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Rules around gifting donation tax credits

In response to a Court of Appeal decision today, Revenue Minister Stuart Nash says he intends to introduce legislation to clarify the law regarding donation tax credits.

“We need to act swiftly to provide certainty,” Mr Nash says.

“Today’s decision opens the way for claims to be made to Inland Revenue for donation tax credits which have never been considered to be eligible. It is important that people who make donations have certainty about when claims for tax credits are eligible.

Mr Nash says that the proposed legislative change would confirm that donation tax credits and gift deductions would not be available for gifts to donee organisations where they are made by way of debt forgiveness.

Today’s announcement follows the decision by the Court of Appeal in the case of Commissioner of Inland Revenue v Roberts. The Court found donation tax credits are available for gifts made by way of debt forgiveness.

“This is contrary to the policy. The policy intent is that donation tax credits and gift deductions are limited to gifts of cash or cash equivalents such as payments made by bank transfers, credit card or cheques.  It is not intended that donation tax credits or gift deductions should be available for gifts in kind or gifts made by way of debt forgiveness.

“The proposed amendment would apply retrospectively to 1 April 2008, being the commencement date of the Income Tax Act 2007. However, a savings provision would apply to taxpayers who have already taken a position in reliance on the current legislation and have filed a return or donation tax credit claim before the date of this announcement,” Mr Nash said.