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New Zealand (NZ) has one of the largest non-profit sectors in the world relative to its population size. Starting a charity in NZ is relatively easy, and you have many organisational structures with which to choose. If you want to become a legal charitable or not-for-profit organisation, you need to formalise your organisational structure first. The two most common structures in NZ are incorporated societies and charitable trusts. You can only use the term registered charity if you register with Charities Services. Registered charities have legal obligations under the Charities Act. However, they also have many benefits, such as being eligible for exemptions from income tax or donee organisation status and having access to funders who only fund registered charities. This article shares some tips to help you decide if a charitable organisation is the best option for your group and the steps to start a charity in New Zealand. 

Create a Strategic Plan 

Writing a strategic plan will help you define what you want to achieve and facilitate your decision making. Your strategic plan should include:

  • a definition of your vision, purpose or mission, and values;
  • specific goals and strategies, in line with your operational plan;
  • an environmental scan; and
  • a SWOT and stakeholder analyses.

Once you finalise your analysis of each of these areas, you should compile your final strategic plan in a document or canvas, and share it with everyone in your group. You should keep it concise, for example, focus on three to five priority areas, including realistic goals and actions, and a roadmap for achieving your goals.

Tip: Do not do all your planning at once. Spread it throughout two to three brainstorming sessions to allow you to pause and reflect on your progress. 

Decide on Your Organisational Structure  

In New Zealand, there are many terms used to identify self-governing community groups working towards a common (non-profit) goal. These include community groups, non-governmental organisations (NGOs), not-for-profit or non-profit organisations, which can be anything from a sports or social club, to marae committees, environmental lobby groups or charitable trusts. However, you cannot use the term charity unless you register with Charities Services. 

If you want to become a legal charitable organisation, you need to formalise your organisational structure. Some of the advantages of doing this include:

  • setting out the rules for the group in a formal document, such as a deed or constitution;
  • having access to a wider range of grants, donations, contracts and loans;
  • improving your credibility and accountability;
  • benefiting from income tax, resident withholding tax and gift duty exemptions from having a charitable status; and
  • limiting your personal liability for the group’s debts.

You can also choose to incorporate your community group. Incorporation gives your group a separate legal identity, which allows the group to enter into contracts, buy or sell property, borrow or lend money (subject to its own rules). 

To formalise your organisational structure, you need to have a clear purpose and vision and understand your role in the community. There is a lot of technical and legal information involved in making this decision, so you should choose to discuss your options with your lawyer.

Choose Your Legal Structure 

If you want to register your non-profit as a charity, you need to choose a legal structure. Deciding on the most advantageous legal structure for your organisation can be challenging. There are many options available, which have different legal and tax implications. For example, you can structure your non-profit as an:

  • unincorporated group;
  • incorporated society;
  • registered charitable trust (society-based);
  • registered charitable trust (trust-based);
  • company;
  • industrial and provident society; or
  • Māori land trust.

Community Aotearoa provides a table that outlines the legal, reporting and tax requirements under each of these structures. Your lawyer can help you decide on the most suitable structure for your organisation. 

Register Your Charity

To register your charity, you must have a charitable purpose, as defined in the Charities Act. Charitable purposes include:

  • relieving poverty;
  • advancing education or religion; or
  • anything else that benefits the community.

Your charitable purpose must also:

  • provide a public benefit; and 
  • be available to the public (generally). 

Once you register with the Department of Internal Affairs – Charities Services, you have legal obligations under the Charities Act. These obligations include providing annual reports and maintaining updated and accurate information about your organisation on the Charities Register. 

To qualify for or retain your donee tax status, you must register. This status provides your organisation with tax benefits, such as donations of money qualifying the giver for a donations tax credit or a tax deduction. 

When you apply to register, you must provide Charities Services with a copy of your most recent organisation’s rules document. Your rules must follow specific guidelines, such as:

  • being legally binding for your organisation;
  • setting out your charitable purpose;
  • avoiding powers clauses which would allow your organisation to undertake activities that further non-charitable purposes;
  • having sufficient protection to ensure the organisation cannot carry on its activities for the private pecuniary profit or benefit of any individual; and
  • restricting distributions on winding up (or dissolution) to charitable purposes.

