Tax law changes a benefit  

Recent changes to the tax rules should encourage more people to give, existing donors to be more generous and help charities raise more money from donations.

TrustLine newsletter, June 2009

From 1 April 2009 the limit has been removed from the tax deductibility of donations – meaning donors can claim back 33.3% of whatever sum they give to charity.

Previously the maximum refund was $630, meaning only the first $1,890 of an individual’s giving received any tax relief.

There is evidence the change is already having results. One trust has reported that when a supporter of the local performing arts centre heard about the rebate, he immediatly changed his $1,000 donation to $1,500, knowing he could claim the extra $500 back in tax. Another foundation says a supporter changed a $15,000 donation for administration costs to $20,000.

The Government estimates donations will increase by a further $300 million a year as a result of the changes.

In announcing the changes, Prime Minister John Key said they would mostly benefit New Zealand-focused charities,although the rebate will also apply to many overseas aid organisations.

“Understandably, New Zealand charities are likely to feel excited by the tremendous potential boost that this policy offers,” he said.

The tax changes should also encourage more corporate giving, with the tax deductability limit removed for public benefit gifts. Previously, companies could claim a maximum of 5% of their taxable income as a charitable gift.

More changes are in the pipeline, payroll giving is presently making its way through the legislative process. This will allow donations to be deducted directly from wages. Each pay day, employees would receive a PAYE credit on the amount they donated, rather than having to file a donation form at the end of the tax year. The Government is also investigating Gift Aid.