The Government is introducing changes to tax rules for the charitable and not-for-profit sector following feedback that existing provisions lacked clarity.
Revenue Minister Simon Watts and Community and Voluntary Sector Minister Louise Upston announced the package, which includes raising the tax-free net income threshold for not-for-profits from $1,000 to $10,000.
The donation tax credit scheme will cap eligible donations at $100,000 per year to ensure financial sustainability and limit tax planning risks when donors give to charities they control. Donors will also be allowed to receive refunds throughout the year in certain circumstances rather than waiting until the end of the tax year, and will be able to gift their tax credit to a charity.
Membership subscriptions and levies will remain non-taxable for not-for-profit organisations.
The changes follow an Inland Revenue Issues Paper released last year that attracted significant public interest. "Submitters noted that the rules lacked clarity and could undermine credibility," Watts said. "The Government has listened to this feedback and is introducing a range of measures to ensure the charitable and not-for-profit sector is strong, fair, and has integrity."
The changes will take effect between 2027 and 2028. Inland Revenue will publish detailed information when the legislation is introduced.