Tax incentives for company donors

Company donors can also claim back more from donations they’ve made after 1st April 2008. Company donors:

• Must make their donation to an IRD-approved donee organisation and keep the receipt for the donation.
• Can deduct the total amount of donations they’ve made from their yearly taxable income, as long as it’s not more than the company’s net income (as worked out before taking the deduction into account).
  For example, Company Ltd donated $20,000 to an organisation. Company Ltd’s annual income before tax is $200,000, and its net income after tax (before making the donations deduction) is $150,000. Because its $20,000 donation is less than its $150,000 net income, Company Ltd can deduct the full $20,000 from its annual tax return and file for an income of $180,000.
• Can make the deduction above only if they are a publicly listed company or an unlisted close company.

What has changed?

In the past, companies could deduct only 5% of their total donations for the year from their tax return.
Unlisted close companies were not able to make any deductions for donations.

Why is this change good for you?

The increased reduction makes donations a good option for companies wishing to reduce their end-of-year tax bill. This may encourage more companies to give donations to your organisation.

MĀORI AUTHORITIES

Māori authorities have the same rules as companies – they can deduct the total amount of donations they’ve made for the financial year from their annual tax return, as long as it’s not more than the Māori authority’s net income (as worked out before taking the deduction into account).

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.

How do companies offer payroll giving?

Only companies that file their EMS(IR348) and EDF(IR345) electronically using ir-File can offer payroll giving.
If an employer chooses to offer the scheme, they are responsible for deducting the donation, calculating the employee’s tax credits, passing the donations on to the donee organisation and keeping records of all donations and tax credits. For more information, see the IRD page about payroll giving for employers.

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.

 

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