Non-Profits & Charities GST Rules

There is a common misconception in New Zealand that charities and Non-Profit Bodies (NPBs) do not pay GST. This is incorrect. The IRD views charities very similarly to businesses. If you conduct a "taxable activity" and your turnover exceeds $60,000, you must register.

Should you register voluntarily?

If your turnover is under $60,000, your committee can choose to register voluntarily.

• ✓ Pros: You can claim back the 15% GST on all your organizational expenses (rent, computers, event costs, volunteer reimbursements).
• ✗ Cons: You must return GST on commercial grants, sponsorships, and ticket sales.

The Government Grant Trap

When a GST-registered charity receives funding, the GST treatment depends on what the money is for.

Special Rules & Exemptions

Non-profits benefit from several unique legislative carve-outs that commercial businesses do not get:

• ✓
  Donated Goods (Op Shops): If a charity sells goods that were donated to them (e.g., second-hand clothes or furniture), the sale is completely excluded from GST. You do not collect or pay GST on these sales.
• ✓
  Volunteer Reimbursements: If you reimburse a volunteer for out-of-pocket expenses (like petrol or buying morning tea), your organization can claim the GST on that reimbursement, provided the volunteer supplies a valid tax receipt.
• ✓
  Input Tax on Setup: Newly registered NPBs can claim input tax on assets held prior to registration under special rules.

Income Tax vs GST

Remember, GST is completely separate from Income Tax. Individual donors can claim a 33% tax credit on their donations to your charity, but this has nothing to do with your GST return. The unconditional donation itself remains GST-exempt for your organization.

Frequently Asked Questions

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