We are grateful to Lawyer Susan Barker and Charities Law Reform Aotearoa New Zealand for the following comment:
Budget 2026 makes 10 tax changes for charities, falling broadly into 3 categories:
Donations tax credit changes:
1. New cap of $100,000 for donations tax credits
2. allowing in-year donation tax credit refunds
3. allowing donors to transfer their DTC directly to a charity
4. allowing NFPs to treat honoraria as salary or wages
5. “pay-in-money” rule for trust income allocations to charities
Non-resident charities:
6. removing the tax exemption for non-resident charities with no charitable purpose in New Zealand
Membership subscriptions for taxable NFPs:
7. ensuring membership subscriptions remain non-taxable
8. increasing the not-for-profit deduction to $10,000 (s DV 8)
9. smaller NFPs exempt from filing annual tax returns
10. financial institutions required to provide interest income information for RWT-exempt customers to IRD.
Many of these are welcome changes – particularly welcome is the decision not to progress work on creating a new category of “donor-controlled” charity for the purpose of imposing minimum distribution requirements and other complicated tax rules. Kudos to the Government for listening to the charitable sector and for ceasing work on this issue – this is a very prudent and welcome development!
However, you will no doubt have noticed that the proposal to reinstate the “cap” on donations tax credits is very controversial, not least because it was not properly consulted on, and has been included in the Budget Bill which passed through all Parliamentary stages under urgency by Friday 29 May. In our view, with an upcoming election taking place before the cap takes effect, we now have an important opportunity to have the discussions that have not been had to date regarding clarifying and enforcing the fiduciary duties – working with the underlying law rather than cutting across it will address any issues of concern in a targeted way that is simple and easy to understand and yet very effective. In case it might be of interest, more on this can be found here and here – if you would like to join or support this discussion, please get in touch.