Supercharging your giving – give and get your tax back

Eleanor Cater
Philanthropy & Membership Services Director
Community Foundations of Aotearoa NZ
3 February 2025

Giving into our communities, both through our time and our resources, plays an important part in the kiwi psyche. Here in New Zealand, we understand and support a giving culture, however what is not widely understood is the part played, and the rationale behind, our country’s tax incentives to promote giving and philanthropy.

How does it work? In a nutshell, 33% of what we give to charitable causes can essentially be claimed back through a tax rebate*. So, if you make a donation of $30, you can claim $10 back from the tax that you have already paid into the government coffers, $300 and you can claim $100 and $3,000 a whopping $1,000 tax rebate. When it comes to significant donations the tax rebates can make a big difference to the $ amount we donate as, in effect, the tax credit can significantly boost our individual giving power.

The reason behind tax incentives for giving is to encourage generosity and to support a thriving charity and community sector, which is independent from government and driven by the hearts, heads and desires of the people. Such incentives are a recognised tool worldwide which encourage a culture of philanthropy to thrive, and have also been shown by research to increase the level of private giving for public good.

Tax incentives on charitable donations are commonplace across the world and can vary widely, both in percentages and in terms of complexity. Some international examples include:

• In Australia, donors can claim deductions for donations to registered charities and deductible gift recipients (DGRs), equal to the amount donated (100%).
• Canada offers a two-tiered system for charitable tax credits: for the first CAD 200 donated, individuals receive a federal tax credit of 15% and, for amounts above this the credit increases to 29%, with provincial tax credits also available.
• The UK operates a system known as Gift Aid, which allows charities to reclaim the basic rate of tax on donations made by UK taxpayers, effectively increasing the value of the donation by 25%.
• Japan offers tax deductions for charitable donations known as Furusato Nozei, or "hometown tax", encouraging donations to local governments or charities and receiving a credit of up to 40%, significantly reducing their tax burden while supporting local communities.
• In India, donations to certain charities and non-profits are eligible for a tax deduction of either 50% or 100% of the donated amount, depending on the type of organization and its approval status under the Income Tax Act.
• In the USA, donors can receive 100% of their donations back, to up to 60% of their adjusted gross income, although this percentage can vary depending on the type of donation and the recipient organisation.

Our relatively uncomplicated system in New Zealand, of a 33% rebate for charitable donations over $5 (up to the level of income tax paid), makes it straightforward for donors to reduce their tax paid while simultaneously increasing support for charitable causes and community groups. Depending on how you view the tax incentive, it can make a real difference to the frequency and to the amount that you give, increasing gifts given during our lifetime and boosting funding to areas of local priority.

Utilising New Zealand’s 33% tax rebate on charitable donations is a smart move, helping to enable and shift extra funding into our communities. That’s why our network of local community foundations promotes ‘Give and Get Back’ towards the end of the tax year, encouraging kiwis to think about how they will utilise their tax rebate, to further strengthen their local community.

We see many instances unfold where the tax rebate supercharges giving in communities, sometimes encouraging a larger donation or the regifting of the tax rebate itself. With all of the community need out there, we think it’s a shame to leave your giving unclaimed, when you can utilise it to donate in your lifetime to an area of impact in your community.

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*Up to the level of income tax paid.

Inland Revenue offers two convenient ways to claim your tax credit – either by submitting copies of your donation receipts electronically throughout the year via your ‘myIR’ account, or by filing the tax credit claim form (IR526) from April of the following year. And here's a bonus tip: If you've missed claiming tax credits for donations in the past, the IRD allows you to go back up to four years, covering tax years 2021 through 2024. See more at the link here.