myIR, payments and more
On this webpage you will find information to help keep you up-to-date with new tax matters that could affect your non-profit charity, club, society or association.
- Remedial changes to the tax rules regarding not-for-profit entities
- Simplifying tax - claiming donation tax credits
- State and state integrated schools - donation tax credits and GST
- Recent changes to the tax rules when a charity deregisters
- Issues paper about GST on assets sold by non-profit bodies released
- Reimbursing volunteers for petrol
- The interpretation of "wholly or mainly" for the purposes of the donee organisation test
- Changes when volunteers are paid honoraria
- Changes for not-for-profits that are financial institutions and have foreign account holders
(published 6 July 2018)
On 28 June 2018 The Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill was introduced.
The Bill contains a number of remedial changes to address unintended gaps in the current law governing the tax treatment of not-for-profit entities. These proposed changes are intended to ensure greater transparency from entities that receive not-for-profit tax treatment, and improve the overall integrity and coherency of the rules. Changes are proposed to ensure:
- the charitable business income tax exemption applies only to charities registered under the Charities Act 2005
- organisations seeking donee status obtain donee status approval by the Commissioner of Inland Revenue
- organisations with charitable purposes register as a charity in order to obtain donee status
- refinements are made to the tax rules for deregistered charities
- relevant penalty, interest, and avoidance provisions apply to donation tax credits
- the deemed disposal provision for depreciation recovery income applies when a taxable entity becomes a registered charity
- the disclosure requirements that apply to foreign trusts also apply to foreign trusts that are registered charities.
(published 6 July 2018)
In the discussion document "Making tax simpler: Better administration of Individuals' income tax", which was released on 19 June 2017, the government sought feedback on the administration of donation tax credits. The outcome of that feedback is included in the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill, which was introduced on 28 June 2018.
The Bill proposes that donation receipts could be submitted electronically during the year and the donations tax credits could be claimed as part of the year-end income tax process. When donation receipts have been submitted electronically during the year, they would be taken into account without requiring a separate claim form to be completed. However, people would be able to continue to complete a separate donation tax credit claim form should they wish to.
(published 21 June 2018)
QB 18/10 Income tax – state schools and donation tax credits
QB 18/11 Income tax – state integrated schools and donation tax credits
These two “Questions we’ve been asked” (QWBAs) explain when a parent’s payment to a school will be a gift, so that the school can issue a donation tax receipt to the parent. A payment will be a gift when it is voluntary, does good for the school, and the parent obtains no material benefit or advantage in return for making the payment. The QWBAs refer to Circular 2018/01 Payments by parents of students in schools (Ministry of Education, 2018).
Public Ruling BR Pub 18/06: Goods and services tax – payments made by parents to state and state integrated schools
GST is not chargeable on payments made by parents to the board of trustees of a state or state integrated school where the payments are made to assist the school with the cost of delivering education services which the student has a statutory entitlement to receive free of charge. GST is chargeable on payments made for supplies of other goods or services that are not integral to the supply of education to which the student has a statutory entitlement, where that supply is conditional on the payment being made.
This Ruling is a reissue of BR Pub 14/06 which expired on 20 June 2018. It is substantially the same as BR Pub 14/06 but some parts have been rewritten to improve readability, and legislative changes have been included. A new example (Example 5) has been added. The Ruling refers to Circular 2018/01 Payments by parents of students in schools (Ministry of Education, 2018).
You can receive email notifications when draft public items are available for comment or when finalised public items are published. Contact Public Consultation to be placed on a distribution list.
(published 27 June 2018)
In March 2018, amendments were made to the Income Tax Act which affect the tax rules when a charity deregisters. The changes extend the existing deregistration tax rules to all entities that derive exempt income under section CW 42 of the Income Tax Act (previously the rules just applied to registered charities). The changes also clarify that there will be no tax liability if assets are disposed of or transferred to another person for charitable purposes or in accordance with the entity's rules within 1 year of the deregistration.
The amendments apply to charities that are deregistered on or after 6 April 2016. You can find out more information about these changes in Tax Information Bulletin Vol 30 No 5 (June 2018) pp107-108.
(published 17 May 2018)
An issues paper, GST on assets sold by non-profit bodies released on 15 May 2018, sets out proposals to clarify the GST rules for the sale of assets by charities and other non-profit bodies.
The main proposal is to ensure that GST is paid on the sale of assets where input tax deductions have been claimed. This applies to insurance receipts and de-registrations, as well as asset sales. The proposed changes will apply from 15 May 2018, with a savings provision to preserve tax positions taken before this.
Submissions on the issues paper close on 15 June.
(published 10 October 2017)
Not-for-profits can reimburse volunteers for petrol. The reimbursement payments are tax exempt for volunteers. From the 2016-2017 year, different rates apply for petrol/diesel, hybrid and electric vehicles.
(published 20 October 2017)
We are consulting on our new draft item on the meaning of “wholly or mainly” for the purposes of the donee organisation test in s LD 3(2)(a). Consultation closes on 30 November 2017.
(published 1 August 2017)
Many not-for-profits make payments to their volunteers. Those payments may be to reimburse volunteers for costs incurred while volunteering, or as payment for services that is at less than the market rate. A reimbursement payment is generally exempt from income tax, whereas a payment for services that is at less than the market rate is generally honoraria and subject to withholding tax.
Up to 31 March 2017 the rate of withholding tax on honoraria payments was 33%.
From 1 April 2017 volunteers can elect their own withholding rate by using our new form Tax rate notification for contractors (IR330C). The minimum rate they can elect is now 10%. Volunteers will still be required to file an IR3 income tax return.
(published 3 August 2017)
From 1 July 2017, new due diligence and reporting obligations apply to New Zealand financial institutions, including some not-for-profit organisations (NFPs).
If you are a NFP you may be impacted by the Common Reporting Standard (CRS). The CRS is the single global standard for the collection, reporting and exchange of financial account information on foreign tax residents on an annual basis. The CRS has similarities to reporting requirements under the US Foreign Account Tax Compliance Act (FATCA). However not-for-profits are generally exempt from FATCA whereas they are not exempt from the CRS.
The CRS requires financial institutions to collect and report financial account information on foreign tax residents (Reportable Accounts). Under the CRS some NFPs will be financial institutions and may have obligations to report to us. NFPs could be financial institutions by either having managed investments or by conducting an investment business.
Even if your NFP is not a financial institution it may be asked by other entities for self-certification. Self-certification will require a financial institution to ask all new (and some existing) financial account holders a series of questions about their residence and entity status for tax purposes. Where a self-certification shows that an account holder is from a foreign jurisdiction, the financial account will have to be reported to us.
You can find a flowchart "CRS - Is the Trust a reporting NZFI" to help you understand whether you are a financial institution on our Important AEOI and CRS documents page.