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The Gap We All Rely On

How Charities and Not-for-Profits Hold Communities Together, And Why Proper Funding Matters

Every suburb and town relies on a network of charities and not-for-profits. These NFPs keep families housed, feed people in crisis, support older Australians, include people with disability, and run outreach for young people who have fallen through the cracks. Government funds a large share of the work and sets the standards. Yet demand outstrips public budgets, program rules lag behind real life, and thin margins leave services exposed to shocks.

The national charity dataset confirms the scale. Total charity income is in the hundreds of billions of dollars a year. Roughly half comes from the government through grants and service contracts. The rest comes from donations, philanthropy and earned income. That pattern tells a simple truth. Public money is essential; however, community organisations raise and earn a similar amount to meet local needs.

What public grants pay for, and why the job is bigger than the budget

Government grants and purchase-of-service contracts fund regulated programs in aged care, disability, health, child protection and housing. The states and territories invest billions each year in housing and homelessness. They do the same in child protection and allied services. Commonwealth programs also purchase large volumes of care. This funding is significant, and it is vital to stability.

It is also incomplete. Program prices do not always keep pace with wage awards, insurance, transport, rents and compliance. Grants often fund outputs on paper but underprice the hours required to do the work safely. NFPs cover the shortfall with philanthropy, donations and trading income. They do it because the need is local and immediate. The result is a constant balancing act between rosters, waiting lists and the practical costs of service delivery.

How much of each dollar reaches the frontline

There is a persistent claim that too much money never reaches the frontline. The sector-wide figures tell a different story. Most charity spending goes on people and direct operating inputs. Staff costs are the largest line because care is human work. Vehicles, clinical supplies, food, utilities and outreach are the work as well. Administration and governance are necessary but remain a smaller share. For regulated services, safe staffing and sound oversight are not overhead in the pejorative sense. They are the preconditions for safe, effective care.

This matters for trust. When the bulk of spending in charities and not-for-profits is people and program inputs, donors and taxpayers can be confident that funds support real outcomes rather than paperwork.

Why the government cannot do everything directly

Public systems must set consistent rules and manage fiscal risk across decades. They share responsibilities across levels of government. They also fund schools, hospitals, defence, infrastructure and pensions at the same time. Long-run budget pressures are real. Health, aged care, the NDIS, defence and interest costs will drive public spending for many years. Even if growth holds, those demands limit how far the government can extend direct delivery.

This is where community organisations step in. NFPs can start a small pilot quickly, shift hours and locations, and weave multiple supports together without waiting for a new budget line. They reach people who do not trust large systems. They can redirect staff and volunteers within hours when fire, flood or a public health event strikes. Government funds the base. Charities and not-for-profits extend that base, innovate at the edges and deal with needs that do not fit neatly into program rules.

A national map of the sector

The charity footprint is spread across every jurisdiction. New South Wales hosts the largest share of registered entities, followed by Victoria and Queensland. Western Australia, South Australia and Tasmania each carry smaller but important shares. The Australian Capital Territory and the Northern Territory host fewer organisations by count, yet they often manage high-cost remote and specialist work. Average revenue per entity varies by state, reflecting service mix, cost structures and the presence of very large providers in some locations.

While there is no single table that cleanly totals “state grants to charities” for all jurisdictions, two public sources sketch the picture. The national charity dataset shows where organisations operate and how they earn and spend. The Report on Government Services shows, by state and territory, what the government spends on programs that are largely delivered by community partners under contract. Together, they point to the same conclusion. The sector is woven through every state economy and holds up critical parts of everyday life.

What grants cover, in percentage terms, and what remains unfunded

Using the national totals, government revenue accounts for roughly half of charity income. The other half comes from fundraising, bequests, philanthropy and fees for goods and services. That split is not a rounding error. It is the sector’s operating model. Grants and contracts pay for core, regulated services. Community organisations find the rest to keep doors open, extend hours, respond to local shocks and try new approaches.

The practical impact is visible. When donations fall or trading income dips, outreach vans skip nights, caseworkers carry heavier loads, and waiting lists grow. When philanthropy rises, pilot programs scale and more people get help sooner. The reliance on mixed income is a strength in terms of responsiveness, and a risk when the economy stutters.

Philanthropy helps, but it cannot replace public purchase of essential care.

Donations and bequests move with confidence and with news cycles. Major gifts can transform a service; however, they are not a stable replacement for public funding of essential care. The best results come from a balanced approach. Government funds safe, regulated baselines. Private giving supports innovation and unfunded needs. Charities and not-for-profits join the dots and feed lessons back into policy.

State-by-state signals from public reports

Housing and homelessness programs in every state and territory account for many billions of dollars each year. Child protection, family services and youth justice add more. Health spending by state also runs to many tens of billions. A large share of practical delivery runs through NFPs, because they are configured to provide local casework, tenancy support, therapeutic programs and community health. If state budgets flatten or contract, the consequences are immediate in community organisations. Hours drop. Staff leave. Rebuilding capability later costs more.

The available public reports are clear enough to guide decisions. They show sustained demand and material investment, and they point to the need for contract prices that keep pace with costs, payment terms that protect cash flow, and reporting that is simple and consistent.

What communities lose when funding fails

The costs of under-funding are visible within weeks.

  • Crisis lines close early.
  • Food hubs reduce days.
  • Casework teams exceed safe caseloads and burn out.
  • Tenancies fall over for want of basic support.
  • Regional clinics cut services because an ageing vehicle cannot be replaced.

