintain their supporter base and preserve their social licence to operate, charities need to demonstrate accountability.

Registered charities must comply with the ACNC Governance Standards which require the charity to remain charitable, operate lawfully, and be run in an accountable and responsible way, although the ACNC does not require any evidence or reporting to demonstrate compliance[i].  Charities that are companies limited by guarantee are required to comply with the Corporations Act 2001. 

Accountability and transparency to donors are critical. As the commitment the charity makes in its fundraising appeals, the ‘donor promise’ tells the prospective donor what their support will fund to further its work, purpose and outcomes.  This can be in the form of specific donation amounts to purchase items

For financial accountability, the ACNC requires all registered charities, except those classified as ‘small’ with annual revenue under $500,000, to publish annual audited accrual-based financial statements.  The requirement is optional for small charities, who may submit unaudited cash or accrual-based financial statements.  The perception that the higher the administration or overheads cost, the lower the money spent directly on services and so less ‘good’ the charity is doing for my contribution, ignores the outcomes the charity is achieving, is not comparable due to the different accounting bases for costs and revenue[ii].  The reality is that all organisations, be they for-profit or not-for-profit, need to spend on office rent, human resources, training, accountants, information technology and administration to manage their compliance with laws and regulations, governance requirements, information technology systems, cyber security, risk management, staff and financial management.  After all, you want your charity to be well-managed, financially accountable, cyber-safe, and legally compliant. As the ACNC notes ‘assessing and comparing charity administration costs is difficult and it can be misleading’[iii].

The same is true for the ratio of fundraising costs to income, although with less variables. All fundraising has a cost. The ACNC advises that ‘because charities are so varied, there is not a one-size-fits-all standard ratio or percentage to measure what might be deemed as ‘reasonable’ spending on administration’.  A 2013 study found a fundraising cost ratio of 10-65 per cent with events incurring the highest ratio and bequests the least[iv].  Bear in mind that a charity’s fundraising activities are also designed for donor acquisition.

Although permitted, charity Board Directors are usually voluntary and rarely paid. Any Director fees will be reported in the financial statements. Large charities (annual revenue of $3 million or more) are required by the ACNC to disclose the total key management personnel remuneration, but, unlike ASX-listed companies, are not required to report the remuneration for the five most highly paid executive officers.  There is a case that ‘extra large’ charities (annual revenue of $100 million or more) are the ASX equivalent for the charity sector and warrant this disclosure.

Given the fierce competition for the dollar, charities face pressure not to include the full cost, including overheads, as this could lead to being outbid on costs, turning away funders, and undervaluing their ask. The pressure by donors and funders on charities to incur low administration costs is called the nonprofit starvation cycle[v] - a vicious cycle that fuels the persistent underfunding of the capacity of charities.

The recent Paying What It Takes report by Social Ventures Australia and the Centre for Social Impact confirmed that charities are underinvesting in critical capabilities due to a pervasive belief that funders are reluctant to provide the full financial support needed to create impact. The report also found that charities that spend less on indirect costs are not necessarily more efficient nor more effective than those that do not. Indeed, there is clear evidence that spending insufficient resources on indirect costs can potentially reduce overall effectiveness[vi].

The report found that ‘the average indirect costs of the not-for-profits analysed were 33 per cent of the total costs, with significant variation between 26 per cent and 47 per cent. This is comparable to the minimum of 29 per cent indirect cost funding found in a US study of 130,000 charities. By contrast, funding agreements often only included indirect costs of between 10-20 per cent of overall costs. A significant proportion of not-for-profits stated that they underreported their indirect costs to funders due to a pervasive belief that funders are unwilling to fund more than 20 per cent of indirect costs[vii].

