Learn more about charitable entities
Charitable entities come in many forms – if you’re starting out or just want to know more, let us know
Types Of Charitable Organisation's
Understanding the different types of Charitable organisation’s and the various terms associated with this can be confusing. Further compounding this is the fact that organisation’s can be dual-registered with both the Companies Office and Charities Services. Below, we try to clear up some of this confusion and in the process help you figure out what might be best for your charitable idea or initiative.
Although over-simplifying it, one way to think about it is that an organisation’s legal status is dictated by how it is incorporated with the Companies Office – either as an Incorporated Society of Charitable Trust. Then, an organisation’s tax status (whether it is required to declare income tax or not) is defined by whether it is a Registered Charity or not.
Once you have incorporated a Charitable entity with the Companies Office, it is a choice as to whether you seek Registered Charitable status or not. Doing so involves some compliance obligations. However, if you don’t seek this then your organisation will not receive the benefits of being a Registered Charity – the primary ones are enhanced public credibility as well as income exempt tax status.
- Registration is held with the Companies Office
- Generally established when a group of people want to work together toward a charitable purpose
- Have members which vote on various matters – illustrating a democratic process
- Examples – Sports clubs, national and local associations
- Over 20,000 in NZ
- Registration is held with Charities services
- Must meet legal definition of Charitable purpose
- Registered Charities can be Incorporated Societies or Charitable Trusts as well
- Benefits – Income tax exemption by virtue of being a Registered Charity, donation tax credit for donors (if applied for), and possible FBT benefit
- Over 27,000 Registered Charities in NZ
- Registration is held with the Companies Office
- Closely held organisation’s, Trustees can essentially do as they please so long as the Trust deed is followed
- Trustees are the guardians of organisation’s purpose
- Generally established when someone has funds they wish to use for a charitable purpose
- Make up around 41% of Registered Charities
- Examples – Churches, Community centres, environmental organisation’s
- Over 20,000 Charitable Trusts in NZ ‘
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The 5 Types Of Charitable Entities And What To Know
1. Registered Charity
Governed by Charities Services (DIA) and the Charities Act 2005
Registered Charities are required to supply a rules document with their application
Registered Charities must file an annual return with Charities Services. This must include:
- Updates to officer details
- Changes to founding document(s)
- Financial statements/performance report – which may need to be audited or reviewed depending on the Charities size
All of the above is publicly available on the Charities register.
Registered Charities automatically have an income tax exemption. This is one of the main benefits of becoming a registered charity.
2. Incorporated Society
Governed by Incorporated Societies Act 1908 and Incorporated Societies Act 2022 (currently in transitional period)
Founding document is commonly a constitution, which sets out the purpose of the society and what its officers can and can’t do on behalf of its members, amongst other things
Incorporated Societies are required to file financial statements annually with the Companies office, as well as filing any constitutional updates and changes to officers.
Societies may apply to the IRD for an income tax exemption but must meet certain criteria for this to be granted.
3. Incorporated Society + Registered Charity
Many Incorporated Societies are also Registered Charities. Accordingly, they are governed by 2 sets of legislation – the Incorporated Societies Act and the Charities Act
Typically a Societies constitution can be provided to Charities Services alongside the application. Charities Services will review the constitution to ensure it does not contradict anything required to become a Registered Charity
Incorporated Societies that are also Registered Charities are required to file annually with Charities Services. Essentially, the reporting standards for Charities Services supersede those of the Companies Office
If dual-registered, the automatic exemption granted to Registered Charities attaches to the Incorporated Society
4. Charitable Trust
Governed by the Charitable Trusts Act 1957 and Trusts Act 2019
Founding document is commonly a Trust deed, which sets out the purpose of the Trust and what its Trustees can and can’t do, amongst other things
Charitable Trusts are required to file financial statements annually with the Companies office, as well as filing any Trust deed updates and changes to Trustees.
Charitable Trusts may apply to the IRD for an income tax exemption but must meet certain criteria for this to be granted.
5. Registered Charity + Charitable Trust
Many Charitable Trusts are also Registered Charities. Accordingly, they are governed by 3 sets of legislation – the Charitable Trusts Act, The Trusts Act and the Charities Act
Typically a Charitable Trusts Trust deed can be provided to Charities Services alongside the application. Charities Services will review the deed to ensure it does not contradict anything required to become a Registered Charity
Charitable Trusts that are also Registered Charities are required to file annually with Charities Services. Essentially, the reporting standards for Charities Services supersede those of the Companies Office
If dual-registered, the automatic exemption granted to Registered Charities attaches to the Charitable Trust
What can we help with
For recently or soon to be established organisation’s, we have a number of accounting, finance and advisory services we can offer, either on a one-off or ongoing basis.
If you aren’t sure about what type of entity to create, we can offer pointers based on your circumstances and what you are trying to achieve.
Assistance with your Charities Services application can make sure your efforts don’t go to waste.
We’re partnered with Xero and MYOB, and can setup your organisation on these platforms to add some stability to your day-to-day.
We can provide advice on what types of tax accounts to register with the IRD, and can then set about meeting the relevant compliance obligations.
Processes and Controls
It pays to be forward thinking – our experiences with established organisation’s helps to keep an eye on what to implement from the get go.
We aim to grow with you. Once you’re up and running, we can look to create a package of services that work for you.