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Inland Revenue

Tax Policy

Chapter 2 - Registration process under the Charities Act

2.1 In New Zealand, registration of charities began on 1 February 2007. Charities Services is responsible for determining whether an entity can be registered as a “charitable entity” under the Charities Act 2005.

2.2 Although registration is voluntary and non-registration does not mean that the entity is not charitable in purpose, there are a number of benefits to registration. In particular, registered charities can qualify for charities-related tax concessions in the Income Tax Act 2007, and they may be eligible for greater funding as some funders have policies that only support charities that are on the Register.

Registration requirements

2.3 To be registered as a “charitable entity” an entity must meet the requirements in section 13 of the Charities Act 2005. It must:

  • be established and maintained for exclusively charitable purposes. A “charitable purpose” is defined in section 5(1) of the Charities Act and includes:

“…every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community.”;

  • not be carried on for the private financial benefit or profit of an individual;
  • restrict its distributions upon winding-up to charitable purposes;
  • have a legal name that is not misleading or offensive; and
  • have proposed officers that are qualified by virtue of section 16 of the Charities Act 2005.

2.4 The Charities Act 2005 also requires all registered charities to file an annual return with Charities Services. An annual return includes both a complete annual return form and financial accounts.

On-going monitoring processes

2.5 Registration under the Charities Act 2005 is not necessarily a permanent status. An entity must continue to qualify for registration in order to remain on the Charities Register. Charities Services assesses the eligibility of entities to remain registered if there is cause to open an investigation or a monitoring review.

2.6 Charities Services may open an investigation in response to specific information – for example, a complaint, adverse information received about an entity’s activities, a negative media report, a Court judgment relating to a similar type of charity, or concerns identified by Charities Services at the time of registration. Charities Services also proactively monitors entities it identifies to be a medium to high-compliance risk, some of which proceed to investigation.

2.7 Alternatively, Charities Services may open an investigation because of information provided by the entity itself. This includes:

  • notification of changes to its rules which mean its purposes are no longer charitable;
  • notification of changes to its winding-up clause which means the winding-up clause no longer meets on-going registration qualification criteria;
  • an annual return that shows spending on activities that are not related to its charitable purpose; and
  • an annual return that indicates someone is receiving a private financial benefit.

2.8 In Chapter 3 we discuss the importance and significance of registration as a charitable entity for tax purposes.