Christchurch earthquake: Rebate sought to spur donors

Gumboots were donated to clean-up volunteers. Photo / Brett Phibbs

Jeff Owens is doing his bit for Christchurch.

The Wellington tax agent is using his professional know-how to lobby for a change in the law that allows tax deductions on donations of goods.

Under the current rules, cash donations are eligible for a 28c-in-the-dollar tax rebate, whereas donations in kind get nothing.

It's a matter of being equitable, Owens says.

"If you donate $1 million you get a rebate. But you donate $1 million of your trading stock, be it refrigerators, chemical toilets, building materials or whatever, then that trading stock is deemed to have been sold for market value."

Officials would need to spend some time making the rule change work - "you don't want people to be donating a container-load of expired yoghurt" - but even a deduction on the cost-price of goods may encourage businesses to give more. He believes the change should be backdated to the September 4 earthquake.

"Christchurch really has triggered the concept because it's going to require such a large amount of contribution."

He is awaiting a response to an open letter he has sent to the Prime Minister and Commissioner and Minister of Revenue on the issue.

Two manufacturers are promoting the idea, and he is approaching a long list of companies who have donated goods to the Christchurch earthquake relief effort. About 50 accounting firms have indicated their support, as have industry bodies CPA Australia and the Tax Agents Institute.

The Business Roundtable supports the idea in principle, says executive director Roger Kerr.

Craig Lamberton, Auckland managing partner of accountancy firm BDO, backs the concept but says the issue is how you value the goods.

In the case of fixed assets such as computer equipment it is relatively simple, but it gets harder when it comes to trading stock.

He used the example of a 2-year-old laptop that was bought new for $1000 and had depreciated to $250 on a company's books.

"If I gave that laptop to the Red Cross in Christchurch, why can't I get a deduction for $250?

"But in the absence of having depreciation tables and a fixed asset register what is the value [of the goods]?"

However, a company that disposes of unsaleable stock in some other way would be able to claim a deduction, Lamberton says.

Craig Macalister, director of tax at the New Zealand Institute of Chartered Accountants, says the industry body wouldn't oppose a broadening of the rules if the Government decided it was a spending priority.

"The Government's got a lot of options in front of it ... for the money to go to Canterbury and we see that as just one way of distributing support."

Many donating businesses are probably not even aware they are supposed to account for the gifted stock anyway, and it's "highly unlikely" the Inland Revenue Department will be chasing it, he says.

But several donating companies told the Herald on Sunday they were in favour of a change.

Christchurch-based Cookie Time gave 25,000 cookies and bars to residents and rescue workers. "Whenever there's the ability to have tax relief for the right reasons there should be no issue at all," general manager Lincoln Booth says.

The company supports 150 staff who have experienced all kinds of trauma as a result of the earthquakes and every bit helps, he says.

Skellerup, also headquartered in Christchurch, gave 500 pairs of gumboots to the army of volunteers helping to clear the effects of liquefaction.

"A donation is a donation, whether it's money or goods," says national sales and marketing manager Perry Davis.

Christchurch skincare company Linden Leaves designed and produced 4000 hand sanitisers that were distributed around the city.

Creative director Juliet Blair says it was a joint effort with the company's suppliers, who also gifted ingredients.

Linden Leaves donates product to charity two to three times a week anyway, and tax relief would be great, she says.

It would also encourage other businesses.

"A lot of New Zealand companies are in the position we are; we don't have a lot of funds to donate but we want to help where we can."