Find out about tax incentives for individuals

From 1st April 2008, donors can claim back more money from the donations they’ve made. Individual donors:

• Must make their donation to an Inland Revenue Department-approved donee organisation and keep the receipt for the donation.
• Can claim back 33% (or one third) of the total donations they’ve made in one tax year. For example, Manu donated $30,000 in one tax year (1st April – 31st March). She can claim back $10,000.
• Can not claim back more than 33% (or one third) of their total taxable income for the year. For example, Peter donated $60,000 in one tax year (1st April – 31st March). One third of his donation is $20,000. However, Peter’s total taxable income for that tax year was $15,000. One third of his taxable income is $5000. Therefore, Peter can claim back only $5,000.

What has changed?

In the past, individuals could claim back one third of their donation, but only up to a total of $630.00 in one tax year. Now, there is no limit on how much that third is.

It’s not a change, but your donors should know that they can claim back all donations over $5.

Why is this change good for you?

The increased tax credit (rebate) may encourage more people to give donations to your organisation.

PAYROLL GIVING

What is payroll giving?

Payroll giving is a way for individuals to donate to specific organisations straight from their pay. This means the individual can immediately receive the tax credits, rather than having to file for them at the end of the financial year. However, individuals can only participate in this scheme if their employers are eligible and choose to offer it. Click here to see which employers may choose to offer payroll giving.

What are the incentives for individuals?

Individuals receive the same 33.33% tax credit through payroll giving as through other methods of donation. For example, Angela donates $30 per pay. This $30 goes to the donee organisation, but Angela’s pay is only about $20 less, as the remaining $10 is a tax credit and immediately subtracted from the amount of tax Angela pays per pay period.

This method of donation also removes the need to file a tax credit claim form (IR526).

Why is this new scheme good for you?

Because individuals won’t have to do as much paperwork and can immediately receive tax credits, rather than having to wait until the end of the financial year, it will be easier for them to donate to your organisation.

For more information about payroll giving, go to www.payrollgivinginfo.org.nz, click on ‘Download key information guides’ and download the For Arts and Cultural Groups PDF. You can also visit the IRD website.

VOLUNTEERS AND HONORARIA

Some people may contribute time, rather than money, to your organisation. For these donors, there are two types of compensation.

Reimbursement for expenses

If volunteers have to spend their own money while carrying out tasks for you, it is common to reimburse them. This might be for things such as petrol. There is no tax charged on reimbursement.

When you are reimbursing volunteers, you need to make sure you file the correct receipts. If you don’t provide the receipts with your tax return, the reimbursement will be treated as honoraria and therefore taxed as such.

Honoraria

An honorarium is a kind of token payment, made at less than market rate. If people are providing you services on a volunteer basis but you would like to give them some payment in return, these payments are honoraria.

In terms of tax, honoraria are treated as schedular payments (formerly withholding payments). This means you must withhold tax at a specified flat rate, regardless of the individual’s normal tax rate. For honoraria, the specified rate is 33%.

For more information about honoraria, go to www.payrollgivinginfo.org.nz, click on ‘Download key information guides’ and download the For Arts and Cultural Groups PDF. You can also see these guidelines from VolunteeringNZ, or visit the IRD website.
What has changed?

The only change around volunteers and honoraria is the change of term from ‘withholding payment’ to ‘schedular payment’, as discussed above.

Even though it’s not a change, it is important to be aware of the current rules around reimbursement and honoraria.

 

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