To continue on with our festive theme, let’s look at the tax effects of giving at Christmas time (and any other time of course). If you missed my last post, which covered the tax effects of Christmas socials, parties and other entertainment, you can view it here.  

As you might expect, gifts to a charity generally provide tax benefits to the giver.  An individual will usually be eligible to claim a refundable tax credit of one third (or more precisely, 33.33%) of all charitable donations during the tax year.  The maximum you can claim in any one year is one third of your taxable income for that year, however, you can share your donations with your married, civil union or de facto partner (and vice versa), as long as your total combined claims are no more than one third of your combined taxable income for that year (assuming your combined claim is split 50/50).

In order to qualify for the credit, you must:

• be an individual (ie the credit cannot be claimed by a company, trust etc)
• have earned taxable income during the year in which the donation(s) was/were made
• have been resident in New Zealand during the year in which the donation(s) was/were made
• have made monetary donation(s) of over $5 to an approved organisation (a searchable database of approved organisations is available here)
• have a valid receipt for each donation which meets Inland Revenue’s requirements (note that IRD has relaxed its requirements slightly in relation to donations for the Christchurch earthquake relief of up to $1,200)
• file an IR526 within four years of the tax year in which the donation was made (the IR526 form for the year ended 31 March 2014 is available here.  The 2015 form will likely become available after 31 March 2015).  It can pay to attach your donation(s) receipts(s) to the claim form.
• have filed your income tax return (IR3) for the year

Donations tax credits can be transferred to another tax type or to another taxpayer or refunded.  Note that if you made the donation through payroll giving, it will have already been applied as a reduction to your PAYE.

The above information is current at the time of writing and is provided in general terms relevant to New Zealand only.  We do not accept responsibility or liability for its accuracy or for the outcomes that may result from placing reliance on this information.  If you believe you may be eligible for a donations tax credit, please feel free to contact me so I can take any subsequent legislative changes and your particular circumstances into account. And remember to keep your receipts.

 

Amanda Imms CA

Principal

AJ Accounting Limited

ph. 021 771 557

amanda@ajaccounting.co.nz