New Zealanders are naturally generous people. Each year an estimated 1.2 million of us volunteer our time and together we give more than $1 billion year to charities.
Now it’s even easier for businesses and employees to give, thanks to recent changes to our tax rules.
The new legislation has introduced ‘payroll giving’, concept that means employees can give as they earn and receive an immediate tax credit of third of each donation.
Now the cap on the donations tax benefit has been removed, meaning that individuals can claim tax benefits on donations up to the level of their taxable income and companies can donate up to the level of their net income and still receive tax benefit.
The new rules also clarify the tax treatment of reimbursement payments and honoraria to volunteers. Reimbursements are not taxed but honoraria is considered taxable income.
International research indicates corporate social responsibility – giving back to the community – is not only the right thing to do, but it is also clever business. Communities include customers and prospective customers as well as employees and prospective employees.
Payroll giving was launched in New Zealand in January and is voluntary for both employers and employees. Employees in participating companies simply nominate charity or organisation to donate to from their pay, as long as it has Inland Revenue-approved status. The employee receives an immediate 33.33 percent tax credit via PAYE.
That means if someone gives $15, it effectively only costs them $10, but the charitable organisation receives the full $15.
Research in countries with already established schemes shows that payroll giving offers significant benefits to employers including:
• Increased employee morale and retention.
• An improved social responsibility profile.
• Stronger partnerships with the community.
In the United States, 35 percent of workers donate through workplace schemes, and social responsibility mechanisms are seen as an active recruitment tool. Recent research from Washington’s Center for Work-Life Policy showed that high-potential employees are seriously motivated by desire to give back to the world and increasingly seek out employers that allow them to participate on company time.
Australians currently donate around A$20 million annually through workplace giving. The additional benefits of such schemes have become clear during recent disasters, for example, PricewaterhouseCooper staff in Australia raised A$650,000 in 10 days through payroll giving for the Victoria bushfires appeal.
The cheapness and efficiency of payroll giving is also seen as an advantage in the light of public concern about the amount charities have to spend to raise money. Charitable organisations internationally report that payroll giving dramatically reduces fundraising and administration costs.
Revenue Minister Peter Dunne said New Zealand’s payroll giving scheme was “about social conscience at the levels of both employees and employers.
“Kiwis are generous by nature, and Kiwi employers, both in the private and state sectors, now have way to play their part in supporting their workers’ generosity.
“It really is win-win situation – as other commentators have called it,” he said.
For more information on payroll giving and the other giving tax changes, visit www.ird.govt.nz, www.ocvs.govt.nz or www.payrollgivinginfo.org.nz.
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