A legal guide to charitable giving
By Liam Hehir
We all get the occasional phone call during tea from someone calling on behalf of a charity. New Zealanders are charitable people: we have high rates of giving internationally and, as the Haitian crisis has shown, we respond generously to natural disasters around the globe.
Nevertheless, there have been several well-publicised scandals where high-profile charities have been exposed as spending more on marketing, social functions and ‘director fees' than on their charitable cause.
Charities are better at marketing and more aggressive fundraisers than they ever have been. The phrase ‘Big Charity' has entered the lexicon for a reason.
In the light of that, there is nothing unreasonable about prudently ensuring your hard-earned dollars are actually helping the people you intend to help.
The Charities Register
By law, registered charities must provide the Charities Commission with annuals returns and financials. Anyone with an internet connection can now view these by searching the register on the Commission website. You can see how many donations it received in the previous year compared to how much it has spent. You can also see how much of the expenditure went on wages and public relations.
Phone callers and street collectors
It will be a surprise to many Kiwis that these people usually aren't manning the phones or braving the elements out of the goodness of their hearts. Many are paid employees of profit-making businesses paid by charities to raise funds. The business either charges a fee to the charity, or directly keeps a percentage of your donation. For this reason, it is often advisable to give directly to the charity and cut out the middle man.
Alternatively, you could ask the caller or collector what proportion of your donation will go to the charity. If they don't know or refuse to answer, don't make a donation.
Tax
Most charities are what the IRD calls ‘donee organisations'.[1] If you're an individual who has donated to a donee organisation, then you can claim a third of your donation as a tax credit. This reduces the amount of tax you have to pay by the amount of the credit. The donation must have been more than $5 and you must give the IRD a receipt. You apply for this by filling out form IR527 (you can obtain one by googling that form number).
If your corporation has made a charitable donation, then it is only entitled to a deduction, which reduces the corporation's taxable income.
Payroll giving
Many employers give you the opportunity to have charitable donations deducted directly from your pay. The advantage of this is that you can claim your tax credits at the same time - instead of waiting until the end of the financial year for a refund.
Complaints
If you have reason to suspect a charity is doing something untoward, contact the Commission about it. It is their responsibility to investigate alleged breaches of the Charity Act and punish those in contravention.
[1] Google ‘donee organisation' to check
