If your not-for-profit organisation has donee status, individuals, companies or Māori authorities who make cash donations to your organisation may be able to get a tax credit or income tax deduction.
To qualify for donee status, your organisation must apply its funds wholly or mainly within New Zealand. From April 2019, we will generally accept that ‘wholly or mainly’ means that an organisation applies 75% or more of its funds within New Zealand.
Read more about how to calculate whether your funds are applied wholly or mainly within New Zealand in our interpretation statement and fact sheet below.
If you do not apply your funds wholly or mainly within New Zealand, you can still get donee status. To qualify for overseas donee status you must be specifically named in tax legislation.
Or your organisation could establish and maintain a fund exclusively for use in New Zealand. In this case, the fund, rather than the organisation, could hold donee status.
Find out more about funds in QB 19/10: Donations: What is required to establish and maintain a fund under s LD 3(2)(c) of the Income Tax Act 2007. Funds are also explained in our Charitable and donee organisations (IR255) booklet
Charities claiming a business income tax exemption
Business income used for charitable purposes in New Zealand is tax-exempt. However, if you use business income for charitable purposes in New Zealand and overseas, you must apportion your business income between charitable purposes in New Zealand and charitable purposes overseas. Only the New Zealand portion is exempt from income tax.
For more information read our pamphlet Charitable and donee organisations - IR255
Charities with a student loan borrower working overseas
To keep their entitlement to an interest-free student loan, a student loan borrower who is or will be working overseas for you as a volunteer (or for token payment), can apply to us to be treated as being physically in New Zealand. Your organisation must be an approved charitable organisation.
Non-resident charities not able to register in New Zealand
We may approve exemption from income tax for a non-resident charity if they are unable to be registered with Charities Services under the Charities Act 2005.
Protect your organisation's funds from terrorism
Not-for-profit organisations and charities are at risk of being misused by individuals or other organisations to finance or support terrorist activity or assist money laundering.
New Zealand is a member of the Financial Action Task Force (FATF), an inter-governmental organisation that sets international standards for combating money laundering and terrorism financing. These standards require member countries to identify the subset of not-for-profit organisations that are likely to be at risk of terrorism financing abuse.
The not-for-profit and charitable organisations at most risk of terrorist abuse:
- are engaged in ‘service’ activities operating near an active terrorist threat
- send funds to counterpart or ‘correspondent’ not-for-profit and charitable organisations located in or close to countries where terrorists operate.
If your organisation sends funds overseas, we expect you to have internal controls to ensure the tax relief is targeted appropriately.
You should have procedures to:
- prevent funds going directly, or indirectly, to any individual or organisation associated with terrorism
- ensure that no support is given to any individual or organisation that may carry out activities that could result in conviction in New Zealand under the law, such as the Crimes Act 1961, or similar laws in the relevant country.
- Protecting against terrorism and money laundering (advice from Charities Services)
- New Zealand’s National Money Laundering and Terrorism Financing Risk Assessment 2018
- FATF REPORT Risk of Terrorist Abuse in Non-Profit Organisations 2014
- FATF REPORT Emerging Terrorist Financing Risks 2015
- Non-Profit Organisations & Terrorism Financing: Regional Risk Assessment 2017
- 2018 Non-Profit Organisations & Terrorism Financing: Red Flag Indicators