|Inland Revenue is currently consulting on an issues paper on donee organisations. When a person makes a donation to a donee organisation, they can generally claim a tax credit for that donation.
The issues paper examines the donee organisation requirements of the Income Tax Act 2007, and is particularly relevant to registered charities that apply some of their funds to charitable purposes outside of New Zealand. This is because donee organisations must “wholly or mainly” apply funds to certain specified purposes (including charitable purposes) within New Zealand. Inland Revenue currently accepts that this requirement is met where 51% or more of the funds are applied within New Zealand. The issues paper suggests a higher threshold should apply which, although no exact figure has been set, could be as much as 90% or more.
If the current practice was to change it would apply prospectively. Organisations unable to satisfy the “wholly or mainly” requirement under any new higher threshold may have alternatives (discussed in the issues paper) if they wish donors to be eligible for tax benefits.
The issues paper also considers how the extent to which an organisation has applied funds to specified purposes is calculated and confirms that applying funds to specified purposes within New Zealand does not limit an organisation to spending funds within New Zealand.
The deadline for comment is 29 July 2016. More information is available on http://www.ird.govt.nz/public-consultation/#03 under Draft items.
Updated 5 May 2021 ADLS – Law News: Rod Vaughan speaks to three experts in the field: Craig Fisher (a consultant at RSM, an ADLS councillor and an associate of Boardworks), Duncan Cotterill partner Scott Moran and Read more…