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Inland Revenue

Tax Policy

Approval of charitable organisations

(Clauses 4, 7, 22, 23, 27, 29, 32, 33 and 40)

Summary of proposed amendment

The bill proposes to delegate to the Commissioner of Inland Revenue authority to approve charitable organisations for the purposes of the student loan scheme.

When student loan borrowers are volunteering overseas or working for a charitable organisation for a token payment they may apply to be treated as New Zealand-based and eligible for write-off of interest on their student loans. However, the charitable organisation must itself be approved for the purposes of the scheme. Delegation for that approval currently sits with the Governor-General, acting on the advice of Cabinet. Delegating approval authority to the Commissioner will speed up the approval process so that students will have more timely access to the interest write-off.

To improve the integrity of the list, the Commissioner will also be able to remove an organisation from it, if the organisation no longer meets the criteria for listing. If that happens, a borrower who has already been approved as eligible for interest write-off will remain eligible until the end date of the period for which the borrower’s status had been approved, or until they cease volunteering for that organisation, whichever happens first.

The Student Loan Scheme (Charitable Organisations) Regulations 2011 will be consequentially revoked. The list of approved organisations will continue be published on the Inland Revenue website, but this will now be a legal requirement.

Application date

The amendments will come into force on the date of enactment.

Key features

Proposed new rules will specify what is required for a charity to be listed for student loan purposes, relying on existing requirements in the Charities Act 2005 and the Income Tax Act 2007.

The Commissioner will be required to maintain and publish a charities list for these purposes and will have the power to de-list organisations that no longer meet the requirements.

When the Commissioner de-lists an organisation, student loan borrowers who have already been approved for interest write-off will remain eligible until they complete their volunteering assignment or reach the end of the 24-month approval period, whichever is earlier.


Under current law, charitable organisations must be approved by Cabinet for the purposes of the student loan scheme interest write-off and listed in regulations. The student loan borrower’s status of being treated as physically present in New Zealand and therefore eligible for interest write-off cannot commence earlier than the date on which the organisation is listed in the regulations.

However, the approval process, which currently requires Cabinet approval and the making of regulations, is slow, so that some borrowers do not have access to the interest write-off because the organisation is not approved and listed in the regulations before the borrower’s volunteer term is completed.

Detailed analysis

The definition of “charity” in section 4 of the Student Loan Scheme Act is proposed to be amended to remove the reference to the regulations, which will be revoked.

Proposed new section 27A will require the Commissioner to keep and publish a list of charities that have been approved. The list must include the date from which each charity’s listing applies and the date of de-listing, if applicable.

Proposed new section 27B will prescribe the primary matters with which the Commissioner must be satisfied before listing a charity. The criteria rely on the definition of “tax charity” in the Income Tax Act 2007 for the purposes of eligibility for exemption from income tax and the essential requirements for registration under the Charities Act 2005. Supplementary criteria will be set out in guidelines for the exercise of the Commissioner’s discretion.

The application requirements are set out in proposed new section 27C, allowing the Commissioner to seek more information if necessary and to list those charities that qualify under section 27B. The Commissioner will also be required to give an applicant prior advice of her intention to refuse a listing, with reasons, and allow the organisation time to rectify any deficiencies in their application. Applicants will be required to be notified of the final Commissioner’s decision.

Under proposed section 27D the Commissioner will be able to list a charity even if no application has been made under section 27C. This is likely to occur when a borrower applies to be treated as being physically present in New Zealand while volunteering, but the organisation, although on the Charities Register or approved as a tax charity, has not yet been listed for student loan scheme purposes.

Proposed section 27E will allow the Commissioner to remove a charity from the list if she determines that the charity no longer meets the criteria for listing. The Commissioner will be required to give a charity prior advice of her intention to de-list, with reasons, allow the organisation time to make any arguments against the proposed decision and consider any such arguments before making and notifying the charity of the final decision.

The proposed amendments to section 173 remove a decision made by the Commissioner to refuse to list a charity or remove a charity from the list, from the process for disputing assessments under Part 4A of the Tax Administration Act 1994. Instead the decision can be challenged by the charity under new section 176A, which will bring the challenge under part 8A of the Tax Administration Act.

Transitional provisions in clause 20, part 4 of schedule 6 will provide for charities already listed in the regulations to continue to be treated as qualifying charities and will require the Commissioner to include them in the list referred to in section 27A.

Proposed section 32 in part 2 will consequentially revoke the Student Loan Scheme (Charitable Organisations) Regulations 2011.