There’s an old proverb that says: ‘May your charity increase as much as your wealth’.
Given the many charitable organisations existing in New Zealand, helping others is clearly engrained in Kiwi culture and will become more so as a result of recent changes which make it easier and more attractive to give more as you make more. A new voluntary scheme called ‘payroll giving’ was introduce by Inland Revenue earlier this year so you can now arrange with your employer to make donations on your behalf from your pay. The advantage of setting up this arrangement is you receive a tax credit of 33% at the same time as you make the donation. For every $10 you donate, you get back $3.33. Instead of keeping track of all your donation receipts throughout the year and putting in an annual claim for your donations, you have no paperwork to worry about. The amount of your donation is spread over the year in small amounts rather than being one lump sum, so it is easier on your budget. There is one catch; it is up to your employer to decide whether they will offer this scheme to employees.
With the exception of schools, donee organisations must be approved by Inland Revenue for the tax benefit on a donation to be claimed. A full list of all approved charities can be found at www.ird.govt.nz /donee-organisations and there are plenty to choose from. The thresholds for donation tax credits were increased on 1 April, 2008 so the amount that can be claimed as a qualifying donation is limited only by the amount of your taxable income. Whichever way you look at it, giving to others makes good sense, allowing you to benefit not only from tax credits but from being a socially responsible citizen.
Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847. Author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, March, 2008. For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com
