27 Sep 2018
After a long period that involved several rounds of consultation and drafts, the IRD this week issued their views around the meaning of “wholly or mainly” as it relates to tax donee organisations operating in New Zealand. We were sent a copy of the fact sheet and statement because we were involved in the consultation process and provided feedback on this so this is a short news flash – a more detailed analysis will follow.
As at the time of writing the documents are not yet available on the IRD website and we will include a link to that soon. In the meantime, if you would like a copy of the fact sheet email email@example.com for more information.
Prior to this interpretation statement, 50% was the figure accepted as being “wholly or mainly” that was used to determine if an organisation was operating in New Zealand in order to be eligible for tax donee status – that is, it needed to apply its funds to specified purposes within New Zealand. So, if it applied 51% or more for purposes overseas it was not operating “wholly or mainly” in New Zealand.
This figure has now changed to 75% - a substantial difference potentially particularly in the context of aid organisations or Church groups because if they apply funds of say 30% to overseas purposes then they will potentially not be tax donee organisations. At one point it had been proposed that the figure be increased to 90% so it is good to see it is lower than that but it will still have impact on many organisations who support work offshore.
This interpretation statement will apply from the beginning of an organisation’s 2019/20 income year so you should consider if there will be impact on your operations prior to that point. For example, some groups may want to potentially look to implement some giving before it takes effect.
There will be a “safe harbour” regime which involves looking beyond any one year to take into account dips or unusual increases (eg due to natural disasters overseas).
We are preparing a more detailed analysis and summary and will post this in the coming week so check back for more.