There is uncertainty about whether membership subscriptions or levies received by a not-for-profit (NFP) entity, and receipts from transactions with members are taxable. Inland Revenue officials have been considering this question. We may soon see on which side of the ‘tax or not tax’ divide the issue will land.

Current situation

Generally, it is accepted that membership subscriptions and levies received by an NFP (excluding an NFP specifically tax-exempt) are not taxable under the principle of mutuality. Briefly, this principle states that a person cannot profit by transacting with themselves and are therefore exempt from tax.

Regarding transactions with members, the position is less clear. There are varying views and practices amongst tax practitioners and NFPs, and conflicting advice and guidance from Inland Revenue. Some are treating receipts from transactions with members as non-taxable under the mutuality principle while others are treating the receipts as taxable.

In April 2025 Inland Revenue issued a draft statement confirming its new position that under the current law, many subscriptions and levies received by an NFP may be taxable because the mutuality principle does not apply to an NFP that is unable to distribute anything to its members (this would be the situation for most NFPs). The draft statement also affirms Inland Revenue’s current view that receipts from transactions with members of an NFP are taxable.

Following public consultation on the draft statement, Ministers asked Inland Revenue for advice on what the policy approach should be for taxing membership subscriptions and levies, and receipts from transactions with members derived by an NFP.

Targeted consultation on detailed design proposals on this issue occurred in November 2025 – January 2026. Some explanatory material in relation to membership subscriptions and levies was posted on Inland Revenue Policy’s website on 15 December 2025.

Proposals and consultation

The December post stated that the “intention is that the large majority of membership subscriptions would remain non-taxable.” The targeted consultation was undertaken to explore how this could be achieved.

One of the recent key proposals involved introducing a definition of membership subscription. The definition would seek to identify payments for core membership benefits and payments that confer direct benefits (i.e. goods and services) to members. The former would be non-taxable. The latter would be taxable.

Another proposal of note is to increase the tax-free threshold of the deduction available to an NFP from $1,000 to $10,000. However, the increased threshold would be a ‘cliff- face’ threshold. This means that if an NFP has net income of more than $10,000 the deduction would not be available to them.

In short, CA ANZ did not support introducing a definition of membership subscription. We recommended that the law be amended to confirm the tax-exempt treatment of membership subscriptions and levies, and to clarify the tax treatment of member transactions. Regarding the tax-free threshold, CA ANZ supported increasing the deduction to $10,000. However, we did not support introducing a ‘cliff-face’ approach. Further detail on CA ANZ’s position on these and other proposals is available here.

Where to next?

In late February 2026, Inland Revenue updated submitters engaged in the targeted consultation round on the feedback and recommendations received. From the update, it seems that submitters’ views were broadly aligned with a preference to confirm in law that membership subscriptions and levies are non-taxable. In relation to trading transactions with members, submitters appeared to broadly lean toward the view that these receipts should not be taxed. Submitters also recommended further legislative clarity and simple guidance be published.

Read more information.

We understand officials are still working on the final form for proposals. Watch this space.