School Tax Issues

This webpage is the ministry's source of tax information for school boards of trustees and some related entities such as trusts and parent teacher associations. For further information on tax matters visit www.ird.govt.nz

Schools and the Charities Act

This information provides answers to questions about schools, school trusts and parent teacher associations (PTA) and the Charities Act 2005.

This information is intended for principals, boards of trustees, school fundraising bodies e.g. PTAs, trusts, and people with responsibility for schools' financial matters.

The Ministry of Education has worked with the Charities Commission and the Inland Revenue Department (IRD) to ensure that this advice is consistent across these organisations.

1. State and State Integrated School Board of Trustees

State and state integrated schools do not need to register with the Charities Commission to be exempt from income tax for school operations.

(a) Income tax - state and state integrated schools are exempt from income tax under the Education Act (Schedule 6, clause 2). State and state integrated schools do not need to register with the Charities Commission to remain exempt from income tax for school operations.

(b) Donee status -.state and state integrated schools have IRD approved donee status. This means that people or organisations that make cash donations to them qualify for tax rebates. State and state integrated schools do not need to register with the Charities Commission to obtain donee status.

(c) Gift duty - gifts to state and state integrated schools are exempt from gift duty under the Estate and Gift Duties Act subject to certain safeguards to prevent private pecuniary benefit.

A state or state integrated school may choose to register with the Charities Commission for other reasons that are not tax-related. Some organisations are only permitted to make donations to charitable organisations and may require applicants to be registered with the Charities Commission. More information is available on the Charities Commission website www.charities.govt.nz.

2. Trusts associated with schools

Trustees of trusts associated with schools will need to register their trusts with the Charities Commission from 1 July 2008 to continue to qualify for tax exemptions based on having a charitable purpose after 1 July 2008. Refer to the Charities Commission website www.charities.govt.nz for information about the registration process.

3. Parent Teacher Associations (PTAs)

The ministry provides the following information for PTAs to help them reach a decision on whether to register with the Charities Commission, not to recommend what they should do. There are three options listed below.

(a) Registration with the Charities Commission

PTAs have the option of registering with the Charities Commission to qualify for tax exemptions based on having a charitable purpose after 1 July 2008. Refer to the Charities Commission website www.charities.govt.nz for information about the registration process.

Charities need to be registered by 1 July 2008 to maintain income tax exemption; although some may still be eligible if they are not registered by this date provided they can show they began the process of preparing an application for registration before the deadline. This measure will be at the discretion of the Commissioner of Inland Revenue and will not apply to organisations that simply have not gotten around to applying for registration before the deadline.

Key points to note about registration with the Charities Commission include:

• There is no cost to register with the Charities Commission.
• Each registered charity will need to have written rules. The Charities Commission has information to help develop these rules (refer to its website). The PTA national body has a template constitution available to members which will form a good basis for a constitution - refer to its website www.nzpta.org.nz
• Once registered, your PTA will need to file an annual return with the Charities Commission. However, if you are registered with the Charities Commission and your PTA is also registered as an incorporated society it will no longer need to file annual returns with the Registrar of Incorporated Societies.
• If your PTA records income over $10,000 per year then there will be a fee of $50 per year for filing the annual return electronically ($75 if it is filed as paper).
• Your accounts do not have to be audited (but the PTA national body recommends PTAs obtain an independent review).

(b) Non-profit status

If a PTA (or any other non-profit entity) does not register with the Charities Commission it will be eligible to apply to the IRD for not-for-profit status which gives it an exemption from income tax on the first $1,000 of net income.

A non-profit organisation is any society, association or organisation, incorporated or unincorporated that:

• is not carried on for the profit or gain of any member, and
• has rules that do not allow money, property or any other benefits to be distributed to any of its members.

Non-profit organisations are taxed at the following rates:

• 30 cents in the dollar for income years 2009 and later.
• 33 cents in the dollar for income years 2008 and earlier.

To apply for non-profit organisation status a PTA should provide the following information to Inland Revenue:

• IRD number - if an organisation does not have an IRD number it will need to apply for one.
• A copy of its rules, constitution, trust deed or other founding documents
• A copy of its certificate of incorporation (if applicable).

Unincorporated non-profit organisations (and many PTAs are likely to fall within this group) are taxed at the same rate as individuals. PTAs can find the income tax rates for all years since 1998 by using the Income tax rate calculator on the IRD's website. The calculator can also work out tax on taxable income.

(c) Board of trustee sub-committee

Alternatively a PTA could discuss with its school board the possibility of relinquishing its activities to the board of trustees. The PTA would be replaced by a fundraising committee of the board of trustees. The committee's fundraising activities would have the same income tax exemption as the school. As part of the board of trustees the fundraising committee would use a school bank account, be included in the school GST returns and in the school annual financial statements.

Section 66 of the Education Act 1989 allows a school board to delegate any of its functions or powers by resolution and written notice in its minutes. Note that this means that the fundraising committee must have a board member on it unless special approval is granted by the Minister of Education.