What’s new for non profits: tax changes 

It’s now been almost ten years since the maximum limit on tax credit for donations was removed, and in this time donor concessions in New Zealand have increased from 100 million per year to over 280 million per year! Inland Revenue has recently made some important changes to the Taxation Act for non profit organisations to ensure the tax rules address this increase, coming into effect this year. 

hand holding change

We recommend charity organisations thoroughly research these amendments to ensure they are across the changes and to avoid any issues with Inland Revenue at a later date. 

Inland Revenue: Income Tax for Charities and Non Profits

Charities.govt.nz: Upcoming Tax Changes That Might Affect Your Charity

We’ll touch on one of the key changes below; mandatory registration with Charity Services and how that affects reporting for charities.

Current situation

Currently, organisations can hold a donee tax status without being registered as a charity. Donee tax status allows individual donors to claim a tax rebate for their donation. However, unregistered charities with donee status are not currently required to submit annual reporting. 

When your organization registers as a charity, you gain access to a number of benefits (including tax benefits) but this also comes with some important obligations, for transparency and integrity.

Benefits and Obligations of Being Registered

What’s changing

The current lack of requirement to be registered as a charity means there are non-registered organisations that aren’t following the same obligations as registered charities, but are receiving similar tax benefits. Therefore, Inland Revenue has advised that from 1 April 2020, all organisations with charitable purposes will need to register with Charities Services in order to qualify for or keep donee tax status. 

Inland Revenue: Donee Organisations Needing To Register with Charities Services

Reporting obligations

The key difference which charities will notice when they become registered is the requirements around reporting. Although the documents can be relatively detailed and lengthy, there is a silver lining – effectively produced annual reporting is a fantastic way to showcase your charity, and it will be available for all to see on the NZ Charities Register.

All charities must submit an annual return, along with financial statements or a performance report. The financial statements or performance report have reporting standards which must be followed, however there is flexibility around layout, branding and use of images for the annual return. The requirements around reporting varies depending on the tier level of your charity.

Charities.govt.nz has many templates and online examples of reports from winning charities which you can view online.

Chartities.govt.nz: information around reporting

Ready To Register?

Charities Services has all the information you need to set up your registration on their Need To Know To Register page.

Interested in more information? We love the not for profit sector, we work with charities, trusts and incorporated societies. Read more here.

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