How co-ops work in Australia
The Basics
A co-operative in Australia is a legal business structure owned and controlled by its members, not external shareholders. Its core purpose must benefit the members (not just investors).
There are two main types:
| Type | Purpose |
|---|---|
| Distributing co-op (DC) | Can return profits to members (dividends, rebates, patronage payments). |
| Non-distributing co-op (NDC) | Profits must be reinvested back into the co-op’s purpose (often used for community, education, social enterprise). |
Who Regulates Co-ops?
Co-ops operate under the Co-operatives National Law (CNL) in most states and territories.
Jurisdictions using CNL:
- NSW
- VIC
- QLD
- SA
- TAS
- ACT
- NT
WA has its own co-operatives act, but it’s similar in practice.
The regulator differs by state (e.g., Department of Fair Trading / Consumer Affairs).
Core legal requirements
To register a co-operative in Australia, you need:
1. A purpose
Must clearly define how the co-op benefits its members.
2. Active membership rule
Members must do something to contribute — for example:
- buy or supply goods/services
- contribute labour or participation
- pay regular subscriptions
- vote / participate in governance
Members who stop being active can be removed.
3. Minimum membership
- 5 members to start (individuals or organisations)
- 1 vote per member regardless of capital contribution — fundamental principle
4. Rules / constitution
Must follow the CNL template or equivalent. Rules cover:
- membership requirements
- board composition and elections
- dispute resolution
- finances and profit distribution
- winding up
5. Board requirements
- Minimum 3 directors
- Majority must live in Australia
- Directors have similar duties to company directors
6. Naming
Must include “Co-operative” or “Co-op” in the legal name.
Financial & Reporting
Reporting obligations depend on the size and type of the co-op:
| Scale | Reporting expectation |
|---|---|
| Small (most) | Simplified financial reports; can often avoid full audit |
| Large or distributing | Full annual financial reporting and typically an audit |
| Co-ops raising capital from public | Greater disclosure rules, similar to companies |
Advantages of Co-ops
- Member-controlled (1 member = 1 vote)
- Profit can stay in the community
- Strong model for shared ownership / mutualisation
- Better cultural fit for purpose-driven organisations than Pty Ltd
- Can pay member dividends (if distributing)
Limitations
- Decision-making can be slower than a traditional startup
- Governance must be transparent and well-documented
- Profit return restricted for non-distributing co-ops
- Not designed for venture capital investment
Best Use Cases
Co-ops are common in:
- Agriculture
- Housing
- Energy
- Education and training
- Healthcare and disability support
- Mutual insurance and risk pools
- Digital platforms / worker collectives
- Community-owned assets
They’re increasingly used for platform and DAO-style shared ownership because the framework aligns with democratic governance.
Forming One (practical sequence)
- Decide distributing or non-distributing
- Draft rules + disclosure statement (for DC only)
- Recruit at least 5 founding members
- Hold formation meeting
- File application + fees with your state regulator
- After registration — open bank account, onboard members, elect board