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|List of words and terms used in the non-profit section|
|Arm's-length transaction||Incorporated organisations|
|Charitable organisation or charity||Organisation|
|Charitable purpose||Registered charity|
|Charitable purpose of marae||Residual income tax|
|Charities Services||Short-term charge facility|
|Donor||Unconditional gift or donation|
|Grants and subsidies||Volunteer|
A deal made between non-related parties, who are not associated persons.
Any enterprise or activity intended to make a profit is classed as a business. If an organisation runs a business, it must pay tax on all profits after expenses (except those made on dealings with its members). However, if a charity runs a business, it may not be liable for income tax on any profits that it uses for charitable purposes within New Zealand.
This is an organisation (incorporated or not) that carries on charitable activities or exists exclusively for charitable purposes. Some charities may be registered by Charities Services.
Charitable purposes include:
An organisation's purposes must fall within one of these categories to be charitable. Its activities or aims must be for public purposes and the benefit must be available to a large section of the community. In addition, it must not be carried on for the benefit or profit of any individual. If the beneficiaries are limited by blood ties the charitable purpose can still be met in some circumstances.
Many organisations consider themselves charitable because of the work they do or because they are registered under the Charitable Trusts Act 1957. As a result, they may also think they are exempt from income tax. However, from 1 July 2008, an organisation will only be tax-exempt if it is a registered charity. Such an exemption does not apply to goods and services tax (GST) or PAYE. The organisation must still account for these.
A marae has a charitable purpose if:
An autonomous Crown entity formed under the Charities Act 2005 to provide:
If the payer receives no direct benefit in return.
This is a special type of organisation, considered by Inland Revenue to have met the requirements set out in the Income Tax Act 2007. Individuals, certain companies and Māori authorities can get certain tax benefits by making gifts of money to a donee organisation. A charity can also be a donee organisation.
A person, company or other organisation that gives money or property to another.
A grant or subsidy can be a payment made to an individual or organisation to meet some of the expenses in carrying out business activities or in starting up a new business. It can also be a payment made to lower income families to help make childcare more affordable.
Honoraria are payments made for services provided where no fixed payment would normally be made. They are treated as schedular payments for tax purposes.
Organisations registered with the Companies Office of the Ministry of Economic Development (such as under the Incorporated Societies Act 1908 or the Companies Act 1993) are classed as incorporated organisations. For more information about becoming incorporated, go to the Societies and Trusts website.
Koha is a New Zealand Māori custom which can be translated an unconditional gift.
Giving koha is the practice of bestowing an unconditional gift where the recipient has neither stipulated that it be given, nor has any expectation of receiving it. It is an integral part of Māori culture and significant protocol is attached to it. Traditionally, koha has taken many forms but in more recent times it has tended to be in the form of money.
A non-profit organisation is any society, association or organisation (incorporated or not):
This is a general term, which covers all types of societies, institutions, companies, estates, trusts, funds and so on, whether or not they have a charitable nature or are considered tax-exempt.
A trust, society or institution that is registered as a charitable entity by Charities Services.
Residual income tax is the amount payable for the year, after deducting any tax credits from income tax assessed, but before deducting any provisional tax paid.
An arrangement that enables an employee to obtain goods or services that have no connection with the employer or its operations by:
The employer must also provide some or all of the payment or other consideration for the goods and services.
Charities are generally exempt from FBT on benefits provided to employees working for the organisation's charitable purpose. However, a charitable organisation is liable for FBT on short-term charge facilities including vouchers (eg petrol and grocery vouchers), provided to employees if the value of the benefit is above the threshold.
Up until 31 March 2014, the threshold to pay FBT is 5% of an employee's salary or wages for the year.
From 1 April 2014, the threshold to pay FBT is whichever is the smaller amount: of
Any activity carried on continuously or regularly that supplies (or intends to supply) goods and services to others for some form of payment (but not necessarily for a profit) is a taxable activity. Businesses, trades and professions are all taxable activities. Charitable organisations of any type can carry on taxable activities.
Setting up a business is part of the taxable activity, as is the closing down and sale of a business.
Taxable activities do not include:
Turnover is the total gross value of all goods and services supplied, excluding GST. It includes:
It does not include:
An unconditional gift is a donation or payment made voluntarily to any non-profit body, where there is no identifiable direct benefit to the donor or the donor's family.
Some unconditional gifts can be:
Subscriptions, payments from trading activities and payments made by the Crown or a public authority are not unconditional gifts for GST purposes.
A volunteer is defined as a person who freely undertakes an activity in New Zealand:
As a minimum, written rules must outline an organisation's: