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If you are planning to enter the non-profit (or nonprofit) sector in New Zealand, it is a good idea to set aside some time to define your purpose before you decide how to structure your organisation and operations. A common mistake that people make is not doing enough research to make sure they are filling a gap in the sector as opposed to delivering competing services to a community or group.

As part of planning and setting up your non-profit, you will also need to choose a legal structure for your organisation, and you may need to register with Charities Services if you qualify for registration under the Charities Act. 

This article will explain what non-profit organisations are and how to set up one, as well as some of the legal and tax responsibilities of non-profits.

What Is a Non-Profit Organisation? 

A non-profit (or nonprofit organisation) is a society, association or group. Non-profits can be incorporated or unincorporated, just like businesses that operate in the private sector. Some examples include churches, public schools, charities, clinics and hospitals, volunteer services organisations and clubs and societies.

The two main attributes that differentiate non-profit organisations from other businesses are that they: 

  • do not carry activities for the profit or gain of their members; and 
  • cannot distribute money or property to their members.

The terms non-profit, not for profit and registered charities are used interchangeably in New Zealand. New Zealand law only defines the meaning of a Registered Charity, which refers to an organisation that has registered with Charities Services (Department of Internal Affairs). If an organisation falsely suggests that it is a registered charitable organisation, they can face legal penalties.

Choose A Legal Structure for Your Non-Profit

When you start a non-profit organisation in New Zealand, you are not required to have a formal legal structure, which is the case for a large number of them. However, there are many advantages to incorporating a group, whether or not the group registers as a charity.

For example, a registered charitable trust (society-based) provides a robust framework for governance and management, and their board members can limit their liability. This makes it suitable for most non-profit groups with a charitable purpose. An unincorporated group, on the other hand, is not a separate legal entity, which means its members may be liable for the group’s debts. They are also not the right choice for ongoing groups that employ staff or receive external funding, due to its informal structure, few rules and restrictions. 

Other legal structures for non-profits in New Zealand include: 

  • incorporated societies;
  • trusts;
  • not-for-profit companies;
  • provident societies;
  • social enterprises; and
  • Maori Land trust.

Before you choose a legal structure, you need to decide what is your organisation’s role in the community, the nature of your project and how you intend to operate. In particular, you need to think about your needs and requirements in the following areas: 

  • flexibility;
  • organisation’s size;
  • culture and values;
  • your activities;
  • governance, management and ownership;
  • funding;
  • accountability (financial performance);
  • liability; and
  • responsibilities (management, governance and operational).

Register Your Non-Profit Organisation

In New Zealand, there is no national association that governs non-profit organisations. Your registration requirements will depend on the legal form you choose. For example, donee organisations (that qualify for registration under the Charities Act) need to register with Charities Services. Upon registration, you will receive a unique number. 

If you incorporate a company, society or charitable trust board, you need to register with the Companies Office. When you register with the Companies Office, you get automatically assigned an NZBN. We discuss the advantages of registering with the NZBN in this article.

Tax Obligations of Non-Profits 

If you have registered and incorporated your non-profit organisation, you have to pay tax at the company rate. Unincorporated organisations will pay tax at the individual tax rate, which follows a progressive system in New Zealand. 

As part of your setup process, you need to: 

  • get an IRD number;
  • understand the rules for your organisation’s founding documents; and
  • register with Charities Services (only applicable to some structures). 

From 2020-2021 year, any person or organisation that wants to get or keep a business income tax exemption must be registered with Charities Services. This tax-exempt status applies to business income used for charitable purposes in New Zealand.

Once you are set up, some of your ongoing tax obligations include: 

  • filing a Clubs and societies tax return (IR9);
  • getting an exemption from paying resident withholding tax (RWT);
  • understanding your income tax obligations;
  • registering for and charging GST;
  • checking if you qualify for the $1,000 income deduction as a non-profit; and
  • understanding how to pay volunteers working for your organisation.

Key Takeaways 

There are several things you need to do to start your non-profit organisation in New Zealand, including:

  • defining your purpose; 
  • deciding how you will operate; 
  • choosing a legal structure; 
  • registering and (or) incorporating your organisation; 
  • getting an IRD number; and 
  • understanding your tax obligations. 

If you need help with choosing a legal structure for your non-profit organisation or reviewing your funding documents, LegalVision’s business lawyers can help. Call 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is a non-profit organisation?

To qualify as a non-profit organisation in New Zealand, you cannot carry activities for the profit or gain of your member. You also cannot distribute money or property to members. Non-profits can be incorporated or unincorporated societies, associations or groups.

What are non-profit organisations examples?

Some non-profit organisations examples include churches, public schools, charities, clinics and hospitals, volunteer services organisations and clubs and societies.

How do I start a non-profit organisation in NZ?

To start your non-profit organisation in New Zealand, you need to define your purpose, decide how you will operate, choose a legal structure, register and (or) incorporate your organisation, and register for tax.

How do I register a non-profit organisation in NZ?

Your registration requirements will depend on the legal structure you choose. If you incorporate a company, society or charitable trust board, you need to register with the New Zealand Companies Office. Donee organisations that qualify for registration under the Charities Act need to register with Charities Services.

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