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.
- Debt forgiveness and donation tax concessions
- The interpretation of "wholly or mainly" for the purposes of the donee organisation test
- GST on assets sold by non-profit bodies
- 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
- Reimbursing volunteers for petrol
- Changes when volunteers are paid honoraria
- Changes for not-for-profits that are financial institutions and have foreign account holders
(published 26 October 2018)
In August 2018 a High Court judgement clarified that forgiveness of a debt owed by a donee organisation can constitute a “monetary gift … paid” to a donee organisation. Therefore the donor may be eligible to claim a donation tax credit or gift deduction.
In October 2018 the Commissioner of Inland Revenue announced she would appeal that decision.
The Commissioner’s position continues to be that forgiveness of a debt owed by a donee organisation will not qualify for a donor donation tax credit or gift deduction.
Find out more about the August 2018 High Court judgement and read the Commissioner's 2011 Revenue Alert about arrangements entered into to get a donation tax credit where there has not been a true gift of money
(published 4 October 2018)
Interpretation statement IS 18/05: Income tax - donee organisations – meaning of wholly or mainly applying funds to specified purposes in New Zealand concerns donee organisations under s LD 3(2)(a) of the Income Tax Act 2007.
It applies to organisations applying funds to charitable, benevolent, philanthropic, or cultural purposes within New Zealand and to other purposes (for example, overseas purposes). It doesn’t apply to organisations listed in schedule 32 of the Act.
The statement clarifies the interpretation of these requirements.
It also explains our “safe harbour” approach to administering this requirement. We will generally accept that an organisation meeting the minimum safe harbour percentage of 75% has met the requirement without asking you any more questions.
The statement is accompanied by IS 18/05 - fact sheet – applying the “safe harbour” approach. The fact sheet sets out the most important information from IS 18/05 without the legal details. It includes examples of when funds are considered to be applied to specified purposes within New Zealand, and an example of the safe harbour calculation.
(published 16 August 2018)
An issues paper, GST on assets sold by non-profit bodies released on 15 May 2018, set out proposals to clarify the GST rules for the sale of assets by charities and other non-profit bodies.
The main proposal ensures 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. For not-for-profits who did not expect to pay this GST, the proposal allows a 12-month period in which GST input tax claimed can be repaid. The proposed changes will apply from 15 May 2018, with a savings provision to preserve tax positions taken before this.
On 14 August 2018 Minister Nash announced that these changes will be made as part of a Supplementary Order Paper (SOP) to the tax bill currently before parliament. For more information see the Minister of Revenue’s media statement, the SOP, and the regulatory impact assessment.
(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 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 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.