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Make your Giving go Further - Tax Benefits from Charitable Giving.

Updated: Mar 13

Mark Glover, Manager, Deloitte Private, Queenstown.

 

Charitable giving is a selfless and generous act that can have positive impacts on individuals and society. It is a way of showing compassion and empathy to those who may be experiencing difficult times and to fund organisations or projects close to your heart.

   

Charitable giving can bring a sense of fulfilment and purpose to an individual's life. The act of giving, even in modest amounts, can make a significant impact on people's lives. Giving can be used as a way to show gratitude and appreciation for the good things in life, which can boost your overall well-being and happiness. The effect of charitable giving can not only be felt on our society's current state, but it can also impact future generations.

The Wakatipu Community Foundation provides an easy solution to giving in your community with the multiple initiatives that it administers.

 

Charitable giving can have additional benefits beyond the warm fuzzy feeling you get inside from making a difference. In New Zealand, for cash donations of $5 or more you may be able to receive a tax credit to the tune of 33.33%. See below for how simple it is to claim your rebate.

  

 What is a donation tax credit?

 A donation credit is a tax benefit provided to individuals who donate to charitable organisations or causes. In New Zealand, a donation tax credit allows you to claim a credit of 33.33% for any cash donations of $5 or more made in the financial year. This means that for every $5 donated, the donor can claim a tax credit of $1.67. This credit can be used to offset income tax obligations or refunded directly to the donor's bank account, depending on their circumstances.

 

How do I claim them?

All you need to do is satisfy the requirements listed below and complete an IR526 through your MyIR* login or ask your accountant to do it for you. You can claim each time you donate or save them all up until the end of the year. The credits come direct from the IRD and will either be refunded to your bank account or used to offset your current income tax obligations.

 

Don’t worry, if you have forgotten to claim some old credits you have up to 4 years to do it, as long as you have the receipts.

 

What are the requirements?

 The donation must be for $5 or more. A donation receipt must be from an approved donee organisation (the Wakatipu Community Foundation is approved) and include;

  • The donors full name, the amount donated and the date of the donation.

  • A clear statement that it was a donation.

  • The name of the charitable organisation, its charitable services registration number and IRD number.

  • The official stamp, logo or letterhead.

  • The full name, designation, and signature of the authorised person.

  • A unique receipt number.

· The donation must not directly benefit you or your family.

· You must be a person and not a company, trust or Maori Authority.

· You must have earned taxable income during the period.

· The credit must not exceed 33.33% of your taxable income.

 

 What if my business donates?

 Companies are eligible for a taxable deduction on donations made up to the level of their net income. A donation cannot be made that would cause a taxable loss. The donation is claimed when the company files its annual tax return.

 

Can I share my donation tax credit?

 The simple answer is yes you can. A donation tax credit can be shared with a spouse, de facto or civil union partner who is eligible. They don’t need to be named on the receipt to be eligible. You do this when you are submitting your IR526 through MyIR. They do not need to submit the receipt themselves.

  

Can I donate my tax credit?

 You can also request that your tax credits be donated back to the Wakaptipu Community Foundation (or charity of your choice) so that they can distribute them for you. You can do this when completing your IR526 or through one of the many tax gifting programmes such as Supergenerous

 

Grossing up your giving

We are seeing an increasing trend of individuals grossing up their donations by adding the value of the tax credit to their donation, noting that they will personally receive the rebate back. An example of this is that Jane wants to donate $100 to her local foodbank charity. She works out that her rebate will be $33.33 so instead she donates $133.33 noting that the net cost to her will be closer to $100 once she has claimed her donation rebate in her tax return.

 

Other types of giving

 Payroll Giving – Makes it even easier to donate. A donation is taken from your pay each period and the tax credits are used to offset your PAYE. The administration is simplified as the rebate is accounted for automatically rather than at year end. Encourage your employer to register.

  

Common misconceptions – what is not a donation?

 Not all donations are eligible for a tax credit. To be eligible the donation would not normally benefit you or your family directly. It is common for people to think that all school fees are eligible however, things such as tuition fees, exam fees, parent teacher association membership fees, voluntary fees for activities outside of the curriculum and costs for materials for art or technology classes are not.

 

Still have questions?

 If you still have questions about donating or would like to volunteer and your time, skills or talents then I am sure that anyone of the fantastic people at the WCF or any other charitable organisation would love to have a chat.

 

 *The first time you add a donation credit claim you may need to register under the ‘I want to’ section.


Written by Mark Glover, Manager Private, Deloitte Queenstown. 

Catering to a range of clients from SMEs to large organisations, Deloitte Queenstown specialises in family succession planning and intergenerational wealth, helping families navigate complexities with sensitive, pragmatic advice and expertise.

Deloitte Experts in audit, consulting, financial advisory, risk management, and tax services.  





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