Communities lose more than a service. They lose stability and connection. Businesses feel it when staff struggle with care responsibilities and crises. Councils feel it when local amenity slips. Schools feel it in attendance and engagement. A dollar that keeps people housed and supported today avoids many dollars in health, justice and lost productivity tomorrow.

Pricing for real costs and paying on time

Community services funding works best when prices reflect the real costs of safe delivery. That means aligning rates with wage awards, travel, insurance, rent, safeguarding, training and IT. It means multi-year agreements where services are ongoing. It means replacing repetitive forms with shared metrics and simple dashboards. Most of all, it means paying on time. NFPs cannot borrow cheaply. Cash-flow strain leads to staff churn and lost capacity. Payment discipline is a no-cost way to protect outcomes.

Where better tax compliance can boost community services funding

There is a practical way to lift community services funding without a blunt across-the-board tax rise. Keep closing gaps in the existing rules and ensure the largest companies and multinationals pay what the law intends. Corporate Tax Transparency reports list hundreds of large entities paying no income tax in a given year, sometimes for legitimate reasons such as losses or offsets. At the same time, the Tax Avoidance Taskforce has delivered billions in extra revenue through enforcement and settlements.

Policy is moving in the right direction. Parliament has adopted global minimum tax rules aligned with the OECD’s Pillar Two framework. New integrity measures limit excessive debt deductions and profit shifting through intangibles. Independent budget officers have noted that sustained investment in enforcement can improve the fiscal balance by billions over the medium term. Earmarking even a portion of that uplift for community services would make a visible difference on the ground.

This is not about punishing success. It is about a level playing field. When the biggest market participants meet their obligations, governments can fund stable programs, and charities and not-for-profits can plan staffing and expand proven services with confidence.

Why a stronger community sector helps business as well as government

Enterprises of all sizes rely on stable communities. NFPs reduce absenteeism and improve participation. They keep young people engaged, support people back to work, and provide care when families face illness or crisis. That is good for employers, good for local suppliers and good for growth. Stronger community services funding is not a cost without return. It is an investment that reduces future expenditure and expands the workforce.

Transparency builds confidence

Public trust grows when data is easy to find and compare. The national charity dataset, the ATO’s transparency reports, GrantConnect and the Report on Government Services allow anyone to follow the money. Publishing consistent state-by-state summaries of grants to charities and NFPs would improve confidence further and help governments target funding to the best outcomes.

Bringing it together

Australia works best when every sector does what it does well. Government sets standards and funds baselines. Charities and not-for-profits deliver flexible, human-centred work where the rules meet real life. Businesses create jobs and benefit when communities are stable. The numbers show that public funding covers about half of sector income, and that community organisations generate the rest to keep services running. That mix keeps people housed, fed, healthy and included.

Lifting community services funding is a choice. Index contract prices to real costs. Pay on time. Keep reporting lean. Close tax gaps at the top end. Use the extra capacity to expand proven programs and build new ones where the need is rising. If we value safe homes, dignity in ageing, accessible disability support and inclusive communities, then we should fund the partners who deliver those outcomes every day.

 

If you lead a community organisation, a social enterprise, or a business that partners with the sector, SBAAS can help you strengthen funding models, simplify reporting and present your impact with evidence. Book an appointment to discuss your needs or learn more about our approach and advocacy.

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Sources

SmartyGrants. (n.d.). Aussie grants reach $125 billion. https://www.smartygrants.com.au/articles/total-value-of-australian-grants-each-year

Eric Allgood is the Managing Director of SBAAS and brings over two decades of experience in corporate guidance, with a focus on governance and risk, crisis management, industrial relations, and sustainability.

He founded SBAAS in 2019 to extend his corporate strategies to small businesses, quickly becoming a vital support. His background in IR, governance and risk management, combined with his crisis management skills, has enabled businesses to navigate challenges effectively.

Eric’s commitment to sustainability shapes his approach to fostering inclusive and ethical practices within organisations. His strategic acumen and dedication to sustainable growth have positioned SBAAS as a leader in supporting small businesses through integrity and resilience.

Qualifications:

  • Master of Business Law
  • MBA (USA)
  • Graduate Certificate of Business Administration
  • Graduate Certificate of Training and Development
  • Diploma of Psychology (University of Warwickshire)
  • Bachelor of Applied Management

Memberships:

  • Small Business Association of Australia –
    International Think Tank Member and Sponsor
  • Australian Institute of Company Directors – MAICD
  • Institute of Community Directors Australia – ICDA
  • Australian Human Resource Institute – CAHRI

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Further reading

Discover how a unified small business political voice can steady government, shape debate, and protect growth. SBAAS polls 60,000 subscribers to speak for you nationally.

The Quiet Superpower, Mobilised: How a Small Business Political Voice Can Steady Australia and Set the Agenda

September 19, 2025

Before the numbers, know this. Every subscriber to SBAAS newsletters is part of a national voice when you take part in our polls. With approximately 60,000 subscribers and growing, your responses guide a consolidated position we share with decision makers. Our Managing Director carries that shared small business political voice into the Small Business Association of Australia’s Think Tank. He also advocates to government at all levels for small business across all industries, including small charities and the wider not-for-profit sector. We help when we are engaged and paid to do the work. We also give our time freely to improve conditions for small enterprises, because the economy and our communities rely on you.

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