To compound the issue, a 2025 study has found that ‘current Australian governments do not provide adequate funding for services procurement; nor do they provide adequate indexation for ongoing contracts and service delivery or adequate capital inputs to meet policy and regulatory change’[viii]. ‍

Although not required by the ACNC, a charity’s annual report is key in demonstrating its progress to its purpose through the outcomes and impact achieved over time. In reality, though, annual reports can be more like promotional brochures filled with smiling pictures, activity infographics, heartfelt stories, and financial pie charts.  For fear of losing the confidence of its stakeholders, annual reports rarely include an admission and analysis of ‘lessons learnt’ from programs and services that didn’t achieve their expectations. This lack of questioning perpetuates the defence that every charity is doing ‘good work’ and so deserves your support.
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[i]https://www.acnc.gov.au/for-charities/manage-your-charity/governance-hub/governance-standards

[ii] Although a national standard chart of accounts has been developed by the sector and the ACNC, there is no requirement to use it, no accepted accounting definition of what constitutes administration costs, and no external audit sign-off to verify their accuracy.  As charities include different costs in administration, no direct comparison is therefore possible.  The administration cost ratio is also variable due to the revenue amounts chosen for the calculation. For instance, if the ratio is calculated to total revenue from the financial statements, including non-fundraising income such as government grants, the ratio reported bears little relation to how much the donor’s contribution was spent on beneficiaries.  The recent Blueprint Expert Group considered an action to update National Standard Chart of Accounts and embed it in accounting software, but the improvement did not make it into the final 2024 Not-for-profit Sector Development Blueprint[ii].

[iii]https://www.acnc.gov.au/for-public/understanding-charities/charities-and-administration-costs

[iv]https://morestrategic.com.au/what-is-the-real-cost-of-fundraising/

[v] Goggins Gregory A & Howard D (2009),  The Nonprofit Starvation Cycle, Stanford Social Innovation Review, Fall 2009

[vi] Social Ventures Australia and the Centre for Social Impact (2022) Paying what it takes: funding indirect cost to create long-term impact, Social Ventures Australia at https://www.socialventures.org.au/wp-content/uploads/2024/07/Paying-what-it-takes.pdf

[vii] Ibid p.3

[viii] Gilchrist D.J., & Perks B (2025) Real Costs, Real Impacts: A Path to Social Services Sustainability, Centre for Public Value, UWA Business School, Catholic Social Services (Australia) Ltd, Canberra at https://www.uwa.edu.au/schools/-/media/centre-for-public-value/resources/250315-real-costs-real-impacts-final.pdf

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With all governments viewing the private sector as more efficient, alongside the need to limit the rising cost of public services in the face of idling government revenue, the open tendering out of government services from the early 1990s has pitted charities against each other and competing with large companies to win service contracts. 

Whilst the tendering out of government services has seen the growth in government revenue to over $100 billion, or over half of all charity income, the competition for contracts has resulted in charities becoming increasingly protective of their brand and what they see as their intellectual property.  Consequently and understandably, charities are reluctant to disclose their ‘what works’ evaluation information or cooperate with others in the sector.

Unfortunately, the result is the lack of demonstrated good practice or outcomes, service improvement, integrated client-centred services or coordinated collaboration for policy, systems and funding change.  As a result, these charities may be complicit in maintaining the very policy and service systems that fail to enable the outcomes that their recipients need and deserve.

So, it is important to look for the collaborations, alliances, networks and sector bodies that the charity actively participates in, especially across service sectors and with research institutions.

Then, with the growing need, charities need to ‘push the envelope’ to challenge the status quo and innovate to improve outcomes. description

In my experience, charities have an inherent culture of innovation as they endeavour to stretch budgets further to address the rising and complexity of needs, as well as having to respond to the cyclical political change and the ebbs and flows of fundraising income.   In striving to attain their purpose, charities need to seek donations to invest in pilot programs and services that utilise their evaluation to design and test different ways to achieve better outcomes and provide the evidence needed to advocate for policy, system and program change with government. 

Sadly, I’ve seen hundreds of trials funded by donors come and go.  All achieved new or better outcomes, but none attracted ongoing funding to enable sustainability.  So, it is vital that charities collaborate with a range of partners, including research institutions, governments, peers in the sector and philanthropy, and have a plan to become sustainable upfront.