The tax system encourages charitable giving by offering tax benefits for both individual and corporate giving.
Individual charitable donations – including those made through payroll giving – are eligible for tax credits. Corporate donations are eligible for tax deductions. In both cases, the donations must be made to an approved donee.
Individuals can claim a 33.33% tax credit for all donations over $5 they make to an approved donee. A tax credit reduces the amount of tax you have to pay.
The total tax credits an individual can claim is capped at one third of their total taxable annual income.
Most approved donees are registered as charities by Charities Services. Some overseas aid organisations are also approved as donees. You can check the donee status of an organisation in the IRD website.
To claim your tax credit you need to complete an IR526 and send it to the Inland Revenue Department with your donation receipt within four years of making the donation.
You cannot claim credits for donations that exceed your total annual taxable income. Find out more.
Donations made through Payroll Giving are also eligible for tax credits of 33.33%. You do not need to claim these credits yourself – your employer will do this for you. Find out more.
Companies can claim tax deductions for all donations made to an approved donee providing their claim does not exceed their total annual net income.
A tax deduction is a reduction in the amount of taxable income. Companies can claim this deduction using the IR4 form.
Most approved donees are registered as charities by Charities Services. Some overseas aid organisations are also approved as donees. You can check the donee status of an organisation in the IRD website. Find out more
Businesses may be eligible for a tax deduction on sponsorship providing they can show that the sponsorship is likely to increase their taxable income. This could be through things such as naming rights, increased recognition or advertising.
A business does not have to sponsor a registered charity or donee organisation in order to be eligible for a tax deduction.