Co-operative and mutual frequently asked questions

Welcome to our co-operative and mutual FAQs page, where we aim to demystify the world of co-operatives and mutuals. We answer common questions and provide insights into the diverse world of co-operatives and mutuals. Discover how these unique entities operate, their benefits and how they contribute to creating a more inclusive and equitable economy.

Co-operatives and mutuals are member-owned businesses formed to benefit the people who use them or work in them, rather than shareholders.

Designed around seven international co-operative values and principles including open and voluntary membership and democratic member control, co-ops and mutuals empower their members to be active participants in the enterprise.

Eight in 10 Australians are members of at least one co-operative or mutually owned organisation. These include organisations formed to provide social care including aged care and disability services, primary health care, housing for health key workers and people living with disability, veterans’ care and Indigenous services.

  • Individuals, as in customer owned banks (building societies, credit unions and mutual banks)
  • Businesses, such as small and medium enterprises that operate independently within a bigger co-operative
  • Agricultural and food producers, often owned by farmers, growers or fishers
  • Policy holders, as in mutual health funds
  • Roadside assistance members
  • Employees in worker co-operatives or employee-owned enterprises
  • Australia‚Äôs member-owned super funds are also mutuals

Consumer or community-owned co-operatives can be an ideal approach for disadvantaged groups where there is the energy, commitment and expertise in the community to tackle problems together.

Co-operatives can facilitate the development of members’ capacity to participate in the broader community by providing enhanced networks, increased confidence and skills.

Consumer co-operatives have a successful track record and offer enormous potential for some of Australia’s most disadvantaged groups to access appropriate care, including Indigenous groups, rural communities, people from culturally and linguistically diverse backgrounds, people with disabilities and older Australians in need of care.

Worker-owned co-operatives provide employees with autonomy and the ability to make judgements as to how to provide the best service at the local level. They free staff to be entrepreneurial and to innovate.

Employee-governed businesses can be effective for those working with people with complex needs, where consistency of personnel is required, and where services are focused on empowerment-based approaches. Staff-based co-operatives can be particularly effective in areas where staff attraction and retention has proven problematic.

Governments throughout Australia are seeking larger, more efficient service organisations with a single point of entry for a wide range of complex social problems. Many smaller, yet highly effective social support organisations may not survive competing against these larger organisations with their economies of scale. This can mean larger organisations replacing smaller local groups that have built relationships with their local community, have local knowledge and specialist experience.

Co-operatives of businesses and not-for-profit organisations, called enterprise co-operatives, can support smaller providers to share corporate functions including bulk purchasing, accounting, human resources, marketing, client software and OH&S services. Enterprise co-operatives assist specialist organisations to increase productivity and market power while retaining local input and local jobs.

Multi-stakeholder co-operatives are co-ops that formally allow for governance by representatives of two or more ‚Äústakeholder‚ÄĚ groups within the same organisation, including consumers, producers, workers, volunteers or general community supporters.

This can help align the interests of otherwise competing stakeholders ‚Äď producers and consumers, for example. They are appropriate when there is a need to plan long-term for the needs of various stakeholders and the normal market relationship is leading to inefficient short-term investment horizons.

Having only gained traction in the 1990s, multi-stakeholder co-ops are one of the newest models of co-operative.

A mutual is a member-owned organisation where people come together to meet their shared needs. The members of a mutual are its customers who do not usually contribute to the capital of the organisation through direct investment. Instead, they support the mutual through using its services.

A mutual is a co-operative when each member has one vote and the organisation is guided by the seven co-operative principles.

Defining Mutuality explains what co-ops and mutuals are and how they fit together as a unified sector.

Social care co-operatives and mutuals deliver social care through co-operative or mutual structures. This means that members of the organisations, who can be the consumers, the carers, the community or any combination of these, are involved in decision-making and benefit from its activities, including through the reinvestment of trading surplus. Co-operatives and mutuals operate in aged care and disability services, community health, First Nations services and social housing. Co-operative and mutual structures can increase diversity and choice in health, community and social services with positive outcomes for accountability, innovation, quality and productivity.

Social care co-operatives and mutuals generate benefits through their autonomy and independence, decision-making by members, member economic participation, reinvestment of profits, and co-operation. They can:

  • Increase organisational diversity in social service markets:¬†Co-ops and mutuals can assist smaller service providers to come together in a mutual to collaborate and operate more efficiently in a market.
  • Harness the professionalism of carers and unleash their entrepreneurialism:¬†Employee-owned organisations are an alternative to privatising or outsourcing services. Government can sponsor innovation, such as in the example of¬†Kudos Services, Australia‚Äôs first public service mutual.
  • Increase consumer choice and control by helping individuals and communities to formulate their own responses to problems in client directed care markets:¬†Co-operatives and mutuals develop empowerment through community owned co-operatives.

There is evidence that when carers and consumers are empowered through democratic governance productivity and workplace satisfaction increases dramatically.

Social care mutuals are well placed to support community resilience where services cannot be delivered due to market or other service provision failure. Co-operatives and mutuals have advantages in delivering services in areas that are not well services because they are small scale, remote or complex. They have proven particularly useful when:

  • Services are too expensive for government or market forces to provide
  • Profits are low or variable
  • Specialised services are needed
  • User input is required in service design and delivery.

The co-operative structure and not-for-profit organisations

The below information is current as of September 2023.

