Many non profits and community groups will be aware that the government has invited discussion on a taxation change that would allow

Above: Heather Newell

donations to charities to be made directly from a donor’s paypacket, before tax! Heather Newell of Foresee Communications has been reporting on the tax changes in the company’s publication Fundraising in New Zealand. Heather comments that although most non profits are aware of the potential changes, very few corporates are aware of the issues or the proposed legislation.

  

The two options discussed in the document will offer either tax credits or tax deductions but regardless of which option is chosen the earliest the changes will take effect will be April 2009. Meanwhile many organisations are moving to investigate how payroll giving will be incorporated into their fundraising tool box. Organisations like Philanthropy New Zealand, Volunteering New Zealand and the Office for the Community and Voluntary Sector are currently collaborating on a project to encourage generosity, giving and volunteering in 2008. To kick start the process they invited representatives from across many sectors to a Wellington meeting in November to set an agenda to promote philanthropy.

Payroll giving will be one more tool to use in the campaign to promote generosity, along side the removal of the limits on taxable donations and the widening of the list of eligible companies.  While there are no operational barriers to a company being able to offer payroll giving as an option to their staff (it can be easily achieved with updated payroll software), there have been concerns expressed by both IRD and the bigger companies about the difficulties of the processing of the donations.

The extra work involved in offering the programme to staff will be the key issue for employers, particularly small employers without payroll systems. There will also be a time cost in selecting and maintaining relationships with donee organisations. The discussion document suggests that intermediary organisations may offer a payment or facilitating service as is done overseas.

In Australia a workplace giving scheme allows for before tax deductions but is voluntary and if the employer decides not to alter their equivalent of the PAYE then tax relief can be claimed at the end of the year. The Australian Charities Fund was established to help employers to set up workplace giving schemes. The Australian Charities Fund charges a fee for its services and the amount of the fee is dependent on the number of employees employed by each employer. An Australian research project found that about 0.7% of those surveyed had made a donation from their pay which equates to about 100,000 people.

Workplace giving in Canada is largely through United Way although some companies give directly. The scheme is after tax with an end of year tax credit. Their research shows that payroll giving is about 3 percent of the total number of donations which comes to about C$294 million.

The UK has just celebrated 20 years of payroll giving. Their system offers an immediate tax benefit from their pre-tax pay and a number of companies offer intermediary services. In the past two incentive schemes have been run by the government to encourage participation. In one programme the government itself offered a ten pence top-up of the donations and in another small businesses were offered a grants scheme to introduce the programme in their work places. During the last financial year almost $89 million pounds was distributed by the payroll giving agencies. More than 640,000 people donated by payroll giving, an increase of 6.5 percent on the previous year.

For a full copy of the Heather's articles please contact Heather on 04 5280742 or visit the company’s website on www.foresee.co.nz .