Charities deregistration tax on assets

Charities may need to pay deregistration tax when they’re removed from the Charities Register.

This only applies to deregistered charities, not to other sorts of not-for-profits that are only registered with the Companies Office.  

You have 1 year after deregistering

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 2022 and you kept some assets, you’d need to include these assets in the charity’s 2024 income tax return. That’s because 1 November 2023 (1 year after the end date) is in the 2024 tax year.

Proposed law change about deregistration

Parliament is considering a change to the deregistration tax rules. If approved, this change would mean that income tax would need to be paid on certain net assets if they are not transferred to another registered charity.

This change may take effect for transfers from 18 May 2023.

If you want to know what this proposed change would mean for you, speak with your tax agent or legal advisor. You can also find more technical information on our tax policy site.

Tax Policy - Bills

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.

When you do 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 Māori Fisheries Act 2004
• assets, other than money, gifted or left to the organisation when it was exempt from income tax
• marae land and improvements under the Te Ture Whenua Māori Act 1993.