Income tax and charitable organisations (Charitable organisations), charitable organisations.#Charitable #organisations
GST and income
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In this section
Income tax and charitable organisations
Registration of charities
Deregistration of charities
Charitable organisations and community housing
Charitable organisations and the Student Loan Scheme
Guidelines for non-resident charities
Charitable bodies requesting overseas donee status
Income tax and charitable organisations
Charitable organisations can receive many types of income, including subscriptions, grants, subsidies, donations or koha, fees, raffle money, trading profits, and proceeds from selling assets. There are income tax exemptions available if they are registered with Charities Services.
Registering with Charities Services
You can find out how to register with Charities Services on their website.
Once Charities Services have approved your registration, they will send you a registration certificate and letter, as well as our leaflet Tax information for charities registered under the Charities Act 2005 (IR256) advising you about the exemptions available to registered charities.
As the registration process of Charities Services meets most of the requirements for income tax exemption, you don’t have to provide us with your organisation’s founding documents. We no longer issue letters confirming tax-exempt status. However, if you require an exemption from RWT (resident withholding tax) you will need to complete an Application for exemption from resident withholding tax on interest and dividends (IR451) and send it to us.
You will be expected to self-assess your tax-exempt status annually.
Some organisations may have rules that prevent additions or alterations to the charitable objects, personal benefit and winding up clauses without first getting our approval.
If you are registering your charitable organisation with Charities Services, we don’t need to give approval for changes to rules. Instead,we give general consent to any amendment removing such a rule. We recommend that you remove this requirement from your rules.
When charitable organisations are liable for income tax
Charitable organisations are liable for income tax if they:
- operate without written rules, constitution or trust deed
- operate under a set of rules, a constitution or a trust deed that does not meet the requirements for an income tax exemption
- use business income for charitable purposes outside New Zealand
- are not registered by Charities Services.
Paying income tax
Income tax rates can vary for your organisation, depending on whether you’re incorporated or unincorporated. You may also need to pay provisional tax.
Getting an IRD number
Any type of charitable organisations you are running will need an IRD number.
Registering for GST and PAYE
You may also need to register for GST and PAYE.
Filing income tax returns
When charitable organisations are exempt from income tax
The Income Tax Act 2007 and the Estate and Gift Duties Act 1968 set out a number of income tax and duty exemptions. Some of these exemptions give benefits to charitable organisations and some give benefits to people or companies who make donations to these organisations.
There are generally two main conditions that a charitable organisation must meet to qualify for any of the exemptions:
- The organisation’s aims and activities must be exclusively charitable.
- None of the organisation’s income or funds may be used (or be available for use) to benefit any of its members, trustees or associates.
Your responsibilities if you are exempt from income tax
If your charitable organisation is assessed as being fully exempt from income tax, you don’t need to file an income tax return unless we ask for one. However, you still need to keep accurate records for the organisation.
Banks and other financial institutions that pay interest are required to deduct RWT (resident withholding tax) from interest. Charities are eligible for an exemption from RWT. You can request an exemption from RWT (resident withholding tax) by completing an Application for exemption from resident withholding tax on interest and dividends (IR451) and sending it to us.