Issue 097 August 2011

Estate & Trust Bulletin

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In This Issue:
   > 97.1 Govt announces Charities Commission to be absorbed
   > 97.2 NZTA supports DIA absorption of Charities Commission
   > 97.3 Donations Tax Credits investigation by Inland Revenue
   > Acknowledgements and Contributors

97.1 Govt announces Charities Commission to be absorbed

The Government has announced final decisions on changes that will further reduce the number of government agencies, State Services Minister Tony Ryall announced.

“These changes will provide greater value for money, reduce duplication and improve coordination across the state sector,” Mr Ryall said.

“In May the Government signalled our intention to review a number of Crown entities as part of our overall programme of state sector reform. We’ve decided to proceed with the changes that a process of due diligence confirmed had value.

“Reducing the number of government agencies, where it makes sense, will improve the delivery of services to the public, reduce duplication of roles, and allow reprioritisation of spending to where it will have the greatest impact.”

The Charities Commission is to be absorbed into the Department of Internal Affairs.

A three person statutory board is to be established to take over the registration and other functions of the Charities Commission.
The State Services Commission has extimated a $2.432 million saving over a four year period with transition costs of $300,000.

See Announcement

See Cabinet Minute

97.2 NZTA supports DIA absorption of Charities Commission

Following a NZTA Council meeting held on 25th August 2011, the Council agreed to support the Governments move to absorb the Charities Commission into the Department of Internal Affairs. NZTA President Jim Gray said “By moving the Charities Commission into the DIA at the same time as reviewing the Charities Act 2005, there will be an opportunity to create a clearer and less costly process for appeal by charities denied registration.”

Currently the cost of challenging denial of registration is prohibitive for all but the largest of charities where a High Court response is the only process, and where charities have also been required to dissect their organisation into charitable and non-charitable entities at more cost.

Mr Gray said “The Trustees Association was instrumental in development of the Commission in the late 1990’s and now is equally supportive of a restructuring for economic and procedural benefits to meet the needs of the charitable sector.”

NZTA found the Commission’s legal section was far too inflexible with their interpretation of the Charities Act to the detriment of some of New Zealand’s well known and respected charities. Further benefits to charities from the restructure may see the annual return filing fee dropped and any legal challenges made by the DIA, not the registration entity.

The achievements of the Charities Commission Board must and will be recognised in establishing the Commission and quantifying the charitable sector over the past 6 years, however the costs to Government of a number of devastating earthquakes, the current economic climate, combined with the CC staff’s hard line with high profile charities have not helped the Commission’s case to remain.

97.3 Donations Tax Credits investigation by Inland Revenue

Many people make charitable donations each year and receive tax credits accordingly. However, increasingly Inland Revenue is seeing situations where people are claiming tax credits for "donations" in situations where they have not made a true gift of their own money.

Any payment of over $5 to a charity (or some similar public entities) can potentially qualify for a donations tax credit if it is a gift. To be a gift it must:

Be made voluntarily;
Provide a material benefit to the recipient without imposing a countervailing detriment;
Be for no consideration; and
Provide no material benefit or advantage to the giver in return.

Inland Revenue has been investigating arrangements where tax credits for donations have been claimed in circumstances where a true gift of money has not been made.

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Acknowledgements and Contributors

Acknowledgements and Contributors:
Denis Bourke, Errol Anderson, Rosemarie Dawson, Carene Muller, State Service Commission

While every effort has been made to ensure the accuracy of items and article content, the onus is upon the reader to satisfy their own needs of verification. This publication is not intended as legal advice or guidance, the views expressed and content are not necessarily those held by NZTA membership, Advertisers or Sponsors.

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