The draft interpretation statement, accompanied by a fact sheet considers the extent to which business income a charitable entity derives is exempt from tax under s CW 42. It explains that:

• business income is only exempt to the extent a registered charity carries out its charitable purposes in New Zealand; and
• all business income is taxable if a person with some control over the business is able to direct or divert business income away from charity.

According to CA ANZ, the draft items are comprehensive and will be helpful for taxpayers conducting activities in the charitable sector.

To improve clarity and enhance value, CA ANZ makes some suggestions on such issues as operationalisation; amounts that are income from a business; determining when a business is carried on by, or for, or for the benefit of a charity; the control restriction; apportioning business income; funding overseas purposes with amounts not subject to the test in s CW 42; and change in charitable purposes.