Indian Newslink Feb 15, 2016 Digital Edition

10 BUSINESSLINK
February 15, 2016
Not all charities are honourable and honest
Dave Ananth
davetaxnz@gmail.com
This article is not intended
to discuss legal issues
regarding charities but
to point out some facts.
I have, in the past, expressed
concern over the lack of proper
advice in running of charities.
Accumulation of wealth is not
the purpose of a charitable
organisations but I would not
dismiss that notion where some
charities are concerned.
New Zealanders are generous
by nature and give sizable sums
to charities and non-profit
organisations promoting
various causes.
Tax exemptions and
privileges are given to such
organisations to encourage
them to support the needy.
Unfortunately, not all
charities are operated in a
transparent manner.
Complex Statute
The law in this area can be
complex and daunting even for
a practitioner.
New Zealand has defined
charitable purposes in Section
5 (1) of the Charities Act 2005,
which says, “In this Act, unless
the context otherwise requires,
charitable purpose includes
every charitable purpose,
whether it relates to the relief
of poverty, the advancement of
education or religion, or any
other matter beneficial to the
community.”
The Charities Act was amended
in 2012 to include amateur
sport.
Charity and taxes can be
complex. It is actually a tax
payer-funded subsidy.
According to the Charities
Services(formerly known as
the Charities Commission),
there are over 26,000 registered
charities in New Zealand, with
a collective income of almost
$16 billion in the 2013 tax year,
with $218.3 million paid as tax
credits.
Inland Revenue Department
(IRD) de-registered 3902
charities in 2012 and 479 since
February 2015 for various
reasons.
Where is money given to
charities going?
Tax exemption
Charities do not pay income
tax on their exempt income
provided that they do not
receive any non-exempt
income. They would however
be required to file their Annual
returns with the Department of
Internal Affairs.
Income earned by charities
and distributed in New Zealand
is tax free.
If you employ staff, whether
it is a priest or a caretaker,you
must remit PAYE.
If you are a registered
Charity, then you are entitled
to a Resident Withholding Tax
(RWT) Certificate of exemption
so that you do not need to pay
tax on your interest on savings.
You must show this to the
interest payer(usually a Bank)to
avoid them deducting tax and
remitting to IRD.
Some charities are exempt
from paying Fringe Benefit Tax
( ), but there are conditions
to be met. It is essential that
your tax agent or professional
advisers guide you correctly
and are familiar with tax issues
involving charities.
Output Tax
If you are carrying out a
taxable activity and your
turnover is more than $60,000
in a 12-month period, you
must register for GST. If you
are hiring a hall for a wedding
or a function that is prima
facie a taxable activity and if
registered for GST, you must
charge output tax.
In return, you can claim your
inputs.
A common error amongst
charities is to determine
income which is taxable and
supplies which attract GST.
There is certain ‘income,’such
as donations that have no GST
impact as opposed to a trading
activity or a supply. In such a
case, there will be a GST impact
even if you are a charitable
organisation.
There are of course
concessions and special rules
for claiming input tax for non
profit bodies. It is important
that you get the correct advice.
Accountability Issue
Charities have limited statutorily
imposed accountability in
respect of the board of trustees,
unlike directors of companies.
This should be addressed in the
near future to ensure that the
principles enunciated by the
Charities Services are upheld.
Not all charities serve the
community. I read an article
recently in New Zealand Herald
according to which a charitable
hospital gave only 0.2% of its
income for charitable causes.
The focus must not be the
accumulation of wealth but its
purposeful distribution for the
benefit of the people.
Abuse and Audits
Tax exemptions are approved
and given for a purpose hence
should not be abused. No
person with some control over
the Charity should be able to
divert any amount derived
from the Charity for their
own benefit or any pecuniary
benefit of any individual.
If potential conflicts are
discovered or dubious transactions
exist, advisors must
advise Charities to refrain from
such practices. You can subject
yourself to investigations under
various civil and criminal
offences. It is morally and
ethically wrong to be involved
in such practices. Tax exemption
will not apply if a person
has obtained any benefit from
the exempt income.
IRD conducts audits from
time to time. It is essential that
tax agents and professional
advisors are kept informed of
all correspondence when this
happens. Record keeping is
essential whether you pay your
tax or not. These documents
(hard or electronic copies) become
evidence of your charity.
The onus is on you to show that
you have complied.
We wish to see a Charity
Tribunal set up for Charities
to air their grievances. Legal
China offers
the Great Wall of Money
Following a record year
of sales volume, low
vacancy rates and yields
I see little reason for that
trend to change in 2016.
Two key features will underpin
the confidence and demand
in the commercial property
market for the next 12 months:
historically low interest rates
and population expansion.
Population growth was a key
tenet of my predictions for last
year (2015).
It will remain a driving force
behind major commercial
developments in 2016.
New Zealand’s net migration
gains show no sign of letting up,
and population – specifically
in Auckland - will provide
the impetus for more major
commercial developments.
Low yields
Record low yields will also
feature again in 2016, purely
because of demand.
There is a lot more money
available for investment than
there are properties to be
invested. The record low CBD
office and industrial vacancy
rates in Auckland will continue
as an acute barometer of this
trend.
action, as the recourse now, is
expensive and time-consuming.
The High Court case concerning
the National Council
of Women of New Zealand is
a good example (The National
Council of Women of New
Zealand Incorporated v Charities
Registration Board 2014
NZHC 3200).
It is also advisable that the
Charity Services be expanded
to monitor the 26,000 Charities.
The tax payer has a right to
know how their money is spent.
The residential market is also
placing greater focus on density
to alleviate demand and price
pressures, and this will increase
the attractiveness of quality
apartment projects such as
Alexandra Park.
As predicted last year, New
Zealand’s commercial property
market is still seeing the
beginnings of the ‘great wall of
money’ on offer from China.
The sheer weight of capital
available from Asian investors
who want to find a home for
it in international markets is
massive, and New Zealand is an
extremely attractive location.
I predict that activity within
the retail property sector will
also be very notable in 2016,
particularly coming off the back
of significant momentum late
last year (2015) where Colliers’
Capital Markets team transacted
a record $1 million in sales in
less than six months, anchored
in the main by Westfield
shopping centres ($549 million)
and Countdown supermarket
($287 million) sales.
Tourism New Dairy
I also see a strong case for
‘tourism becoming the new
dairy.’
Dave Ananth is an experienced
tax barrister practicing in
Auckland. He was an IRD
Prosecutor based in Manukau
before establishing his private
practice. He is now in Malaysia
advising on GST compliance
on a two-year contract. He is
a regular speaker at various
conferences and seminars.
Email:davetaxnz@gmail.com;
www.davetaxnz.nz
Mark Synnott
Chief Executive of
Colliers International
New Zealand.
New Zealand is currently
enjoying a major tourism
boom, with more than three
million international visitors
visiting our shores for the first
time in a one- year period. This
represents an 8.1% increase on
the previous twelve months,
and our hotel property market
is reflecting that.
Colliers Hotel division is
witnessing the first stages
of the next transaction cycle
with more than $290 million
in sales recorded in 2015, up a
staggering 500% over the same
period in 2014.