Your charity’s name must also meet certain requirements under the Charities Act. 

Develop Your Policies and Procedures 

Regardless of your structure, it is essential to develop policies and procedures to cover strategic and operational matters. Your policies should have a clear purpose, for example, to guide your recruitment processes or comply with health and safety laws. Likewise, they should consider your organisation’s mission, culture and values.

Some of the most important policies for charities include: 

  • health and safety policies to help you comply with your obligations under the Health and Safety at Work Act (if you have paid employees or regular volunteers); 
  • complaints policies and procedures that explain your customers’ rights and your obligations under New Zealand consumer laws;
  • volunteer policies to guide the recruitment and management of volunteers, as well as their roles and responsibilities and your obligations under the Human Rights Act; and
  • a Treaty policy that explains how you will consider the interests of Māori and protect their rights.

Your policies should be accessible to all staff and volunteers and available at all board meetings. You need to review your organisation’s policy manual regularly to reflect any changes within your group or the community. 

Tip: You should write your policies in plain language and avoid the use of jargons. Only create rules if there is a need for them. For example, if you do not provide your employees or volunteers with computers or the internet, you do not need a computer and network usage policy.

Sort Out Your Finances 

You should create a financial plan that forecasts your total expenditure and funding needs to allow you to meet your strategic goals and objectives. Your financial plan should include a forecast of your income and expenses (for at least twelve months) and a cash flow forecast.

Your organisation’s treasurer should provide the management committee or board with both a statement of financial performance and a statement of financial position every month. Investing in accounting software can help you plan, manage and report on your finances accurately and efficiently. Your accountant can help you find an option that suits your needs and budget.

There are some essential tax responsibilities that most organisations or groups have, including:

  • getting an IRD number;
  • completing an income tax return (the type depends on your legal structure);
  • paying income tax on your net income;
  • paying resident withholding tax (RWT) on interest and dividends received;
  • completing fringe benefit tax (FBT) returns and paying FBT;
  • paying provisional tax during the year;
  • registering for Goods and Services Tax (GST) if your organisation’s income is over $60,000, completing GST returns and paying GST to the IRD; and
  • if you are an employer, deducting PAYE, student loan, child support and KiwiSaver, and paying all of these to the IRD.

Key Takeaways 

To start a charity in New Zealand, you need to make some crucial decisions, such as choosing an organisational and legal structure, and deciding whether to incorporate your non-profit. If you have a charitable purpose, you are required to register with the Department of Internal Affairs – Charities Services. Once you do, you have certain obligations under the Charities Act, such as reporting monthly to Charities Services. However, you may also be eligible for certain tax benefits. It is essential to create a strategic plan to define your vision and purpose, as well as roadmap to achieve your goals. You also need a sound financial plan and forecasts, to help you understand your funding needs, and sound policies and procedures to ensure you meet your obligations under the law towards employees, volunteers, customers and other stakeholders. 

If you need help to set up your charity, decide on a legal structure or draft your deed or constitution, LegalVision’s business lawyers can help. Call 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

How do I become a charity in NZ?

To become a charity in NZ, you need to have a charitable purpose and provide a public benefit. You need to decide on a legal structure and register with Charities Services. Once you do, you have certain obligations under the Charities Act, and you may also qualify for some tax benefits.

What is the legal structure of a charity?

There are many legal structures with which to choose. The two most common structures in NZ are incorporated societies and charitable trusts. Each has different tax and legal obligations, so it is a good idea to discuss your options with your lawyer.

What is a charitable trust in NZ?

A charitable trust is a type of charitable organisation, which is suitable for not-for-profit organisations with a charitable purpose, where the initial trustees want to maintain control and succession. It has obligations under the Charitable Trusts Act. Some of the benefits of this structure include enjoying limited liability while maintaining control in a few hands (the trustees).

Do charities pay tax in NZ?

Charities have similar tax obligations to other businesses, such as paying income tax, RWT, and FBT, as well as GST and employer obligations. Under some circumstances, your charity may qualify for income tax and RWT exemptions, or donee status, which gives tax benefits to people, companies and Māori authorities who make donations to your charity.

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