Consultations on taxation and the non-profit sector
Created: March 12, 2025 at 4:21 PM | Updated: December 4, 2025 | By NZ Navigator Trust
Update November 2025: IRD has recently released an update on taxation and the non-for-profit-sector.
Work will not continue on the taxation of the business income of charities but will focus on strengthening the tax rules for charities.
Minister Watts has requested a targeted consultation of the policy design for changes to donor-supported charities, running from November 2025 to early February 2026.
The Community Constellation will be participating in this IRD consultation later this month.
The topics for the consultation are:
1. Donor-supported charities:
a proposed definition for donor-controlled charities
a proposed minimum distribution rule
proposed integrity measures.
2. Taxable associations: subscriptions, mutual transactions and related matters:
- a proposal to clarify the circumstances when membership subscriptions and levies could be exempt
- a proposal to raise the annual tax-free threshold from $1,000 to $10,000 and target it towards small not-for-profits
- a proposal to require taxable not-for-profits to have simplified income tax return filing requirements.
3. Simplifications for donors:
a proposal that will allow donors to claim in-year donation tax credits
a proposal that will allow donors to allocate donation tax credits to the charity they donated to.
Sue Barker (Sue Barker Charities Law) has shared her thoughts and concerns about the 14 November consultation paper in her latest newsletter. In her opinion, IRD’s latest proposals are complex, will cut across the underlying law and be very expensive to comply with and administer. Read the newsletter here.
Update July 2025: IRD announcement - On 7 July 2025, Inland Revenue proactively released the submissions that were received on the officials’ issues paper Taxation and the not-for-profit sector (February 2025) in the interests of transparency. The release includes a summary of the main themes that emerged from the consultation. All matters discussed in the issues paper are being considered further and could be subject to further consultation.
Update April 2025: The Finance Minister told media that the Government's charities tax plans have been pushed out by a year. Despite the short consultation period, there were a lot of submissions and clearly many complexities to work through. The sector is ready to engage with any future developments in this space.
Background
Inland Revenue (IRD) released an issues paper related to a review generated by the government's tax and social policy work programme (released in November 2024).
The review includes the exploration of issues related to:
- Charity business income tax exemption
- Donor-controlled charities
- Integrity and simplification issues
IRD asked for submissions from the public - this process closed on 31 March 2025.
You can check out the issues paper here and download a questions and answers paper here.
Want to know more?
Sector-generated survey
The consultation documentation was technical and the issues complex.
The Community Constellation (a collaboration of community sector peak bodies coordinated by Hui E!) wanted to ensure that everyone could participate in this important review so they created a plain English survey that outlined the key areas of the consultation.
The survey results have been collated into group feedback and sent to IRD.
Link to the survey results here.
Listen to a Radio New Zealand interview
Nine to Noon talked to two experts who work in the non-profit and charitable section and who are worried that the government is looking to the sector to increase tax revenue.
Link to the podcast here.
A briefing on the consultation paper
A webinar briefing on the consultation paper with Craig Fisher, Jenny Gill and Steven Moe.
Link to webinar here.
A charity tax background paper
A background information paper written by Craig Fisher and Steven Moe: Charities & Tax Examining the foundations of how and why we empower charities to have positive impact.
Link to briefing paper here.
Summary of submissions
On 7 July 2025, Inland Revenue released a summary of the main themes that emerged from the submissions received during the public consultation.
Link to the summary of submissions issue paper here.
