Are You Fundraising or Accepting Donations? Why the Difference Matters for Charities

Introduction

For any not-for-profit charity, understanding the difference between fundraising and accepting donations is crucial. While both are vital for generating income to support a charitable purpose, they represent distinct approaches to acquiring resources and come with different legal obligations.

Fundraising is an active and organised process of soliciting support that is regulated by state and territory laws, often requiring a licence for the organisation. In contrast, donations are typically voluntary gifts. Managing these differences is essential for ensuring all funds are managed correctly and applied to the organisation’s charitable purpose.

Defining Fundraising & Donations for Your Charity

Understanding Charitable Fundraising Activities

Charitable fundraising is an active and organised process where a charity solicits money or other resources to support its charitable purpose. This involves planned effort and specific campaigns to engage potential supporters and encourage contributions for the not-for-profit organisation.

Common examples of charitable fundraising activities include:

Fundraising Activity	Description & Examples
Soliciting public donations	Approaching people directly on the street, online through digital platforms, or via mail appeals.
Holding public events	Organising events like galas, auctions, charity walks, or trivia nights where charges contribute to funds raised.
Running campaigns	Includes raffles, games of chance, and large-scale crowdfunding efforts that leverage social media.
Corporate partnerships	Collaborating with businesses that provide financial support or sponsorship in exchange for brand recognition.

It is important to understand that fundraising is regulated at the state and territory level in Australia. Consequently, the specific definition of what constitutes a fundraising activity can vary between jurisdictions. Additionally, your charity may need a licence to operate legally in each state or territory where it raises funds.

Understanding Donations for a Charitable Purpose

In contrast to the active nature of fundraising, a donation is a voluntary and often spontaneous gift of money or goods made directly to a charity. This form of support is typically given on the donor’s own initiative, representing a more passive way for an organisation to receive resources for its charitable purpose.

Donations can be provided to a charity in several forms, such as:

Donation Type	Description
Cash donations	The most direct form of support, made online, by mail, or in person, providing immediate funds.
In-kind donations	Non-monetary gifts, including goods like food and clothing or valuable professional services.
Recurring donations	Regular, scheduled contributions (e.g., monthly, annual) that provide a reliable income stream.
Planned giving	Substantial gifts made through a donor’s will or other estate planning arrangements to secure long-term funding.

A key consideration for any not-for-profit charity is that not all donations are tax-deductible for the donor. For a donor to claim a tax deduction on a gift of $2 or more, the charity must be endorsed by the Australian Taxation Office (ATO) as a Deductible Gift Recipient (DGR).

Key Legal & Governance Differences for Your Organisation

The Role of Charitable Purpose in Receiving Funds

For any not-for-profit charity, its charitable purpose is the foundation for all operations. All funds, whether acquired through active fundraising or received as direct donations, must be used exclusively to advance this specific purpose.

Those responsible for the charity have a fiduciary duty to ensure every dollar is applied correctly. Failing to do so can be a serious breach of their obligations.

The importance of this principle becomes particularly clear when a charity’s purpose is narrower than donors might assume. For example, consider a case where a fundraiser generates millions for a specific rural fire service. If that service’s governing document strictly limits its funds to equipment and training for its own brigades, it cannot legally redirect those funds to:

• Aid families of fallen firefighters
• Support other charities

This restriction applies even if redirecting funds was the fundraiser’s and donors’ original intent.

Understanding State & Territory Fundraising Licence Rules

A significant legal difference between fundraising and accepting donations lies in regulation. While actively fundraising is a regulated activity in Australia with laws that vary across jurisdictions, simply accepting unsolicited donations generally does not require a special licence.

A charity must comply with the fundraising legislation of every state or territory in which it solicits funds, not just where it is based. This is particularly relevant for online campaigns, which can easily reach a national audience.

Depending on the jurisdiction, your organisation may need to acquire a specific permit or licence to legally conduct charitable fundraising.

Some states and territories offer streamlined arrangements for charities already registered with the Australian Charities and Not-for-profits Commission (ACNC). However, this does not always remove the need for a local fundraising licence. Therefore, it is crucial to verify the specific rules for each jurisdiction where your charity operates.

Tax Implications for Your Charity & Donors

The tax treatment of funds differs significantly for your charity and its supporters, depending on whether the activity is a donation or fundraising. For donors, a key benefit is that their contributions may be tax-deductible.

This tax deduction for the donor is only available if:

• The donation is $2 or more
• The charity is endorsed by the Australian Taxation Office (ATO) as a Deductible Gift Recipient (DGR)

For the charity itself, the financial implications are different. While it is legitimate for a not-for-profit organisation to spend money on fundraising activities, these expenses are not tax-deductible for the charity. This includes costs associated with:

• Running events
• Marketing
• Administration for a fundraising campaign

Responsibilities of Your Charitable Organisation

Governance & Oversight of Charitable Fundraising

A charity’s Responsible People, such as the board or committee members, hold the ultimate responsibility for all fundraising activities. This accountability is a crucial component of good governance for any not-for-profit organisation.

The oversight responsibilities of Responsible People include:

Guideline	Requirement for Transparency
Avoid False Statements	Avoid making false statements or creating misleading impressions about how funds will be allocated.
Be Clear on Costs	Do not claim that 100% of donations go directly to a cause if a portion is used for administrative or fundraising costs.
Use Reasonable Grounds	Ensure all statements made to solicit donations, including statistics or research, are based on reasonable grounds.

Additionally, they must consider the impact of fundraising methods on the public and potential donors to protect the organisation’s reputation.

Ensuring Transparency & Avoiding Misleading Conduct

Your organisation has a legal obligation to be transparent and avoid misleading the public about its fundraising activities. Under the Australian Consumer Law, charities must maintain integrity in their communications about how funds will be used.

To maintain public trust and donor confidence:

• Avoid making false statements or creating misleading impressions about fund allocation
• Do not claim that 100% of donations go directly to a cause if a portion is used for administrative or fundraising costs
• Ensure all statements made to solicit donations, including statistics or research, are based on reasonable grounds

Failing to be transparent can breach the Australian Consumer Law, which may also constitute a breach of the ACNC Governance Standards.

Conclusion

Understanding the distinction between active fundraising and voluntary donations is essential for any not-for-profit charity. This key difference shapes several important aspects of your organisation’s operations:

• Legal and governance obligations: Each fundraising approach carries different compliance requirements that must be carefully managed.
• Licensing requirements: State and territory regulations vary based on how you collect funds.
• Fund allocation: All funds must be properly applied toward your specific charitable purpose.

Exploring these complexities is vital for maintaining both compliance and public trust. For specialised guidance, contact our expert team at LawBridge.  Our not-for-profit legal services will ensure your charity manages its fundraising activities and donations effectively and lawfully.

Frequently Asked Questions