Your charity is deregistered when it’s removed from the register held by the Department of Internal Affairs - Charities Services.
A charity can be deregistered from the Charities Register by:
- voluntary deregistration by you
- deregistration by Charities Services.
There are several reasons a charity may be deregistered. The reason will determine:
- the date of deregistration
- the tax treatment of the charity from this date
- if you need to pay income tax and meet other tax obligations.
When a charity is deregistered it must pay income tax and resident withholding tax (RWT) unless it qualifies for another tax exemption.
Other income tax and RWT exemptions
There are other income tax and RWT exemptions that may apply, for example if the organisation is:
- an amateur sports promoter
- a local or regional promotion body
- a community housing entity
- a not-for-profit-organisation.
Contact us if you believe your organisation may qualify for any of the above, or any other, income tax exemption.
Paying income tax
When income tax will apply depends on why your charity was deregistered - this is called the end date.
If your charity:
- has always kept to its rules held on the Charities Register but has been deregistered because it did not file annual returns with Charities Services, you’ll need to pay income tax from the date it’s deregistered or all appeals or court proceedings are final or exhausted, whichever comes later.
- stopped keeping to its rules held on the Charities Register, you’ll need to pay income tax from the date it stopped keeping to its rules.
- never kept to its rules held on the Charities Register, you’ll need to pay income tax as if it was never a registered charity.
Your charity may also have to pay income tax on net assets you hold – your charity’s total assets, minus its total liabilities.
Paying tax on net assets
Your charity has 1 year from the date it’s deregistered to either:
- re-register as a charity
- dispose of its net assets or transfer them to a registered charity or for charitable purposes, or as set out in its rules while it was on the Charities Register.
If you do not dispose of or transfer the net assets within 1 year, you’ll need to pay income tax 1 year from the date you deregistered. Any net assets you keep will be treated as income. You’ll need to include them in your charity’s income tax return for the period that includes the day 1 year after the end date.
For example, if your charity was deregistered on 1 November 2017 and you kept some assets, you’d need to include these assets in the charity’s 2019 income tax return. That’s because 1 November 2018 (1 year after the end date) is in the 2019 tax year.
When your charity does not have to pay deregistration tax
There are 2 situations when your deregistered charity will not have to pay tax on assets it keeps. You do not have to pay the deregistration tax if your charity:
- was deregistered by Charities Services before 1 April 2015 (or before 14 April 2014 if you chose voluntary deregistration)
- has net assets worth $10,000 or less on the date it deregisters. This applies from 1 April 2019.
From 1 April 2019, only charities with net assets worth over $10,000 will have to pay deregistration tax on the total value of the net assets. The total value includes the initial $10,000.
When you work out the value of your charity’s net assets, do not include:
- assets received from the Crown to settle a Treaty of Waitangi claim or under the Maori Fisheries Act 2004
- assets, other than money, gifted or left to the entity when it was exempt from income tax
- Marae land and improvements under the Te Ture Whenua Māori Act 1993.
Working out the value of depreciable property or financial arrangement
After your charity is deregistered, you’ll need to work out the value of any depreciable property and financial arrangements you hold. You’ll use this value to work out tax for each following year.
Our Charitable and donee organisations – IR255 guide has examples of how to pay tax on and calculate net assets, depreciable property and financial arrangements.
Donee organisation status when a charity is deregistered
Your charity will keep its donee status up to the date it was removed from the charities register or when all court or appeal proceedings are finalised or exhausted, whichever is the later date. This protects donors who claimed tax credits for donations in good faith.
Donors can still claim tax credits for donations made before the charity was deregistered.
You will need to make sure that your receipts and any websites or newsletters clearly state that donations made after the above date will not qualify for a donation tax credit or income tax deduction.
RWT exempt status when a charity is deregistered
Your charity will keep its RWT exempt status up to the date it was removed from the charities register.
You’ll need to tell your bank, and anyone else who pays interest or dividends to your organisation, that your RWT exemption has ended.
Your status will be updated to cancelled on the RWT exemption register.
Fringe benefit tax (FBT)
If you're still operating and providing fringe benefits to your employees, you’ll need to register for FBT.
Organisations that run businesses for charity
If your organisation is not registered with Charities Services but is run for the benefit of a tax charity, it may qualify for an exemption from income tax on business income.
If it stops meeting the requirements of its tax exemption, it will need to pay tax from the date it stopped meeting its requirements. From 6 April 2016, it may also need to pay tax on net assets in the same way as a deregistered charity.
If you have questions about your charity's deregistration you can send us a secure mail in myIR, email us at the address below, or write to us at:
PO Box 1147
Palmerston North Central
Palmerston North 4440