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Which grants and subsidies are liable for tax

Whether you're liable for income tax on grants and subsidies depends on:

  • who you received the payment from and
  • what your taxable status is.

If you have to pay income tax, the following special tax rules apply to grants and subsidies.

If you're liable for income tax

You'll be liable for income tax if you receive a:

  • grant or subsidy amount based on income received, income foregone, or an income deficiency
  • payment made towards expenses incurred in earning gross income (except for government grants)
  • surplus from a grant or subsidy that becomes part of the organisation's general funds.

If you're not liable for income tax

You won't be liable for income tax if you receive:

  • a grant or subsidy paid to offset capital, or expenses that don't produce income
  • payments made to offset the cost of a capital asset, or to reinstate an asset which is used to produce gross income. However, any claim for depreciation must be based on the cost of the asset, less the amount of the grant or subsidy.

 Go to Grants and subsidies (IR249) guide for more information