Donations - Important updates from the IRD
Schools will typically be registered as a charity. As such, parents will sometimes treat payments to the school as a charitable donation for tax purposes.
Inland Revenue are making it clear on its interpretation on this subject through the release in October 2022 of QB 22/09 – Income Tax –Payments made by parents to private schools and donation tax credits; which may impact the approach taken by some parents.
In summary, payments will qualify as a “gift” for donation tax credit purposes when all of the following apply:
- The school is a donee organisation.
- The payment is money of $5 or more.
- The parent makes the payment voluntarily to benefit the school either generally or for a specific purpose or project; and the parent or child gains no material benefit or advantage in return for making the payment.
QB 22/09 includes the below examples which Inland Revenue assert will not be eligible for a donation tax credit: A “donation” which results in a discount on
tuition fees, or the payer’s business being advertised in a school publication. Contributions requested by the school with reference to its operating costs, number of students and each family’s circumstances. A donation of a non-cash prize for the school to use in a fundraising auction. The purchase of a ticket for a school event (e.g.quiz night), where part of the ticket proceeds will go towards a school project.
It would be wise to assume the circumstances surrounding a payment to a school will be reviewed by Inland Revenue if it is claimed as a charitable donation.
For help understanding donations, please feel free to contact us here.