Some non-profit organisations may qualify for a $1,000 income deduction. This deduction makes the first $1,000 of income that organisation earns free from income tax.
- If your organisation earns under $1,000
- If your organisation earns over $1,000
- Applying for the $1,000 income deduction
- Applying for an income tax exemption
If your organisation's net income is below $1,000 per year, then the deduction effectively means you are exempt from income tax.
Therefore you won't be taxed on any income you earn, and don't need to file any income tax returns.
However, we recommend your organisation keeps records of any financial transactions, in case they are required for future reference.
An exemption or deduction of income tax doesn't automatically qualify your organisation for an exemption to all taxes. You may still be liable to pay other taxes, such as GST.
If your organisation's net income is above $1,000 per year, you may be eligible for a deduction of up to $1,000. If you subtract this amount from your organisation's income, you reduce the amount of tax to pay.
To qualify for this deduction, your organisation will need to have written rules. An organisation without rules or a constitution won't qualify for the $1,000 income deduction.
If your organisation doesn't qualify for an income tax exemption, you can apply for a deduction against your net income.
A non-profit organisation is allowed a deduction for the amount equal to the lesser of:
- $1,000, or
- the amount that would be the net income of the organisation.
To apply for a deduction, your organisation will need to follow the same processes as applying for the income exemption.
If you're a charitable organisation, go to the Charities Commission website to register as a charity.
If you're a non-profit body of any other kind, you may qualify for an income tax exemption.
Income tax exemptions aren't automatic. You'll need to apply to us in writing - go to "Contact us" for our address details.
Your organisation can send us a draft document of your exemption application for us to review. We can then suggest any changes before your organisation goes through the process and cost of having it submitted.
When you apply for the exemption, please include the following information about your organisation:
- IRD number - if you don't have one, you'll need to apply. Please complete an IRD number application - non-individual (IR596)
- a copy of its rules, constitution, trust deed or other founding documents - preferably in draft (before being finalised) form
- a copy of its certificate of incorporation (if applicable)
- a letter stating the type(s) of exemption being requested, eg sports club
- details of how it has been or will be operating.
We'll then give you written confirmation of your organisation's tax exempt status for income tax.
Date published: 28 May 2010