TAX CHANGES FOR CHARITABLE GIVING

 

 

 

The changes, effective from the 2008/09 income year, include:

the removal of the $1,890 rebate threshold on donations made by individuals
the removal of the 5% deduction limit on donations made by companies and Maori authorities.
the company deduction for the donations will be extended to include unlisted companies with five or fewer shareholders

The changes recognise the significant contribution made by the charitable and non-profit sectors to the well-being of our communities, and foster a stronger culture of charitable giving in New Zealand .

 

How will the changes work?

For Individuals

The $1,890 threshold for which individuals can claim a tax rebate for cash donations to donee organisations will be removed
Individuals will be able to claim a 33 1/3 % tax rebate for donations, up to a maximum claim equal to their annual taxable income.

For example:

Indira donates $3,000 to various charities and other non-profit organisations, including her local church. Her taxable income for the 2009 year ( 1 April 2008 - 31 March 2009 ) is $35,000.

In the past Indira could only claim a maximum of $630. With the removal of the threshold Indira will now receive $1,000, a gain of $370.

For Indira to claim her rebate she will need to complete the Rebate claim form (IR526). Indira will need to include her receipts from the approved charitable organisations with her rebate claim form.

 

For Companies

The 5% limit on deductions that companies can claim for cash donations to donee organisations will be removed

Companies will be entitled to a deduction for donations made to donee organisations, limited only by the amount of the company's net income
The donation deduction is also being extended to unlisted close companies (companies with five or fewer shareholders)

For example:

Company Ltd is a publicly-listed company. In the 2009 tax year ( 1 April 2008 - 31 March 2009 ) Company Ltd supported the local community charities, donating $20,000. The Company Ltd net income before taking into account its donations was $200,000.

Under the current law, Company Ltd is entitled to a tax deduction of $10,000.

Under the new rules, the full $20,000 can be deducted. The tax deduction will be included in the company's income tax return (IR4). 

 

Maori Authorities

The 5% deduction limit for cash donations to donee organisations and Maori associations will be removed
Maori authorities will be entitled to a deduction for donations made to donee organisations, limited only by the amount of their net income

The change will operate in exactly the same way as the change to the company deduction and the donation deduction will be included in the Maori authority's income tax return (IR8).

 


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