Many groups in the community sector exist for purposes that the law recognises as being “charitable”. Because these groups provide a benefit to the public, they don’t have to pay tax on income that they earn.
To get this tax-exempt status – called “charitable status” – your group will need to register with the Charities Services section of the Department of Internal Affairs.
This section explains:
There are several public bodies involved in regulating and monitoring charities in New Zealand:
You’re not required to register your group on the Charities Register, but there are several benefits if you do. Most importantly, registering is a precondition for obtaining “charitable status” from Charities Services (Department of Internal Affairs), and therefore for being exempt from paying tax on income.
Usually Inland Revenue will presume that if your group is a registered charity and has only non-business income, it qualifies for tax-exempt status.
Your group will need to register with Charities Services even if it’s already registered and incorporated as an incorporated society or a charitable trust or trust board.
Registering as a charity also has other benefits:
Yes. An unregistered charitable organisation can still call itself a “charity” and ask the public for donations.
However, if you choose not to register you can’t call yourself a “registered charitable entity”, and you also won’t qualify for tax-exempt status.
It’s a criminal offence, carrying a fine of up to $30,000, for a person to falsely claim or imply that they are a registered charitable entity or that they act on behalf of one.
To be able to register as a charity:
These requirements are explained below: see “Charitable purposes” and “Qualified officers”.
Yes. Charities Services will accept applications from unincorporated groups and from the trustees of a trust, as well as from incorporated societies and other incorporated bodies.
A charitable purpose can include:
A charitable purpose must also provide a public benefit, which means a benefit that is:
A purpose can’t be charitable if it’s aimed at creating private financial profit.
A marae has a charitable purpose if the physical structure of the marae is on Māori reservation land, and the marae’s funds are used only for administering the land and physical structure and/or for a “charitable purpose” according to the general definition above.
Sport and recreation organisations can qualify for registration as charities if promoting sport is the means by which the organisation pursues a charitable purpose. For example, a sports organisation providing training or skills-development for the public may qualify as a charity under the “advancement of education” purpose, or an organisation providing public sport or recreation facilities may be considered to be benefitting the community. (For more information, visit: www.charities.govt.nz/apply-for-registration/charitable-purpose.)
The organisation’s main purposes must be exclusively charitable, but it may also have non-charitable purposes if these are “ancillary” to the main purposes.
A non-charitable purpose will be “ancillary” if it’s an inevitable consequence of the charity’s main work, or if it supports the main charitable purpose. A non-charitable purpose won’t be ancillary if it’s a significant or independent part of the organisation’s work.
For an organisation to be able to register as a charity, its officers must not be disqualified under the Charities Act (see also below, “Who are a charity’s ‘officers’?”).
An officer is disqualified if, for example:
However, if an officer is disqualified by one of these factors or any of the others set out in the Act, the Charities Registration Board has the power to ignore the factor in the particular case.
If a charitable organisation is a trust, its officers are all the trustees of the trust.
With other organisations, the officers will be:
Organisations wanting to register as a charity must apply to the Charities Services section of the Department of Internal Affairs. However, the decision whether to register your organisation is then made by the Charities Registration Board, an independent body.
You’ll need to provide:
If your organisation is already registered as an incorporated society, a company or a charitable trust board, the name under which it was registered will also be used for the Charities Register.
If your organisation isn’t incorporated, the name to be recorded on the Charities Register should be the name used on formal documents. The Charities Registration Board can refuse to register the organisation under a name that is offensive or likely to mislead the public.
If your organisation has more than one name (for example, if it’s known more commonly by a name other than its legal name), it may be possible for both names to be entered on the Charities Register.
The Register holds the following information about each registered charity:
This information is required to be publicly available, so that members of the public can search the register online. In limited situations, Charities Services can restrict public access to information or documents on the Register if it believes this is in the public interest (for example, to protect the health and safety of members of the public).
Note: Even if this information is restricted on the Charities Register, it will still be available through the Official Information Act.
All registered charities are required to file an annual return and financial statements with the Charities Services section of the Department of Internal Affairs.
Note: From 1 April 2015, financial statements have had to be presented according to new standards set by the External Reporting Board (XRB). The particular standard each charity must use depends on their annual operating expenditure. In general, charities with an annual operating expenditure of less than $125,000 will be able to prepare less complex financial statements. (For more information, go to: www.xrb.govt.nz and ww.charities.govt.nz/forms/annual-return). From April 2015, larger charities are also required to have their financial statements audited or reviewed by qualified auditors – this applies to a charity if its annual operating expenditure in each of its last two financial years was more than $500,000.
Organisations must provide their Charities Register registration number to any member of the public who asks for it.
Organisations must also notify Charities Services if there are changes to their:
The Charities Registration Board can remove or deregister a charity:
Charitable organisations can also ask to be removed from the Charities Register.
Deregistered charities who have complied with their own constitution and rules are only subject to tax on their income from the date of the final decision to deregister. A deregistered charity that hasn’t complied with its own constitution and rules will be subject to income tax from the date of non-compliance.
A separate tax on net assets applies to deregistered charities who have not distributed any accumulated income and assets for a charitable purpose within 12 months of becoming subject to income tax.
It’s not necessary to apply to Inland Revenue to obtain tax exempt status.
The Charities Services section of the Department of Internal Affairs automatically notifies Inland Revenue when a group has registered with them and when a group has deregistered.
A charity only needs to contact Inland Revenue for other tax matters such as GST or PAYE.
A group can also apply directly with Inland Revenue for donee status without registering with Charities Services (visit www.ird.govt.nz) .
To be eligible for donee status, an organisation’s purpose must either be charitable, benevolent, philanthropic or cultural. The funds of the organisation must apply mainly in New Zealand and Inland Revenue will consider who will benefit from the funds.
Donee status is wider than charitable purpose. However, Inland Revenue will consider whether the organisation has charitable status, or if they have applied to and been turned down by Charities Services. IRD and Charities Services work closely together.