A Week in Review

Qualifying as a Donee Organisation

Subpart LD of the Income Tax Act 2007 contains provisions surrounding tax credits for gifts and donations. Where a monetary gift or subscription (one not conferring any rights) of $5 or more is paid to a qualifying organisation (society, institution, association, organisation, trust, or fund), a tax credit (donation rebate) will usually be claimable by the payer.

In mid-2016, an Issues Paper was released by IR (IRRUIP9 Donee organisations — clarifying when funds are applied wholly or mainly to specified purposes within New Zealand). The “specified purposes” referred to in IRRUIP9, focussed on an organisation’s charitable, benevolent, philanthropic or cultural activities. A proposal was made in IRRUIP9 to change the Commissioner’s current practice of accepting a minimum percentage of application of funds to specified purposes of a simple majority of more than 50%, to a 90% threshold.

Following up on the 2016 publication, IR has now released draft interpretation statement PUB00295 – Income tax: Donee organisations — meaning of wholly or mainly applying funds to specified purposes within New Zealand (which also includes an accompanying fact sheet). Readers of the previous IRRUIP9 will note that the key change between the two publications, rests in the proposed threshold for the minimum percentage for the “wholly or mainly” test, reduced now from 90% to 75%.

The main impact of PUB00295 once finalised, and should it retain its present form, will naturally be on those organisations who presently satisfy a 50% funds application threshold, but would not satisfy a higher 75% threshold, and consequently how would a loss of donee organisation status affect their future funding, if the ability for a donor to claim a tax credit was removed. The Commissioner makes limited suggestions in PUB00295 to assist these organisations, instead reminding them that the obligation to ensure ongoing compliance rests with the organisation itself, and providing an 0800 help-line for those who wish to discuss their situation with IR in more detail.

It should be noted that PUB00295 does not apply to any schedule 32 organisations.

It is intended that the interpretation statement will apply from the 2018/19 tax year. The deadline for comment is 30th November 2017.

Six Monthly GST Filing

The passing of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill earlier this year, widened the classes of taxpayers entitled to file six monthly GST returns, to those seasonal suppliers who made 80% or more of their taxable supplies during the last six months of the income year (regardless of the level of annual taxable supplies).

IR has now released SPS 17/02, a standard practice statement commenting on the application of the six monthly filing rules, although to be honest, to suggest it is short on useful guidance would be a significant understatement and I would really question why it was felt necessary to publish at all (although clearly to replace GNL 420 – Dec 2001 TIB due to the new 80% rule).

In essence the main point of SPS 17/02, is that should you experience a breach of the $500k threshold when you go to complete your latest GST return, but you can reasonably forecast that you will not breach during the following 12 month period, then you can remain registered on a six monthly basis. Should you not be able to satisfy that criteria however, or should you have already relied on this exemption when completing your last GST return, then you should be advising the Commissioner within 21 days and requesting a change to either monthly or two monthly filing.

Update to Public Rulings Work Programme

For those of you who follow it, the latest update is now available on IR’s website.

In case you were not aware of the publication, it is essentially a monthly update of IR’s Public Ruling Unit’s work programme, advising the various issues that are on their agenda for review and the present status of each issue which is often determined by things such as the potential number of affected taxpayers, the need to resolve an existing issue or the potential revenue implications.

Richard Ashby BBus, CA, CPA PARTNER
Em: [email protected] Ph: +64 9 365 5532 Fx: +64 9 309 5260 Mb: +64 21 823 464