The recently enacted Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act made amendments to the tax rules for charities and donee organisations.
Amendments ensure that:
- the charitable business income tax exemption is restricted to charities registered under the Charities Act 2005;
- organisations seeking donee status for donation tax credit must be approved by the Commissioner of Inland Revenue;
- organisations with charitable purposes must be a registered charity to obtain donee status;
- depreciation income recovery rules apply when a taxable entity becomes a registered charity;
- disclosure requirements that apply to foreign trusts also apply to where the trust is a registered charity;
- penalty, interest and avoidance provisions may apply to donation tax credits;
- clarifies the GST treatment on assets and their disposal by Not for Profit bodies (including charities).
- only gifts of money, (cash, electronic bank transfers, credit cards, and cheques) qualify as gifts eligible for donation tax credits or gift deductions. This does not include gifts in kind or debt forgiveness.
Also, donation receipts can now be submitted electronically during the year to a person's myIR account with donations tax credits claimed as part of the end of year income tax process. However, people can continue to complete a separate donation tax credit claim form should they wish to.
Tax rules for deregistered charities:
- address the tax treatment of land owned by deregistered marae charities;
- clarify the valuation of assets and liabilities at the date of deregistration;
- a de minimis threshold for charities with a low value of accumulated net assets;
- prevent potential double-deduction for monetary gifts made within one year of deregistration;
- prevent potential over-taxation of deregistered charities in a group structures where multiple members deregister together;
- address disposal of a wholly-owned subsidiaries by a charitable group for market value.