Charities benefit from receiving donations while donors also often benefit as they can help out worthy causes. Donors are financially incentivised to donate because they can apply for a Tax Refund on their Donation by applying directly to IRD or by way of payroll giving. [Link to the other article once published]
Direct donations
People often make donations to charities directly. As long as the charity has “tax donee” status and is a registered charity, the donor can then submit the receipt to IRD who will issue a tax credit, which effectively returns 33.3% of the donation to the donor. This happens at the end of the financial year. Find out more about claiming tax credits for direct donations.
So what is a tax donee organisation?
Generally a tax donee charity will also be registered with Charities Services, but not always. IRD maintains a list of donee organisations. Charities are added to the list if they use at least 75% of their funds within New Zealand (that is, they operate wholly or mainly here), or for the public good if an organisation is not a charity. For more on the threshold, you can check to see if a charity is on the IRD donee organisation list here.
It is also possible to claim tax credits on donations to charities supporting overseas causes.
We help with charity set ups and answering questions all the time. If you would like to discuss this further, please contact one of our team.
We have written a second article about another option, payroll giving. [link to the other article once published]
This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source.
If you would like to discuss further, please contact one of our team on stevenmoe@parryfield.com, or annemariemora@parryfield.com at Parry Field Lawyers.
