Meeting tax obligations

 

All not-for-profit organisations have tax obligations.  These obligations could include

 

• income tax
• employment taxes such as fringe benefit tax, PAYE on wages and honoraria
• resident withholding tax on interest received and paid
• goods and services tax and many others

 

It is important that all not-for-profit organisations know what their tax obligations are. Below is a summary of the two main taxes (income tax and GST) that affect not-for-profit entities.  Please note the table is a generalisation only and there may be some variation depending on specific circumstances.  A tax professional should be consulted if there is any doubt. Search for a member

Income Items	Liable for Income Tax	Liable for GST	Not Liable for GST	Exempt from GST
Subscriptions
Donations
Koha
Bequests
Grants
Subsidies
Suspensory loans
Trading activities
Raffles or housie proceeds
Admission fees
Affiliation fees
Sale of donated goods or services
Sale of purchased goods
Sale of assets or equipment
Insurance receipts
Hall or equipment hire
Rent received (residential)
Rent received (commercial)
Penalty payments (fines)
Advertising or sponsorship
Interest or dividends
Gaming machines

 

With respect to expenses, expenses relating to exempt income cannot have GST claimed off it.

 

Ignorance is not a defence for not meeting one’s tax obligations, and penalties can be severe.  Penalties on unpaid tax for example can quickly accumulate. This is not only costly but can also damage an organisation’s public credibility and in extreme cases put their viability at risk.

 

Where not-for-profit organisations are having difficulty meeting their tax obligations it is important they consult an appropriately qualified tax advisor as soon as possible.

 

There is useful information on options available to not-for-profit organisations that might be having difficulty in meeting their tax obligations from the Inland Revenue Department.

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