Splitting best way to keep tax advantage, says charities boss

Trevor Garrett says splitting could work for many groups. Photo / Greg Bowker

Groups caught in a crackdown on charities that are not solely "charitable" are being advised to split in two so that their true charitable arms can keep their tax advantages.

Charities Commission chief executive Trevor Garrett said splitting in two, already adopted by Rotary clubs and the Sensible Sentencing Trust, could be the answer for groups such as Greenpeace and the National Council of Women which face being deregistered because of their "non-charitable" advocacy work.

"We would say to any organisation which has two functions, charitable and non-charitable, to split and register one and not the other," he said this week.

"I'm pretty sure Greenpeace has an educational trust which we have registered."

Separation could also work for the yachting syndicate Team New Zealand, which has been refused registration because its international racing is not considered charitable. It claimed that its support for the Coast Guard, the Ngati Whatua learn-to-sail programme and yacht club youth sailing activities qualified it for charitable status.

At least nine groups that have been refused Charities Commission registration have lodged High Court appeals because registration is now required for tax-exempt status.

National Council of Women president Elizabeth Bang said philanthropic trusts were also increasingly making registration with the commission a precondition for grants.

Sensible Sentencing Trust founder Garth McVicar said last week that his trust would split into a registered charity providing support to victims of crime, and a non-registered campaigning entity.

The campaigning entity would have minimal costs because Mr McVicar is unpaid. All donations would go to the registered charity so they could be tax-deductible. "The money donated goes to victims anyway," he said.

Auckland lawyer Ross Craig, a former Rotary district governor, said the country's 263 Rotary clubs decided on a similar split as soon as the new Charities Act was mooted by the former Labour Government.

"When it all started everyone moaned but I think it's good. It was a grey area."

He said Rotary worked with the Charities Commission to draw up a model trust deed which all Rotary clubs could use to set up trusts for their charitable activities. Their meetings and meals, which were not considered charitable, remained in the clubs themselves. "This way everything is tidy," Mr Craig said. "The only thing is every club has to remember to transfer their funds over to their trust before June 30 [financial year end], otherwise they are deemed to be taxable."

Elizabeth Bang said a split was also a possible option for the National Council of Women if its advocacy work could be separated from its "educational" work teaching women about their rights. Education is an accepted charitable purpose.

But she said the council would prefer to win its appeal to have its advocacy work accepted as charitable too.

"It's really important for other women's groups who can't afford to go to court," she said. "Because we are the umbrella group for all women's groups, our concern is that if we go, they will then topple like dominoes."