Australian co-operatives law allows the formation of two types of co-operatives - a trading co-operative and a non trading co-operative, in recognition that co-operatives can provide both economic and social benefits to people.

A trading co-operative is formed to undertake a commercial venture where members can share in profits made from trading and the asset growth of the co-operative. This type of co-operative is popular with primary producers as they can share in the profits from the value adding of their produce as it moves down the supply chain to the consumer. Because a trading co-operative can provide a pecuniary benefit to members, this type of co-operative is subject to a disclosure regime under Australian co-operatives legislation.

A trading co-operative has the following characteristics.

• A member must support an activity associated with the primary activity of the co-operative, e.g. a dairy farmer is required to deliver an agreed quantity of milk to the co-operative in any given period to remain an 'active' member.
• A trading co-operative must have a share capital.
• Disclosure statements are required for formation and issuing shares.
• Bonus shares can be issued to members upon asset sale or revaluation.
• Shares can be issued at a premium.
• Members may be required to subscribe to more shares or lend money to the co-operative.
• Profits can be distributed to members by way of a 'limited' dividend on shares held, bonus shares and/or a rebate in proportion to the business done by the member with the co-operative.
• Surplus funds from winding up is distributed to members in proportion to share capital held by a member.

A non trading co-operative is an Australian 'not-for-profit' co-operative that can be formed with or without shares. While a non trading co-operative can conduct commercial activities, it is prohibited under law to distribute surplus funds to members from profits or upon winding up. As members of a non trading co-operative receive no pecuniary benefit from their ownership of the co-operative, the co-operative is not subject to the disclosure regime that applies to a trading co-operative.

A non trading co-operative has the following characteristics.

• A member must maintain a relationship with the co-operative associated with its primary activity, e.g. a parent must have a child enrolled in a child care co-operative to be an 'active' member. Payment of a regular subscription by a member is also sufficient to establish 'active' membership of a non trading co-operative.
• No disclosure statement required for formation (except NSW) or issuing shares.
• Shares cannot be issued at a premium.
• Bonus shares cannot be issued either from asset revaluation or sale, or from profits.
• Members cannot be compelled to acquire more shares or lend money to the co-operative.
• Profits made from trading are reinvested in the co-operative and/or distributed to a charitable organisation.
• Surplus funds from winding up are distributed to another similar 'not-for-profit' organisation approved by members.