MEDIA RELEASE (NZ)

A proposal to implement additional taxes on not-for-profit clubs and organisations would undermine New Zealand’s volunteer spirit, says CA ANZ Tax Leader John Cuthbertson FCA.

An Inland Revenue draft statement sets out a change in the Commissioner’s position on the tax treatment of member subscriptions and levies received by not-for-profits.

“This change would reverse a long-standing practice, in place since the 1940s, to treat this income as tax free, which has cultivated New Zealand’s rich history of not-for-profits for the public good,” said Mr Cuthbertson.

“New Zealand has a strong culture of people banding together to deliver not-for-profit community services and companionship. Mutual organisations are amazingly diverse – think your local sports club, community group, professional bodies and social or hobby clubs.

“They have created huge public value along the way, and we do not believe their work should be undermined through additional taxation.

“They are part of New Zealand’s cultural fabric, and the majority run on the smell of an oily rag. Most small clubs aim to break even annually and have very small cash reserves. We want to see them thrive, not dive.

“As it stands, there is inconsistency of tax treatment of not for profits. As a result, some organisations are treating member subscriptions and levies as tax exempt, while others are not. Ultimately, tax compliance should not overburden small clubs and societies who rely on volunteers.

“Chartered Accountants ANZ believes that, because of the unique nature of the not-for-profit sector, any financial transactions made by not-for-profit organisations should not be subject to taxation.

“If there are concerns that some people or organisations might be misusing the tax-free status, for example, by disguising taxable activities as not-for-profit ones, then authorities should respond by conducting focused investigations and enforcing the rules where necessary.

“Our key recommendation is that the law should be changed to confirm the tax-exempt treatment of member subscriptions and levies received by not-for-profits. Given the vital role these organisations play in New Zealanders’ everyday lives the matter should not be left to be determined by a non-binding Inland Revenue statement.

“Thousands of chartered accountants give their time to not-for-profits for free, to enable their public good, and they are telling us they are concerned about their future viability if additional tax must be paid,” concluded Mr Cuthbertson.