KEY POINTS:
Inland Revenue appears to be quietly tightening the rules on giving money to charities, just as MPs prepare to remove the maximum limit on rebates for charitable donations.
The department says it will not allow tax rebates for tickets to charity events such as dinners, concerts and film previews, arguing that they are not pure "gifts".
Its ruling comes as Parliament is due to continue debate this week on a bill that will remove the present $630-a-year limit on allowable rebates for donations - a concession expected to cost the Government about $25 million a year from next April.
Charities were unaware of the ruling until contacted by the Herald, but were not surprised.
"The Government giveth with one hand and taketh away with the other," said Philanthropy New Zealand director Robyn Scott.
"My understanding is that they will be more vigilant on what qualifies as a charitable donation and what doesn't."
Wellington tax accountant Colin Jones said people buying tickets to charity events had never been able to claim the tax rebate for the full cost of the tickets, because part of the ticket price was clearly to buy a service such as a dinner.
But he said a long-established policy since a Public Information Bulletin in 1984 held that "where a minimum amount of the ticket price is guaranteed by the promoters to the charitable organisation, that minimum amount will be acknowledged as a donation provided the ticket clearly specifies the donation element in addition to the total ticket cost".
A recent case in Auckland, where a claim for the whole ticket price was disallowed, suggests that Inland Revenue now holds that no part of the ticket price would qualify for the rebate.
A department spokesman confirmed that a "donation" had to be a "gift of money" of $5 or more.
"Our reasons for believing that the ticket price for a charity dinner is not a gift is that that is the point of these charity dinners - people are prepared to pay a premium for a dinner in the knowledge that the additional profits generated will go to the charity they are supporting," he said.
"However, our view is that they are not making a gift to that charity. Rather, they are supporting the charity in another way - by paying a premium to attend a dinner.
"There is no change in our view. The fact that a claim may have been incorrectly allowed in one year, but correctly disallowed the following year, does not point to a change in our policy."
Mr Jones said there had been no relevant change in the tax law defining donations since 1984, so the only thing that had changed was Inland Revenue's interpretation of the law.
"What might be happening is that the IRD are now correctly applying their own policy," he said.
"This happens from time to time when the IRD lose focus on some part of the law and something brings them back on track.
"Usually it's a court decision. In this case it's likely to be a desire to tighten up before the new unlimited rebate becomes law."
Ms Scott said no one really knew whether the Treasury was correct in guessing that the abolition of the current maximum rebate would cost about $25 million a year, implying claims for gifts of $75 million a year.
"We don't know in New Zealand because we have never done any research so we don't know what effect this is going to have on donor behaviour."
The new law will allow rebates of one-third of the value of donations up to the donor's net annual income each year.
For example, a millionaire earning $1 million a year will be able to claim a tax rebate of $333,333 a year by giving $1 million to charity, wiping out most of his or her tax liability.
