Donation tax credits allow for a percentage of charitable donations to be claimed back as a reduction in income tax or as a refund. For a person who donates to charity, this means that they can receive one third back if they claim it at the end of the financial year. For example, if you give $300 to charity then you can claim back $100.
As part of the New Zealand Government’s 2026 Budget there are big changes to donation credits for donors who make large donations. Under the new changes, a donor who donates $100,000 or more in a year to any organisation will only be able to claim back a tax credit of $33,333.33, with the change coming into effect from 1 April 2027. Once they go above that threshold they will not be able to claim back additional amounts. The Government’s rationale for this change is to ensure the donation tax scheme is financially sustainable and avoid “donor controlled” situations, where a person donates money to a charity they control but receives the one third back.
Of course, this will not affect most donors. However, that justification ignores some of the likely impacts of this which signal a broader shift. It seems likely that the proposed change will disincentive the biggest donors from making large donations. It also signals a subtle message about support of charities and reduces the incentives to do so. The reality is that the biggest donors give the biggest amounts, so it will have an outsized impact on charities.
For a charity, it is worth considering the following:
- If you were expecting large donations, perhaps contact those donors to have them give in this financial year, before the changes come into effect? (Recognising IRD have stated they will monitor this “in case it gives rise to any integrity concerns.”)
- Will this actually affect your charity? Perhaps not, given few charities have these sorts of large scale donors. But maybe take this as a challenge to reconsider your strategy for fundraising and see if you can attract some of the donors who can give $100,000?
- What is your strategy when it comes to fundraising – how can you proactively consider different forms? For example, via wills/bequests, large gifts, one-offs, or fundraisers.
Every year, many eligible donors do not claim back their donation tax credits through IRD. Donation tax credits can be claimed back for any donation made to a donee organisation for donations over $5. We are currently preparing a paper regarding the introduction of a ‘Gift Aid’ system here, which would be similar to the UK.
It is worth noting that the regulatory statement issued has the following comments on what was considered but rejected: “Other options, including multiple rates, removing certain charitable purposes, or introducing a United Kingdom-style gift aid scheme, were considered but not progressed due to complexity, or fiscal or timing constraints. Removing all donation tax concessions was also considered but rejected as inconsistent with the Government’s objective of supporting charitable giving. Increasing direct funding by Government support was not considered, noting this approach is preferred by the community and voluntary sector.”
Some of those points are worth being aware of. For example, we can guess but wonder what is meant by considering “removing certain charitable purposes”?
It is challenging times for charities and the cost of living crisis is having a dampening effect on charitable giving. This change will likely have a more chilling effect for charities than the likely positive impact to the Government of how much they pay to generous donors as tax credits.
It is worth mentioning that there are always green shoots of innovation and hope. We recently released the Changing Paradigms book (downloadable here) with 24 leaders describing how our paradigms of thinking need to change. Last week, we also held the Seeds Impact Conference with a panel on innovation and charities which was most encouraging (you can listen here). There are good things happening in this sector, we just need to tell the stories and get the information out about what is being done.
Our team supports hundreds of charities and if you would like to discuss anything in this article please let us know. We are also helping many charities go through a “governance review” that involves looking at the rules of the charity to consider if changes are needed to keep them fit for purpose (a recent change that requires all Charities to confirm this by October 2026). You can find out more about our resources for charities on our website.
To read more visit:
- Inland Revenue, Charities and Not-for-profits Information Sheet (28 May 2026)
- Taxation (Budget Measures) Bill No. 3 (28 May 2026)
- Government press release on improving tax rules for charities (28 May 2026)
Please note that this article is not a substitute for legal advice and you should contact your lawyer about your specific situation.
29 May, 2026
