Charities' Business Income Exemption in NZ
Explore the intricacies of charities' business income exemption in New Zealand, including its purpose, eligibility criteria, trading activities, recent amendments, and future implications. Learn why charities utilize this exemption, the evolution of charity laws, and what changes to expect in the fundraising landscape.
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Arti Chand arti@actaxlaw.nz www.actaxlaw.nz +64 21 922 718 Future of Charities & Tax Business Income Exemption
Charities: business income Income derived directly or indirectly from a business carried on for: a trust/society/institution established and maintained exclusively for charitable purposes and not for the private pecuniary purpose of any individual; and the trust/society/institution is a tax charity; and it is carrying out charitable purposes in NZ; and controlling persons cannot direct/divert income to the benefit of anyone other than the charity The business must be carried on for charitable purposes.
Charities: business income Why would a charity use this exemption? Funding - need to develop self sufficiency Provide services/products at lower than market Need to partner with commercially driven organisations - on projects that ultimately will further the charitable purpose
Charities: business income 30% of charities have trading activities in NZ (TWG). For example: Commercial property investment; Residential rental property investment; Shops (Op shops, discount shops); Retirement villages; Farming
Charities: business income What amendments/changes are happening now: Trading entity must now also be a registered charity - amendment application from 1 April 2019. Enacted 18 March 2019. Tax Working Group Exemption to apply only to the extent the business income is used for charitable purposes; What about accumulation for necessary reasons? Is the exemption wrong - providing an unfair advantage to charities in the commercial sphere?
Charities: business income What is the future? Fundraising/funding issues necessitates commercial trading options; Australia - retained the concession (Henry Report) Other jurisdictions - focus on related business, and accumulation of profits In NZ, Charities Services will register fundraising entities as charities. What other changes should we expect?
