In August 2011 the Charities Commission (now DIA Charities Services) issued this note:

Inland Revenue has published a “Revenue Alert” highlighting their concerns that some people are claiming tax credits for “donations” where there may not have been a true gift of money to a charity.

The arrangements that have come to their attention involve smaller, locally-based charities, and typically involve a payment being made in the expectation that the donor would receive something in return.

Any payment of over $5 to a charity can potentially qualify for a donations tax credit if it is a gift.

To be a gift it must:

Be made voluntarily;
Provide a material benefit to the recipient without imposing a countervailing detriment;
Be for no consideration; and
Provide no material benefit or advantage to the giver in return.

You may wish to read Inland Revenue’s “Revenue Alert”, to be sure that your charity is complying with tax laws, and (if your charity is also a donee organisation) that your donors are able to claim tax credits when they make donations or gifts.  Full information can be found on the IRD website (search on ‘donations’)

See also:
More information about donee organisations
IRD information on donations, tax credits, funding and grants

Categories: Tax Matters