Yes, a non-distributing co-operative can be a not-for-profit entity, and may also be entitled to tax concessions available to not-for-profit entities.

Not-for-profit entities operate ‘for purpose’ and not for the profit or gain of its individual members. Not-for¬≠ profit entities generally fall within two categories: (1) charities and (2) other ‘NFP organisations’ which can be sporting and recreational clubs, business associations and social organisations.

A co-operative is the legal entity that owns and operates a business. Whether a specific co-operative will be a not-for-profit entity will depend on how the co-operative is structured and established. There are three types of co-operative:

  1. a distributing co-operative with share capital;
  2. a non-distributing co-operative with share capital; and
  3. a non-distributing co-operative without share

A non-distributing co-operative is prohibited from giving returns or distribution of surplus or share capital to members other than the nominal value of shares (if any) on a winding up: s.19(1) of the Co-operatives National Law (the CNL) and s.14(1) of the Co-operatives Act 2009 (WA) (the Co-operatives Act). A similar prohibition on distribution of profit applies to incorporated associations and companies limited by guarantee.

A non-distributing co-operative may be eligible to be a registered charity and to be endorsed as a deductible gift recipient, but that will depend specifically on the purposes and objects of the co-operative, and whether they fall within a recognised charitable and/or deductible gift recipient category.

To be registered as a charity, an organisation (which includes a non-distributing co-operative) must:

  • be not-for-profit,
  • have only charitable purposes that are for the public benefit,
  • comply with the ACNC Governance Standards,
  • comply with the ACNC External Conduct Standards (if operating overseas),
  • not have any disqualifying purposes (which includes engaging in, or promoting activities that are unlawful or contrary to public policy: and promoting or opposing a political party or candidate for political office),
  • not be an individual, a partnership, a political party or government entity, and
  • have an ABN.

See the Australian Charities and Not-for-profits Commission website for further information on charitable purposes:

The ‘not-for-profit’ test requires any profit or surplus to be retained or allocated towards the entity’s purposes; profit must not be provided to members. An entity can still be a not-for-profit if it provides a benefit to a member while genuinely carrying out its purpose. Given the prohibition in the CNL and the Co¬≠ operatives Act, a non-distributing co-operative is capable of being a not-for-profit.

Examples of co-operatives that are also not-for-profits (and registered charities) include: Supporting Independent Living Co-operative Ltd (NSW), the Interchange Health Co-operative Ltd (ACT), and Ballarat and District Aboriginal Co-operative Ltd (VIC).

If your co-operative is a registered charity, then the ATO will also endorse the co-operative for certain tax concessions. If your co-operative is not a registered charity but falls in the ‘other’ category of NFP entities, then the co-operative may be able to self-assess for access to tax concessions. The types of tax concessions that may be available include: income tax exemption, FBT exemption (subject to capping threshold), FBT rebate, GST concessions, refunds of franking credits.

Please note, an entity may be a registered charity but may not be endorsed as a deductible gift recipient (these are separate requirements).

The costs of incorporating the legal entity to operate the business depend on the type of legal entity chosen and the State or Territory of incorporation. As at September 2023:

Legal entity and cost of incorporation

Non-distributing co-operative1: Between $126 and $386

Incorporated association2: Between $126 and $386

Company limited by guarantee: $474

Note: the above table sets out the fees payable to the relevant regulator for incorporation, they do not include any costs which might be payable to third parties who help you incorporate the entity (accountants, lawyers, consultants etc).

Applying for registration as a charity with the ACNC, once an entity has been incorporated, is free. Ongoing operating costs and annual registration fees may vary.


1 Fees depend on jurisdiction. For example: NSW fees are S126, ACT fees are $191; VIC fees are S122.50; WA fees are $386.

2 Fees depend on jurisdiction: For example: NSW fees are S199, ACT fees are $216; VIC fees are $39.80 for model rules and¬†$230.60 for ¬∑own rules’; WA fees are $185 for model rules, and $229 for own rules.

Non-distributing co-operatives can raise funds for service delivery in the same ways other entities can raise funds: through borrowings from banks or private lenders (including loans from members) and debentures. If a non-distributing co-operative is endorsed as a deductible gift recipient, then it may also obtain donations from the public to use toward the co-operative’s purposes.

Unlike other entities, non-distributing co-operatives can issue:

  1. shares to members; and
  2. co-operative capital units to members and non-

Any shares that are issued are at a fixed value and, to maintain the not-for-profit status of the co-operative, must not carry rights to any return or distribution of surplus or share capital to members.

Co-operatives can issue a hybrid security called “co-operative capital units” (or CCUs), which allow them to raise investment capital from members or external investors without compromising the member rights and democratic control. A CCU holder is granted an interest in the capital (but not the share capital) of the co-operative. This allows member control to be retained which is required by the co-operative principles but expanding the potential pool of funds for the co-operative to operate and raise funds. CCUs can be secured, or unsecured, are transferrable, and are subject to the terms of issue and the rules of the co¬≠ operative. It might be that, to avoid any breach of the not-for-profit test, CCUs are only issued to non¬≠ members.

Care should be taken when preparing the rules regarding shares, and in structuring the terms of any issue of CCUs, if the co-operative intends to apply for registration as a charity. You should seek specific legal, accounting and taxation advice before making decisions about capital raising.

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